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Alibaba Q2 financial earnings: Revenue drops, earnings plunge

Guangzhou China – Alibaba on Thursday missed expectations for September quarter revenue and earnings, as slowing economic growth in China weighed on results, adding to regulatory difficulties.

Here’s how Alibaba did in its fiscal second quarter, compared to Refinitiv consensus estimates:

  • Turnover: 200.69 billion yuan ($31.4 billion) compared with the estimated 204.93 billion yuan, up 29% year on year.
  • EPS: 11.20 yuan compared with the estimated 12.36 yuan, down 38% year-on-year.

The company also cut its revenue guidance for the current financial year. Before that, it was expected to bring in 930 billion yuan, up about 29.5% year-on-year. But it is now expected to grow between 20% and 23% annually.

Alibaba’s US-listed shares fell 11.1% on Thursday.

China’s economic growth slowed down in the third quarter of the year, this has also reached the consumption. Alibaba also ended China’s crackdown on its domestic tech industry, which has seen a flurry of new regulations introduced from Antitrust come data protection.

While China’s tech giants have grown largely unchallenged over the past few years, Beijing has managed to clean up some of the behavior of its companies. Alibaba fined $2.8 billion in April as part of an antitrust probe.

As a result, expectations for the fiscal second-quarter earnings report are low, with analysts expecting it to one of the most challenging quarters ever for the Chinese e-commerce giant.

Alibaba’s core commerce business saw revenue grow 31% year-on-year to 171.17 billion yuan, falling short of expectations.

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Customer management revenue, or CMR, is the largest portion of Alibaba’s revenue. CMR is the revenue Alibaba earns from services such as marketing that it provides to sellers on the e-commerce platforms Taobao and Tmall.

CMR increased only 3% over the same period last year. Alibaba said this was due to slow sales growth on its platform “due to slowing market conditions and more players in the Chinese e-commerce market.”

Alibaba is facing stiff competition from rival JD.com but also newer players like Pinduoduo and even social media companies like ByteDance, the owner of TikTok.

The company will launch after Singles’ Day, a major shopping event in China where e-commerce platforms push through discounts and rake in billions of dollars in revenue.

Alibaba collects the total volume of merchandise in an 11-day period 540.3 billion yuan ($84.54 billion). Any revenue Alibaba collected from the event will not be reflected in the September quarter.

Investment weighs heavily on profits

Alibaba said EBITDA (earnings before interest, taxes, depreciation and amortization), fell 27% year-on-year to 34.84 billion in the September quarter, largely due to more investment in new businesses. EBITDA is one of the profitability metrics.

Earlier this year, management signaled that it would invest more in some of its fledgling businesses like discount app Taobao Deals and food delivery service Ele.me. Alibaba is also trying to go after customers in smaller Chinese cities through some of these services.

“This quarter, Alibaba continued to invest firmly in our three strategic pillars of domestic consumption, globalization and cloud computing to establish a solid foundation for our long-term goals. is sustainable growth in the future,” CEO Daniel Zhang said in a statement.

Cloud computing, another area closely watched by investors, grew 33% year-on-year to 20 billion yuan. Adjusted EBITA for this segment was 396 million yuan compared with a loss of 567 million yuan in the same period last year.

https://www.cnbc.com/2021/11/18/alibaba-earnings-fiscal-q2-revenue-misses-earnings-plunge.html Alibaba Q2 financial earnings: Revenue drops, earnings plunge

Emma James

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