New York-listed shares of Alibaba (NYSE: BABA) increased by as much as 6% after the Chinese e-commerce business reported annual first-quarter results on Thursday that performed admirably.
How Did BABA Do in Q2?
Year over year revenue remained stable, for the first time in history, at 205.55 billion Chinese yuan ($30.68 billion) compared to the predicted 203.19 billion yuan. Earnings per American depositary share (ADS) came in at 11.73 yuan compared to the analysts’ estimate of 10.39 yuan, a decrease of 29% on a yearly basis. Net income for the corporation was 22.73 billion yuan, topping the expected 18.72 billion yuan.
Alibaba shares were boosted by the announcement that the company’s Board approved a $25 billion share buyback program, which is effective through March 2024. It’s important to note that Alibaba still has billions in available shares to buy back under the existing regime.
Despite facing challenges, including a rise in the number of Covid infections in China that resulted in the lockdowns and a stringent regulatory environment imposed by the Chinese Government, Alibaba managed to pick up the pace in the last couple of months.
Alibaba CEO Daniel Zhang stated in a press statement that “after a somewhat poor April and May, we observed signs of improvement across our businesses in June.“
The company also claimed that strict restrictions and Covid lockdowns are the main reasons behind a 10% decline in customer management revenue. The China commerce section of Alibaba, which includes its well-known marketplace Taobao, had a 1% year-over-year fall in revenue to 141.93 billion yuan.
Alibaba has been attempting to increase income and consumers through its discounting platform called Taobao Deals as well as its grocery and fresh food service Taocaicai as a way to draw customers from less prosperous cities in China.
The company said Taobao Deals “significantly narrowed losses year-over-year as well as quarter-over-quarter driven by optimizing spending in user acquisition as well as improving average spending of active consumers,” but declined to disclose the losses for Taobao Deals.
On the other hand, Taocaicai GMV grew at more than 200% year over year while its losses “increased moderately compared to the same quarter last year.”
In a conference call with investors, Alibaba’s finance head, Toby Xu, stated that the business will continue to put “cost optimization and cost control” as a top priority, in its attempt to strike a balance between keeping costs under control and carrying on with “essential investments” for lengthy growth.
The Chinese e-commerce powerhouse reported 17.68 billion yuan in cloud computing revenue for the second quarter, an increase of 10% over the same period last year. However, that was a slower rate of revenue growth compared to the 12% and 29% growth increase in Q1 and 2021 respectively.
Even though cloud profits only account for 9% of Alibaba’s total revenue it is thought to be crucial to the company’s future growth and profitability. Losing a significant customer and the Chinese government’s restrictions on sectors like online education that used Alibaba’s goods have both harmed the company’s cloud segment.
The increase in cloud income, according to Alibaba, is due to the “recovering development of total non-Internet industries, driven by financial services, public services, and communications industries,” though.
Summary
Alibaba shares are trading higher this week after the e-commerce company reported better-than-feared results. Shares were especially boosted by the deployment of a new $25 billion stock buyback plan that will run through March 2024.
