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Alibaba (BABA) Q3 Earnings Miss Estimates, Revenues Rise Y/Y
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Alibaba Group Holding Limited (BABA - Free Report) reported third-quarter fiscal 2024 non-GAAP earnings of $2.67 per ADS (RMB 18.97), which missed the Zacks Consensus Estimate by 2.2%. The figure decreased 2% from the year-ago quarter’s reported figure in RMB terms.
Revenues of RMB 260.35 billion ($36.7 billion) rose 5% from the year-ago quarter. However, the top line missed the Zacks Consensus Estimate of $37.2 billion.
The top-line increase was driven by solid momentum across the international commerce retail business. Strength across the local services and Cainiao logistics services businesses also contributed well. The strong performance of the Digital Media and Entertainment Group segment was a positive.
However, sluggish growth in the China commerce business was a major concern.
Shares of Alibaba have lost 30.8% over a year against the Zacks Retail-Wholesale sector’s return of 26.2%.
Alibaba Group Holding Limited Price, Consensus and EPS Surprise
Taobao and Tmall Group (49.6% of the total revenues): The segment comprises Taobao, Tmall, Xianyu, 1688.com and other businesses operating in China’s retail and wholesale markets. Alibaba generated RMB 129.1 billion ($18.2 billion) of revenues from the segment, which grew 2% from the year-ago quarter’s reported figure.
China commerce retail (47.5% of the total revenues): The business vertical’s revenues for the reported quarter were RMB 123.8 billion ($17.4 billion), reflecting a 1% rise from the year-ago quarter. The improvement was attributed to rising direct sales and other revenues. Also, growing online GMV on Taobao and Tmall was a positive and benefited the customer management business, offset by a decreasing take rate.
China commerce wholesale (2% of the total revenues): The business generated revenues of RMB 5.31 billion ($747 million), which grew 23% on a year-over-year basis. This was attributed to increasing revenues from value-added services.
Alibaba International Digital Commerce Group (11% of the total revenues): The segment comprises Lazada, AliExpress, Trendyol, Alibaba.com, and other businesses operating in the international retail and wholesale markets. Alibaba generated RMB 28.52 billion ($4.02 billion) in revenues from the segment, which grew 44% from the year-ago quarter.
International commerce retail (8.9% of the total revenues): Revenues for the reported quarter were RMB 23.3 billion ($3.3 billion), up 56% from the year-ago fiscal quarter’s reported figure, owing to solid combined order growth in AIDC’s retail businesses. Also, the strong momentum in AliExpress’ Choice was a positive.
International commerce wholesale (2% of the total revenues): The business generated revenues of RMB 5.26 billion ($740 million), which increased 8% on a year-over-year basis. Strength in cross-border-related value-added services contributed well.
Local Services Group (5.8% of the total revenues): The segment’s revenues grossed RMB 15.2 billion ($2.14 billion), up 13% from the year-ago quarter. The rise was driven by strong order growth in Ele.me and Amap businesses.
Cainiao Smart Logistics Network (10.9% of the total revenues): Revenues summed up to RMB 28.5 billion ($4.01 billion), up 24% from the year-ago quarter. The upside was led by a solid momentum across cross-border fulfillment solutions.
Cloud Intelligence Group (10.8% of the total revenues): The segment generated revenues of RMB 28.1 billion ($3.95 billion), up 3% from the year-ago quarter. This was attributed to strength across Alibaba’s consolidated businesses.
Digital Media and Entertainment Group (1.9% of the total revenues): Revenues logged RMB 5.04 billion ($710 million), increasing 18% from the year-ago quarter’s reported figure. This was driven by strength in the offline entertainment businesses of Alibaba Pictures.
All Others (18.1% of the total revenues): The segment’s revenues were RMB 47.02 billion ($6.6 billion), down 7% from the year-ago quarter. Declining revenues from Sun Art due to a dip in ticket size were concerning.
Operating Details
In the fiscal third quarter, sales and marketing expenses were RMB 33.8 billion ($4.8 billion), up 10.3% from the year-ago quarter. As a percentage of total revenues, the figure expanded 100 basis points (bps) to 13%.
General and administrative expenses were RMB 11.3 billion ($1.6 billion), up 9% from the year-ago quarter. As a percentage of total revenues, the figure expanded by 10 bps from the prior-year quarter.
Product development expenses were RMB 13.5 billion ($1.9 billion), down 0.2% from the year-ago quarter. As a percentage of total revenues, the figure contracted by 100 bps year over year.
The operating income was RMB 22.51 billion ($3.2 billion) in the reported quarter, down 36% year over year. The operating margin was 9% in the fiscal third quarter, contracting 500 bps from the year-ago quarter.
Adjusted EBITDA increased 1% from the year-ago quarter to RMB 59.6 billion ($8.4 billion).
Balance Sheet & Cash Flow
As of Dec 31, 2023, cash and cash equivalents were $35.9 billion (RMB 254.8 billion), up from $33.4 billion (RMB 243.7 billion) as of Sep 30, 2023.
Short-term investments totaled $42.3 billion (RMB 300.42 billion) at the end of third-quarter fiscal 2024, up from $40.7 billion (RMB 296.8 billion) at the end of second-quarter fiscal 2024.
Alibaba generated $9.1 billion (RMB 64.7 billion) in cash from operations in the reported quarter, up from $6.7 billion (RMB 49.2 billion) in the previous quarter.
BABA’s free cash flow was $7.96 billion (RMB 56.54 billion).
Zacks Rank & Stocks to Consider
Currently, Alibaba carries a Zacks Rank #3 (Hold).
Investors interested in the broader retail-wholesale sector can consider some better-ranked stocks like Amazon (AMZN - Free Report) , Fastenal (FAST - Free Report) and Darden Restaurants (DRI - Free Report) . Amazon sports a Zacks Rank #1 (Strong Buy), and Fastenal and Darden Restaurants carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Amazon have gained 72.9% over a year. The long-term earnings growth rate for AMZN is projected at 28.13%.
Shares of Fastenal have gained 36.9% over a year. The long-term earnings growth rate for FAST is expected to be 9%.
Shares of Darden Restaurants have gained 16.8% in the same time frame. The long-term earnings growth rate for DRI is projected at 7.96%.
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Alibaba (BABA) Q3 Earnings Miss Estimates, Revenues Rise Y/Y
Alibaba Group Holding Limited (BABA - Free Report) reported third-quarter fiscal 2024 non-GAAP earnings of $2.67 per ADS (RMB 18.97), which missed the Zacks Consensus Estimate by 2.2%. The figure decreased 2% from the year-ago quarter’s reported figure in RMB terms.
Revenues of RMB 260.35 billion ($36.7 billion) rose 5% from the year-ago quarter. However, the top line missed the Zacks Consensus Estimate of $37.2 billion.
The top-line increase was driven by solid momentum across the international commerce retail business. Strength across the local services and Cainiao logistics services businesses also contributed well. The strong performance of the Digital Media and Entertainment Group segment was a positive.
However, sluggish growth in the China commerce business was a major concern.
Shares of Alibaba have lost 30.8% over a year against the Zacks Retail-Wholesale sector’s return of 26.2%.
Alibaba Group Holding Limited Price, Consensus and EPS Surprise
Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited Quote
Revenues by Segments
Taobao and Tmall Group (49.6% of the total revenues): The segment comprises Taobao, Tmall, Xianyu, 1688.com and other businesses operating in China’s retail and wholesale markets. Alibaba generated RMB 129.1 billion ($18.2 billion) of revenues from the segment, which grew 2% from the year-ago quarter’s reported figure.
China commerce retail (47.5% of the total revenues): The business vertical’s revenues for the reported quarter were RMB 123.8 billion ($17.4 billion), reflecting a 1% rise from the year-ago quarter. The improvement was attributed to rising direct sales and other revenues. Also, growing online GMV on Taobao and Tmall was a positive and benefited the customer management business, offset by a decreasing take rate.
China commerce wholesale (2% of the total revenues): The business generated revenues of RMB 5.31 billion ($747 million), which grew 23% on a year-over-year basis. This was attributed to increasing revenues from value-added services.
Alibaba International Digital Commerce Group (11% of the total revenues): The segment comprises Lazada, AliExpress, Trendyol, Alibaba.com, and other businesses operating in the international retail and wholesale markets. Alibaba generated RMB 28.52 billion ($4.02 billion) in revenues from the segment, which grew 44% from the year-ago quarter.
International commerce retail (8.9% of the total revenues): Revenues for the reported quarter were RMB 23.3 billion ($3.3 billion), up 56% from the year-ago fiscal quarter’s reported figure, owing to solid combined order growth in AIDC’s retail businesses. Also, the strong momentum in AliExpress’ Choice was a positive.
International commerce wholesale (2% of the total revenues): The business generated revenues of RMB 5.26 billion ($740 million), which increased 8% on a year-over-year basis. Strength in cross-border-related value-added services contributed well.
Local Services Group (5.8% of the total revenues): The segment’s revenues grossed RMB 15.2 billion ($2.14 billion), up 13% from the year-ago quarter. The rise was driven by strong order growth in Ele.me and Amap businesses.
Cainiao Smart Logistics Network (10.9% of the total revenues): Revenues summed up to RMB 28.5 billion ($4.01 billion), up 24% from the year-ago quarter. The upside was led by a solid momentum across cross-border fulfillment solutions.
Cloud Intelligence Group (10.8% of the total revenues): The segment generated revenues of RMB 28.1 billion ($3.95 billion), up 3% from the year-ago quarter. This was attributed to strength across Alibaba’s consolidated businesses.
Digital Media and Entertainment Group (1.9% of the total revenues): Revenues logged RMB 5.04 billion ($710 million), increasing 18% from the year-ago quarter’s reported figure. This was driven by strength in the offline entertainment businesses of Alibaba Pictures.
All Others (18.1% of the total revenues): The segment’s revenues were RMB 47.02 billion ($6.6 billion), down 7% from the year-ago quarter. Declining revenues from Sun Art due to a dip in ticket size were concerning.
Operating Details
In the fiscal third quarter, sales and marketing expenses were RMB 33.8 billion ($4.8 billion), up 10.3% from the year-ago quarter. As a percentage of total revenues, the figure expanded 100 basis points (bps) to 13%.
General and administrative expenses were RMB 11.3 billion ($1.6 billion), up 9% from the year-ago quarter. As a percentage of total revenues, the figure expanded by 10 bps from the prior-year quarter.
Product development expenses were RMB 13.5 billion ($1.9 billion), down 0.2% from the year-ago quarter. As a percentage of total revenues, the figure contracted by 100 bps year over year.
The operating income was RMB 22.51 billion ($3.2 billion) in the reported quarter, down 36% year over year. The operating margin was 9% in the fiscal third quarter, contracting 500 bps from the year-ago quarter.
Adjusted EBITDA increased 1% from the year-ago quarter to RMB 59.6 billion ($8.4 billion).
Balance Sheet & Cash Flow
As of Dec 31, 2023, cash and cash equivalents were $35.9 billion (RMB 254.8 billion), up from $33.4 billion (RMB 243.7 billion) as of Sep 30, 2023.
Short-term investments totaled $42.3 billion (RMB 300.42 billion) at the end of third-quarter fiscal 2024, up from $40.7 billion (RMB 296.8 billion) at the end of second-quarter fiscal 2024.
Alibaba generated $9.1 billion (RMB 64.7 billion) in cash from operations in the reported quarter, up from $6.7 billion (RMB 49.2 billion) in the previous quarter.
BABA’s free cash flow was $7.96 billion (RMB 56.54 billion).
Zacks Rank & Stocks to Consider
Currently, Alibaba carries a Zacks Rank #3 (Hold).
Investors interested in the broader retail-wholesale sector can consider some better-ranked stocks like Amazon (AMZN - Free Report) , Fastenal (FAST - Free Report) and Darden Restaurants (DRI - Free Report) . Amazon sports a Zacks Rank #1 (Strong Buy), and Fastenal and Darden Restaurants carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Amazon have gained 72.9% over a year. The long-term earnings growth rate for AMZN is projected at 28.13%.
Shares of Fastenal have gained 36.9% over a year. The long-term earnings growth rate for FAST is expected to be 9%.
Shares of Darden Restaurants have gained 16.8% in the same time frame. The long-term earnings growth rate for DRI is projected at 7.96%.