Alibaba Group Holding Limited (BABA - Free Report) reported third-quarter fiscal 2019 earnings of $1.77 per share, surpassing the Zacks Consensus Estimate by 14 cents. Also, earnings increased 15% year over year.
The company reported revenues of RMB117.27 billion ($17.06 billion), up 41% from the year-ago quarter. The revenue increase was driven by strength in the company’s China commerce retail business, the consolidation of Ele.me and Cainiao Network, as well as strong revenue growth at Alibaba Cloud.
However, its revenues missed the Zacks Consensus Estimate of $17.26 billion.
Alibaba witnessed sluggish demand for white appliances due to China’s waning real estate market. Moreover, demand for mobile phones declined too due to inadequate technological innovations.
Revenues by Segments
Alibaba has four reportable segments — Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives. The details of these segments are discussed below.
Core Commerce: This segment comprises marketplaces operating in retail and wholesale commerce in China, and international commerce. The segment’s revenues in the quarter were RMB102.84 billion ($14.96 billion), reflecting an increase of 40% on a year-over-year basis.
China commerce retail business (69% of total revenues) — The business vertical’s revenues in the quarter were RMB81.06 billion ($11.79 billion), reflecting an increase of 35% year over year. The increase was driven by robust growth in the company’s New Retail businesses, mainly Tmall Import, Hema fresh food grocery business, and other direct sale businesses.
China commerce wholesale business (2% of the total revenues) — This business generated revenues of RMB2.7 billion ($392 million), reflecting an increase of 40% from the year-ago quarter. The increase was due to a rise in average revenues from paying members.
International commerce retail business (5% of the total revenues) — Revenues in the quarter were RMB5.84 billion ($849 million), increasing 23% year over year. The increase was driven by the consolidation of Trendyol, Turkey’s leading e-commerce platform. However, Lazada’s growth lagged in the reported quarter due to a decline in revenues generated from Alibaba’s direct sales business.
International commerce wholesale business (2% of the total revenues) — This business generated revenues of RMB2.18 billion ($316 million), up 31% from the prior-year quarter. The growth was due to an increase in the number of paying members on alibaba.com platform.
Cainiao logistics services (4% of the total revenues) — This business generated revenues of RMB4.5 billion ($653 million). The segment represents revenues from domestic and cross-border fulfilment services provided by Cainiao Network, after elimination of inter-company transactions.
Consumer services (5% of the total revenues) — This business generated revenues of RMB5.16 billion ($750 million).
Others business (1% of the total revenues) — This business generated revenues of RMB1.44 billion ($209 million), reflecting an increase of 58% year over year.
Cloud Computing: This segment comprises Alibaba Cloud that offers a complete suite of cloud services. Revenues in the quarter were RMB6.61 billion ($962 million), up 84% from the year-ago quarter, driven by an increase in spending by enterprise customers.
Digital Media and Entertainment: The segment operates businesses through media properties that include UCWeb, Youku Tudou, OTT TV service, Alibaba Music and Alibaba Sports. Revenues were RMB6.5 billion ($944 million), reflecting an increase of 20% on a year-over-year basis. The segment’s top-line growth was driven by an increase in revenues from mobile value-added services provided by UCWeb such as mobile search and game publishing, and an increase in subscription revenues from Youku.
Innovation Initiatives and Others: This segment includes businesses such as the YunOS operating system, AutoNavi, DingTalk enterprise messaging and others. Revenues in the quarter were RMB1.3 billion ($193 million), up 73% year over year, driven by an increase in revenues from Tmall Genie and Amap.
Alibaba Group Holding Limited Price, Consensus and EPS Surprise