Alibaba (BABA) Q3 Earnings Report Review

Alibaba Group Holding Ltd. (NYSE:BABA) was founded by Jack Ma and his friends in 1999. It initially focused on the e-commerce market but later stepped into several businesses ranging from food delivery to cloud computing, helping it to become one of the world’s most valuable corporations. Its rapid growth and strong global presence enabled it to compete with the likes of leading tech giants, such as Google and Amazon.

The Chinese e-commerce giant recently reported its financial results for the third quarter above expectations, mainly due to the tremendous growth across its online marketplaces fueled by the Covid-19 pandemic.

Alibaba reported earnings of 79.43 billion yuan, or 28.85 yuan per share for the three months ended Dec. 31, well above 19.55 yuan per share in the comparable period of 2019. On an adjusted basis, earnings rose to 22.03 yuan per share, beating the consensus forecast of 20.71 yuan per share.

Revenue for the quarter climbed 37 percent on a year-over-year basis to 221.08 billion yuan, well above analysts’ average estimate of 214.293 billion yuan.

Here’s the sales performance of key segments:

– Revenue from the cloud computing business jumped 50 percent on a year-over-year basis to 16.12 billion yuan, with the segment reporting positive adjusted EBITA for the first time.
– Revenue from Alibaba’s core commerce business came in at 195.54 billion yuan, significantly higher than 141.48 billion yuan in the same period of 2019. The segment’s solid performance was mainly lifted by the 11.11 shopping festival.

Alibaba’s CFO Maggie Wu said in a statement, “We are pleased that our Alibaba Cloud business achieved positive adjusted EBITA during the quarter and Cainiao Network was operating cash flow positive. These progresses reflect our long-term approach to organically incubate and expand businesses from launch to profitability.”

Nevertheless, Alibaba shares fell nearly 4 percent on Tuesday despite beating expectations for the third quarter.