Is Alibaba’s high-growth era over?

Spark Global Limited reports:

Alibaba, perhaps one of the most closely watched Chinese companies by investors, reported results for the first quarter of its fiscal year 2022 on Aug. 3. At the same time, in the Tokyo Olympic Games, Ali, as the world’s top sponsor and the Olympic Broadcasting Service company jointly created the Olympic broadcasting cloud OBSCloud, is delivering the event to the global audience, the global public immersed in a warm sports atmosphere. Aliexpress and Lazada “online Help for the Olympics” also ignited the enthusiasm of overseas people who buy hands. So, the results of alibaba’s new quarter, can be as enthusiastic as the Olympic Games?

Spark Global Limited reports:

Spark Global Limited reports:

On the evening of August 3, Alibaba announced its FY2022 fiscal first quarter results, which ended on June 30.

Revenue rose 34 per cent year on year to rmb205.74 billion, missing market estimates of Rmb209.38 billion. Excluding the impact of the sun Art merger, revenue was 187.306 billion yuan (us $29.10 billion), up 22% from a year earlier. Alibaba returned to its normal growth rate of 30% this quarter, compared with 64% the previous quarter.

The market fell about 3% after the results were released, suggesting investors weren’t buying the report.

Screenshot from Tiger Securities

The company’s quarterly net profit was 43.44 billion yuan, exceeding market expectations of 29.331 billion yuan and slightly lower than 47.591 billion yuan in the same period last year. Operating profit was 30.847 billion yuan, down 11% year on year; Adjusted EBITDA fell 5% year-on-year to 48.628 billion yuan. Adjusted revenue per ADS for the first quarter was RMB16.60 versus the market estimate of RMB14.45.

Overseas business growth is strong, when will Ali become global Ali?

If we focus on specific businesses, we can see that the growth of this financial report is mainly from the core e-commerce segment, the revenue of 180.2 billion yuan, a year-on-year increase of 35%, accounting for 85% of the total revenue.

E-commerce, which has been the main driver of Alibaba’s growth compared with cloud computing and digital media, also had its share of concerns this quarter. In the last quarter, Alibaba’s revenue surged largely because of other sources, reaching a staggering 54.8 billion yuan, up 82 percent from a year earlier. The revenue is mainly due to the impact of alibaba’s acquisition of Sun Art in October last year.

Just like Ali. In the financial report, Alibaba also mentioned that if the revenue generated by sun Art’s consolidated statement is deducted, alibaba’s total revenue is 187.3 billion yuan, up only 22% year on year, while the core e-commerce revenue is 161.8 billion yuan, up 21% year on year.

So what’s causing the slowdown in Alibaba’s core e-commerce business? A slowdown in the industry’s growth trend is one of the main reasons. On the basis of last year’s high base, industry growth has slowed down. According to data from the National Bureau of Statistics, the total retail sales of consumer goods in June totaled 3.7586 trillion yuan, up 12.1% year on year. That’s up 10.0% from June 2019.

By consumption type, the retail sales of goods in June reached 3,366.3 billion yuan, up 11.2% year on year, and the two-year average growth rate was 5.4%

In addition, Alibaba has introduced a series of measures to reduce fees and profit merchants, which has further reduced customer service revenue.

The relatively happy part of the e-commerce business is the international business. Alibaba’s Lazada,AliExpress, Trendyol and Daraz have been very strong, with the Alibaba ecosystem reaching 1.18 billion global annual active consumers in the fiscal first quarter ended June 30, 2021, an increase of 45 million from the previous quarter. The number of active consumers in China is 912 million, and the number of active consumers overseas, led by Lazada,AliExpress, Trendyol and Daraz, is 265 million. This growth is not only reflected in users, but also in revenue growth. Thanks to the development of international business, alibaba’s global retail and wholesale markets have maintained a high growth rate of 54% and 37%.

Photo from Alibaba

Alibaba Cloud is not growing as fast as Google and Amazon, and the fallout from TikTok’s termination continues

Ali Cloud is the growth potential of the business, can also be said to be the source of many investors’ confidence in Ali. Revenue from cloudcomputing was 16.05 billion yuan in the quarter, up 29% from a year earlier and a record low. Compared with Google, which had already reported in the quarter, its cloud revenue reached $4.6 billion, up 54% from a year earlier; Compared to Amazon, its AWS cloud services net sales were $14.81 billion, up 37% from a year earlier. Both international players are growing faster than Alibaba Cloud.

The decline in cloud computing revenue growth was mainly a continuation of the impact of the previous quarter, with single-head customer revenue from the Internet sector declining, mainly due to the US impact. TikTok used to use Alibaba’s cloud services overseas, but decided to end its international relationship with Alibaba and switch to a cloud provider. As a result of the termination of cooperation, the impact of the decline in the growth rate of Ali Cloud is sustainable. In a conference call, Alibaba said the impact of losing big customers for its cloud services would continue until the end of the fiscal year, when its international business is completely separated from Aliyun. In addition, the online education industry overhaul will also affect Aliyun’s revenue.

When it comes to digital media and entertainment and innovation strategy, the overall performance is mediocre. Revenue from Digitalmedia and entertainment was 8.073 billion yuan, up 15% year on year. Revenue from Innovationinitiatives andother was rmb1.375 billion, up 37% year on year. Much of that growth came from Dingdingu, which Alibaba included in its innovation strategy and other businesses during the quarter.

Conclusion:

Alibaba’s board recently authorized the company to increase its buyback program from $10 billion to $15 billion through the end of 2022, a move interpreted by the market as an attempt to save its share price. Alibaba’s shares are at a discount of nearly 40 per cent from their highs around Singles’ Day last year. In the face of slowing growth and a tightening external policy environment, the buyback plan reflects Alibaba management’s confidence in the company’s long-term growth.

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