3 Important Takeaways from Alibaba’s Latest Earnings

Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988) delivered a solid quarter. Here are three important takeaways for investors. – baba

Last week, Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988), a leading Chinese technology conglomerate, released its second-quarter results for the year ending 31 December, 2020.

Here are three important takeaways for investors from the announcement.

1. Key financials

I’ll start with a quick overview of Alibaba’s latest financials.

Revenue came in at RMB 153.8 billion (US$22.2 billion), an increase of 34% from the second quarter of 2019.

Income from operations was RMB 34.7 billion, up by 42% year-over-year. Similarly, adjusted EBITDA increased 30% year-on-year to RMB 51.0 billion.

In addition to the strong growth on the top and bottom lines, Alibaba also generated significant cash during the quarter.

Net cash generated by operating activities was RMB 50.1 billion and non-GAAP free cash flow was RMB 36.6 billion.

Overall, a commendable set of results thanks to the growth in core-commerce and cloud computing. I’ll expand more on these segments later.

2. Core commerce business

Alibaba’s core commerce business consists of two parts, which are the cash cows of the business – Taobao and Tmall platforms – and the fast-growing ventures like Cainiao, Lazada, Hema, and others.

The former continued to deliver strong performance, with revenue coming in higher by 34% year-on-year and adjusted EBITA growing 19% year-on-year to RMB 55.5 billion.

Higher monthly active users (MAUs) and annual spending per user drove Tmall’s gross merchandise value (GMV) growth, which improved by 27% year-on-year.

The remaining business, which includes Cainiao, Lazada, Eleme, Hema, and others, all saw revenue improve by more than double-digits on a year-on-year basis. These businesses (as a whole) remained unprofitable during the quarter.

3. Cloud computing

Started as an e-commerce player, Alibaba has diversified into adjacent categories like cloud computing, entertainment, and more.

Most of these businesses, though unprofitable, have been growing at breathtaking speed in the last few years.

Among these, Alibaba Cloud has shown the greatest promise thanks to its market-leading market share in China, and the Asia-Pacific.

Not only did the business grow at a breathtaking rate of 84% in 2019, it continued its strong performance during the quarter with 59% year-on-year jump in revenue.

This was thanks to stronger contributions from both public cloud and hybrid cloud businesses.

Foolish conclusion

Overall, Alibaba delivered a good quarter with growth across all segments.

Longer term, it should continue to benefit from various trends such as online shopping, digitalisation, new retail, and others.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.

The Motley Fool Hong Kong Limited( 2020

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