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Alibaba Outperformed Expectations in Fiscal 3Q16 Earnings

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GMV growth was sluggish

E-commerce giant Alibaba Group Holding (BABA) reported its fiscal 3Q16 earnings on January 28, 2016. Despite the economic downturn in China (FXI), the company performed well and beat analysts’ estimates.

The market reaction, however, was a bit dicey. Investors initially appreciated the results that raised the stock 3%, but it ended up losing 2% for the day at $68.10. The reason could be that Alibaba’s GMV (gross merchandising volumes) YoY (year-over-year) growth was sluggish compared to the same period last year. But in absolute terms, it increased by 69 billion renminbi YoY.

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An estimate comparison

Now let’s compare Alibaba’s revenues and non-GAAP (generally accepted accounting principles) diluted EPS (earnings per share) to the estimates.

  • Alibaba’s revenues came in at 34.5 billion renminbi, or $5.3 million. The estimate was 32.9 billion renminbi.
  • EPS was 6.4 renminbi, or $0.76. The estimate was 5.8 renminbi.

The increase in revenues was primarily driven by China’s commerce retail business, which increased by 35% YoY in terms of renminbi. Mobile revenues have seen an increase of 192% YoY.

AliCloud growth

During fiscal 3Q16, revenues from China’s (FXI) commercial retail business increased at a higher rate than the growth rate of GMV on the Chinese retail marketplace. This was primarily due to an increase in online marketing service revenue, which resulted from delivering a better value proposition to its merchants. Annual active buyers came in at 407 million compared to 334 million in the same period last year.

Alibaba’s AliCloud has made significant progress. Its computing and infrastructure business has seen an increase of 126% YoY to 819 million renminbi, or $126 million. The growth was driven primarily by an increase in customers and their use of cloud computing services for content delivery network and database services. Alibaba is still at its nascent stage of cloud computing compared to leading cloud providers such as Amazon (AMZN), Microsoft (MSFT), and IBM (IBM).

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