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Why Alibaba’s Earnings Keep Rising

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Dec. 4 2020, Updated 10:51 a.m. ET

Adjusted EPS came to $1.29 in 2Q18

Alibaba’s (BABA) earnings have risen consistently YoY (year-over-year) for the past five quarters, with adjusted EPS (earnings per share) moving from $0.79 in fiscal 2Q17 to $1.29 in fiscal 2Q18 (quarter ended September 2017). For the better part of the past five quarters, its earnings have also risen sequentially.

Alibaba posted adjusted EPS of $0.63 in fiscal 4Q17 and $1.17 in fiscal 1Q18. Alibaba’s fiscal 3Q is usually a strong quarter because it includes Single’s Day as well as December holiday sales.

Amid these quarterly EPS improvements, what’s noticeable from analyzing Alibaba’s financial reports is that its revenues have been growing faster than its expenses, even though the company has continued to invest in future growth.

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Revenues rose 61%, while costs rose 53%

Alibaba’s revenues rose 61% YoY in fiscal 2Q18, while costs and expenses rose 53% YoY, and so costs and expenses consumed 70% of Alibaba’s revenues in the latest quarter, compared with 73% in the year-ago quarter.

Still, it’s important to point out that the cost of revenues took an even bigger bite out of Alibaba’s revenues in its latest quarter than it did a year earlier. Increased investments in logistics to speed up its e-commerce order deliveries may have contributed to the rise in the cost of revenues in the latest quarter.

Rival EPS metrics

Alibaba’s adjusted EPS of $1.29 beat the consensus estimate by $0.26, compared with Amazon.com’s (AMZN) and eBay’s (EBAY) EPS of $0.52 and $0.48, respectively, in 3Q17. Fellow China-based (MCHI) rival JD.com (JD) posted EPS of $0.23 in 3Q17.

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