Source: Company reports/Fung Global Retail & Technology

2Q17 RESULTS

Alibaba reported 2Q FY2017 revenues of ¥34.29 billion (US$5.14 billion), a 54.7% increase over the corresponding period in 2015, mainly driven by the accelerated growth of the core Commerce segment, inclusion of Youku Tudou to the Digital Media and Entertainment segment and strong growth in the Cloud Computing segment. Non-GAAP diluted EPS was ¥5.26 (US$0.79), ahead of the ¥4.72 (US$0.70) consensus estimate and up 45.7% year over year.

By Reporting Segment

Source: Company reports/Fung Global Retail & Technology

• Core Commerce: Revenue increased 40.8% year over year in the quarter, to ¥49 billion (US$4.27 billion). Within this segment, the China commerce retail business contributed 83% of the revenue, equivalent to ¥24.11 billion (US$3.62 billion), and up 40% year over year in the quarter. The strong growth was mainly driven by an increase in online marketing service revenue and consolidation of Lazada.
• The number of mobile monthly active users (MAUs) on China retail marketplaces reached 450 million, a 30.1% increase year over year in the month ended 30 September 2016. The number of annual active buyers on China retail marketplaces reached 439 million, a 13.7% increase year over year in the 12 months ended 30 September 2016.

Source: Company reports/Fung Global Retail & Technology

• Cloud Computing: Revenue increased 130% year over year in the quarter, to ¥49 billion (US$0.22 billion), which was mainly driven by the increase in the number of paying customers to 651,000, up 108% year over year in the quarter, as the company expanded its customer base across different industries and scales of business. Spending by customers increased as well, with more customers using value-added products such as complex data analysis and security.
• Digital Media and Entertainment: Revenue increased 301.8% year over year in the quarter, to ¥61 billion (US$0.54 billion), primarily owing to the inclusion of Youku Tudou, as well as the increasing revenue contribution from UCWeb, which provides value-added services including mobile search, news feed and game publishing.
• Innovation Initiatives: Revenue increased 6% year over year in 2Q, to ¥0.7 billion (US$0.1 billion). This segment comprises Alibaba’s strategic investments into future growth, which are in the initial investment phase, and includes businesses such as YunOS operating system for mobile devices, cars and IoTs, as well as AutoNavi, China’s leading mobile mapping and navigation app, with 29.8 devices running the app every day.

GUIDANCE

Alibaba maintains a policy of not providing earnings guidance with its quarterly reports. During the 4Q16 earnings call, Alibaba CFO Maggie Wu stated that with the strong margin in the core Commerce segment, the company will be able to invest in future growth areas including clouding computing, digital media and entertainment, as well as innovation initiatives. Alibaba expects these businesses to drive long-term value for both its customers and shareholders in the future.