Alibaba Q2 Earnings, 2022 Guidance Trail Estimates, Dragged By Macroeconomic Weakness, Regulatory Crackdown, Investments

Alibaba Group Holding Limited BABA reported Thursday with September quarter results that missed Street expectations, dragged by a sequential decline in e-commerce sales.

The cloud business put in a strong showing. The company also issued a below-consensus forecast for fiscal year 2022.

Key Alibaba Q2 Metrics: Hangzhou, China-based Alibaba announced September quarter revenues of $31.15 billion, up 29.5% year-over-year. In the previous quarter, revenues rose 34% year-over-year to $31.87 billion.

Excluding the consolidation of Sun Art, the revenues would have risen 16% to $28.004 billion.

Non-GAAP net income per ADS came in at $1.74, down 38% year-over-year, and lower than the June quarter's $2.65 per ADS.

The results trailed the consensus estimates that called for a bottom-line result of $1.93 per ADS and revenues of $32.05 billion.

Annual global active consumers of the Alibaba ecosystem were at 1.24 billion for the 12 months ended Sept. 30, 2021, comprising 953 million consumers in China and 285 million consumers served overseas by Lazada, AliExpress, Trendyol and Daraz.

Net cash provided by operating activities came in at $5.561 billion and non-GAAP free cash flow fell 45% year-over-year to $3.451 billion due to a decrease in profit as a result of increased investments in key strategic areas.

The effective tax rate, excluding certain items, climbed to 24%, leading the company to foot a higher tax bill.

Alibaba's Segment Revenues: Commerce sales, accounting for 85% of the total revenues, rose 31% to $26.57 billion in the quarter. However, the segment saw a sequential drop from the $27.92 billion generated in the June quarter.

Ahead of the results, Mizuho Securities analyst James Lee said he expected below-consensus customer management revenue and commission revenue growth due to negative consumer sentiment from the impact of the services industry in regional lockdowns and uncertainties.

Related Link: Why These 2 Alibaba Analysts Expect Muted Near-Term, Positive Long-Term Prospects

The cloud computing business, which made up 10% of the total revenues, reported 33% growth to $3.11 billion, accelerating from the 29% growth in the June quarter.

Digital medium and entertainment revenues and innovation and initiatives and others came in at $8.08 billion and $1.43 million, respectively.

Alibaba's Forward Outlook: Alibaba said it now expects fiscal year 2022 revenue to grow by 20%-23%, below the 27.9% growth the Street was expecting.

For the fiscal year ending March 2022, analysts, on average, model non-GAAP earnings per ADS of $9.29 on revenues of $141.61 billion.

For the December quarter, analysts forecast non-GAAP earnings per ADS of $3.08 and revenues of $42.1 billion.

In the recently concluded Singles Day, the company raked in GMV worth $84.54 billion compared to $74.1 billion in 2020.

BABA Price Action: Alibaba shares have suffered in the face of a Chinese regulatory crackdown and have come steeply off the all-time high of $319.32 reached on Oct. 27, 2020. The shares have shed about 31% year-to-date. 

The sell-side finds Alibaba's valuation attractive against its fundamental prospects.

In premarket trading, Alibaba shares were down 5.63% to $152.49. 

Related Link: What To Expect When Alibaba Reports Its Q2 Results