Alibaba Q2 Earnings: Clocks Only 3% Revenue Growth As Economic Slowdown And Regulatory Headwinds Weigh; Approves Additional $15B Buyback

Alibaba Group Holding Limited BABA reported second-quarter FY22 revenue growth of 3% year-on-year to $29.12 billion, missing the consensus of $29.45 billion.

Segments: China commerce segment revenue declined by 1% Y/Y to $19 billion, Cloud grew by 4% Y/Y to $2.92 billion, Local consumer services increased by 21% Y/Y to $1.84 billion, and International commerce rose by 4% Y/Y to $2.21 billion.

China Commerce (65% of revenue): The online physical goods GMV for Taobao and Tmall, excluding unpaid orders, recorded a low-single-digit year-over-year decline due to COVID-19 resurgence, restrictions, and competition.

Cloud (10% of revenue): The cloud segment comprising Alibaba Cloud and DingTalk grew driven by healthy public cloud growth.

International Commerce (8% of revenue): The combined number of orders of Lazada, AliExpress, Trendyol, and Daraz declined by 3% Y/Y due to the declining orders of Lazada and AliExpress due to change in the European Union's VAT rules, depreciation of the Euro against the U.S dollar and ongoing supply chain and logistics disruptions due to the Russia-Ukraine conflict. 

Cainiao (7% of revenue): Revenue grew 26% Y/Y to $2.57 billion.

Non-GAAP earnings per ADS of $1.82 beat the consensus of $1.64. Alibaba generated $5.02 billion in free cash flow.

Share Buyback: The board has approved upsizing the share repurchase program by another $15 billion and extending the program to the end of FY25. The company had repurchased $18 billion in shares as of November 16, 2022, under its existing $25 billion share repurchase program.

"We generated another quarter of healthy revenue growth of 3% year-over-year in spite of the impact on consumption demand by the COVID-19 resurgence in China as well as slowing cross-border commerce due to increasing logistics costs and foreign currency volatility," CFO Toby Xu said.

As initially planned, Alibaba did not expect to complete the voluntary conversion to dual listing on the Hong Kong stock exchange before 2022.

Price Action: BABA shares traded higher by 7.74% at $84.21 on the last check Thursday.