Alibaba Earnings Rise as Revenues Continue to Soar

Alibaba Group Holding Ltd. (NYSE: BABA) reported fiscal second-quarter results before markets opened Wednesday. The China-based internet giant reported adjusted diluted earnings per American depositary share (ADS) of $0.79 on revenues of $5.14 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.69 on revenues of $5.03 billion. One ADS is equal to one ordinary share, and the exchange rate used is based on 6.6685 yuan per dollar.

The number of annual active buyers on Alibaba’s retail marketplaces totaled 439 million at the end of the second quarter, up by 5 million sequentially. Mobile active users rose from 346 million at the end of last September to 450 million at the end of September 2016. The company’s core commerce revenues rose by 41% year over year, the cloud-computing segment revenues rose by 130%, digital media and entertainment segment revenues rose 302%, and other revenues rose 78%.

Operating income rose 41% year over year to $1.36 billion in the quarter. The overall cost of revenue rose to 38% of revenue, compared with 32% in the year-ago quarter.

The company’s CEO, Daniel Zhang, said:

Beyond the strong performance of our core commerce business, we are pleased with the continued rapid growth of our cloud computing business. We also see huge potential in our newly integrated digital media and entertainment unit. By combining engaging online experiences with highly relevant content, we delivered impressive financial and operational results in the quarter across the company.

Alibaba did not provide a forecast in its press release. Analysts expect earnings per ADS of $1.13 on revenues of $7.38 billion in the company’s third fiscal quarter. For the full fiscal year ending in March, consensus estimates call for earnings per ADS of $3.22 on revenues of $22.43 billion.

Alibaba’s ADSs traded up about 4% in Tuesday’s premarket session, at $105.32 in a 52-week range of $59.25 to $109.87. The consensus 12-month price target was $116.33 a share before Wednesday’s announcement. The high price target estimate is $137.72.