YOU ARE AT:Network InfrastructureAlibaba misses estimates but beats EPS on tough headwinds

Alibaba misses estimates but beats EPS on tough headwinds

Alibaba’s quarterly cloud division revenue is up 20% year over year, sequentially down by 33%

Chinese hyperscaler Alibaba Group Holding on Thursday reported third-quarter revenue of RMB 242.58 billion (US$38.06 billion), missing consensus estimates by more than RMB 3 billion (US$474.07 million). The company beat estimates for earnings per share (EPS), however, reporting RMB 16.87 (US$2.66) compared to consensus EPS estimates of RMB 16.05 (US$2.53).

The 10% Alibaba reported is its slowest year over year (YoY) quarterly revenue growth since the stock went public in the U.S. in 2014. That news sent the stock downward in early trading. Alibaba is facing stiffer competition in its home market and tougher market regulation from Chinese authorities. 

Toby Xu, chief financial officer of Alibaba, told analysts on a conference call to discuss the earnings that Alibaba’s current trading price does not reflect the company’s value. Alibaba is focused on maintaining a strong cash position to remain flexible for future investments, he told investors.

Earnings for Alibaba’s customer management revenue (CMR) business, its single biggest business, showed a 1% YoY drop to RMB 100.09 billion (US$15.7 billion). International business grew 18% YoY to RMB 16.45 billion (US$2.59 billion). Revenues for Alibaba’s commercial retail business rose 7% YoY.

Cloud computing revenue for the quarter was RMB 19.54 billion (US3.08 billion), up 20% YoY but sequentially down by 33%. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the cloud computing business was down 66% sequentially.

Alibaba said the 20% growth reflected financial and telecom businesses, partially offset by slowing demand from Internet businesses such as online entertainment and education. Also to blame were the continuing effects of “a top cloud customer’s decision to stop using our overseas cloud services for its international business due to non-product related requirements.” 

This is convolutely phrased exception refers to TikTok parent company ByteDance, which moved from Alibaba Cloud outside China to quell international data privacy and security concerns.

“Alibaba’s Cloud revenue is becoming more diversified with revenue contribution from non-Internet industries steadily increasing,” the company reported. Non-internet industries recorded 52% of Alibaba’s Cloud revenue for the quarter, according to the company.

Alibaba counted among its quarterly wins for its cloud division: News of two new data centers to serve the Asia Pacific region in South Korea and Thailand, adding to its growing cloud services in 25 regions globally, including Germany and Dubai. Alibaba also touted ACK Anywhere, its container service for Kubernetes, which now delivers “low-cost, low-latency and localized public cloud products in all types of data centers.”

Alibaba also pointed to its emerging Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) managed service businesses. The offerings scored overall third highest in a recent Gartner Solutions survey. Gartner also recognized Alibaba’s Cloud Database Management Systems (DBMS) as a Magic Quadrant leader for the second year in a row.

ABOUT AUTHOR

Peter Cohen
Peter Cohen
Peter is Technology Editor for RCR Wireless News. His coverage areas include telco cloud and the convergence of 5G and cloud computing. Peter's background includes IT management and a decade as a senior editor at Macworld. He and his family live in Massachusetts.

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