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Alibaba Group Announces June Quarter 2024 Results

Business Wire 15-Aug-2024 6:30 AM

Alibaba Group Holding Limited (NYSE: BABA and HKEX: 9988 (HKD Counter) and 89988 (RMB Counter), "Alibaba" or "Alibaba Group") today announced its financial results for the quarter ended June 30, 2024.

"Our results this quarter demonstrated our strategy at work. Our focus on enhancing user experience by offering quality products at attractive prices with great service led to stabilizing market share of Taobao and Tmall Group as we returned the business on the growth trajectory. The cloud business achieved positive revenue growth momentum, driven by public cloud and AI-related product adoption as we continue to invest to maintain our market leadership," said Eddie Wu, Chief Executive Officer of Alibaba Group.

"In this quarter, we continue to invest for growth in our core businesses while reducing losses in other business units through operating efficiency. We maintained the integrity of our margins and delivered consistent adjusted EBITA. We also returned significant value to shareholders at a pace higher than past quarters, as we made US$5.8 billion of share repurchases that included a concurrent repurchase of shares in connection with our convertible notes offering. This transaction underscores our confidence in our business outlook," said Toby Xu, Chief Financial Officer of Alibaba Group.

BUSINESS HIGHLIGHTS

In the quarter ended June 30, 2024:

Revenue was RMB243,236 million (US$33,470 million), an increase of 4% year-over-year.

Income from operations was RMB35,989 million (US$4,952 million), a decrease of 15% or RMB6,501 million year-over-year, primarily due to a reversal of share-based compensation expense of RMB6,901 million during the same quarter in the prior year, as discussed in "June Quarter Other Financial Results" below. We excluded non-cash share-based compensation expense from our non-GAAP measurements. Adjusted EBITA, a non-GAAP measurement, decreased 1% year-over-year to RMB45,035 million (US$6,197 million).

Net income attributable to ordinary shareholders was RMB24,269 million (US$3,340 million). Net income was RMB24,022 million (US$3,306 million), a decrease of 27% year-over-year, primarily due to a decrease in income from operations and the increase in impairment of our investments, partly offset by the mark-to-market changes from our equity investments. Non-GAAP net income in the quarter ended June 30, 2024 was RMB40,691 million (US$5,599 million), a decrease of 9% compared to RMB44,922 million in the same quarter of 2023.

Diluted earnings per ADS was RMB9.89 (US$1.36). Diluted earnings per share was RMB1.24 (US$0.17 or HK$1.36). Non-GAAP diluted earnings per ADS was RMB16.44 (US$2.26), a decrease of 5% year-over-year. Non-GAAP diluted earnings per share was RMB2.05 (US$0.28 or HK$2.25), a decrease of 5% year-over-year.

Net cash provided by operating activities was RMB33,636 million (US$4,628 million), a decrease of 26% compared to RMB45,306 million in the same quarter of 2023. Free cash flow, a non-GAAP measurement of liquidity, was RMB17,372 million (US$2,390 million), a decrease of 56% compared to RMB39,089 million in the same quarter of 2023. The decrease in free cash flow mainly reflected the increase in expenditure related to our investments in Alibaba Cloud infrastructure and other working capital changes related to factors including our planned reduction of direct sales businesses.

Reconciliations of GAAP measures to non-GAAP measures presented above are included at the end of this results announcement.

BUSINESS AND STRATEGIC UPDATES

Taobao and Tmall Group

We increased investment in strategic initiatives such as price-competitive products, customer service, membership program benefits and technology, with the aim to enhance user experience. These efforts led to better consumer retention, increased purchase frequency, and positive feedback regarding the overall shopping experience.

We improved matching of products with user needs and conversion of user traffic to purchases through investments in technology such as recommendation and matching algorithms, as well as increasing price-competitive offerings through diversification of suppliers. In April, we launched our new AI-powered platform-wide marketing tool, Quanzhantui, which features automated bidding, optimized targeting and performance dashboard visualization. This new product aims at increasing merchants' marketing spending and improving their marketing efficiency, and we have observed steady increase in merchant adoption.

During the quarter, we achieved high-single-digit online GMV growth and double-digit order growth year-over-year, driven by increase in the number of purchasers and purchase frequency. In particular, we had a successful 6.18 Shopping Festival, which delivered strong online GMV growth year-over-year, as we implemented user-friendly promotion mechanisms and increased mindshare for being a comprehensive and price-competitive shopping destination.

The number of 88VIP members continued to increase by double-digits year-over-year, surpassing 42 million during the quarter. We aim to enlarge our pool of premium shoppers by continuing increasing the subscription of 88VIP membership and enhancing their purchase willingness through improved benefits and services.

Cloud Intelligence Group

For the quarter ended June 30, 2024, revenue from Cloud Intelligence Group was RMB26,549 million (US$3,653 million), a growth of 6% year-over-year.

During this quarter, overall revenue excluding Alibaba-consolidated subsidiaries grew over 6% year-over-year, driven by double-digit public cloud growth and increasing adoption of AI-related products. AI-related product revenue continued to grow at triple-digits year-over-year. We will continue to invest in customers and technology, particularly in AI infrastructure, to increase cloud adoption for AI and maintain our market leadership.

Alibaba Cloud has gained notable recognition as the cloud service provider of choice in China for AI training and applications. According to the recently released 2024 Gartner® "Magic Quadrant™ for Data Science and Machine Learning Platforms" report, Alibaba Cloud has been mentioned as the only Asia-based cloud service provider among global players.

Our ongoing commitment to open-source development has led to widespread recognition of our Qwen 2.0 series of large language models among global developers. Qwen 2.0 demonstrates substantial performance improvements across areas such as reasoning, code generation and mathematics, while enhancing safety features and expanding to support 27 languages. The number of paying users using Alibaba Cloud's AI platform (??) increased by over 200% quarter-over-quarter.

During the Paris 2024 Olympics, Alibaba Cloud's technology, which enables remote video production and transmission through cloud infrastructure, overtook satellite as the primary means of broadcast for the first time in Olympics history. Two-thirds of national broadcasters used live signals transmitted by Alibaba Cloud in real-time around the world, reaching billions of viewers. Alibaba Cloud also hosted more than 11,000 hours of Olympic Broadcasting Services-produced games related video content used by the broadcasters. Additionally, this is the first Olympic Games to extensively use AI, with Alibaba Cloud's AI technology deployed in 14 Olympic venues to generate high-fidelity 360-degree replays in real-time.

Alibaba International Digital Commerce Group ("AIDC")

For the quarter ended June 30, 2024, revenue from AIDC grew 32% year-over-year to RMB29,293 million (US$4,031 million). The strong performance was driven by growth of cross-border businesses, in particular the Choice business on AliExpress. During this quarter, our AliExpress and Trendyol platforms stepped up investments in initiatives to increase mindshare in select markets in Europe and the Gulf region. In addition, we continued our efforts to improve efficiency of our operations and investment.

The AliExpress platform expanded its supplier base and now includes local merchants to enrich its product offerings and better meet the needs of local consumers. During the quarter, AliExpress and Magazine Luiza ("Magalu"), a leading retailer in Brazil, entered into a partnership in which Magalu will open and operate a storefront on AliExpress and vice versa. In addition, during this quarter, the unit economics of the Choice business improved significantly on a sequential basis.

Cainiao Smart Logistics Network Limited ("Cainiao")

For the quarter ended June 30, 2024, revenue from Cainiao grew 16% year-over-year to RMB26,811 million (US$3,689 million), primarily driven by increase in revenue from cross-border fulfillment solutions.

We continue to drive synergies between Cainiao and our cross-border e-commerce business, as Cainiao executes its strategy to strengthen its end-to-end capabilities through developing a highly-digitalized global logistics network.

Local Services Group

For the quarter ended June 30, 2024, revenue from Local Services Group grew by 12% year-over-year to RMB16,229 million (US$2,233 million), driven by order growth of both Amap and Ele.me, as well as revenue growth from marketing services. For this quarter, Local Services Group's losses narrowed significantly on a year-over-year basis due to improving operating efficiency and increasing scale.

Digital Media and Entertainment Group

During the quarter ended June 30, 2024, revenue of Digital Media and Entertainment Group was RMB5,581 million (US$768 million), an increase of 4% year-over-year, primarily driven by GMV and revenue growth of its online ticketing platform for live events.

ESG Updates

In July, we published our 2024 Environmental, Social and Governance Report. The report provides updates on our key ESG strategic dimensions, including progress and performance in key initiatives such as our carbon neutrality pledges. The full version of the report is available on our official website.

Share Repurchases

During the quarter ended June 30, 2024, we repurchased a total of 613 million ordinary shares (equivalent to 77 million ADSs) for a total of US$5.8 billion, including the repurchase of approximately US$1.2 billion of ADSs through privately negotiated transactions concurrently with the issuance of our convertible notes on May 23, 2024.

As of June 30, 2024, we had 19,024 million ordinary shares (equivalent to 2,378 million ADSs) outstanding, a net decrease of 445 million ordinary shares compared to March 31, 2024, or a 2.3% net reduction in our outstanding shares after accounting for shares issued under our ESOP.

JUNE QUARTER SUMMARY FINANCIAL RESULTS

	Three months ended June 30,
	2023	2024
	RMB	RMB	US$	YoY % Change
	(in millions, except percentages and per share amounts)

Revenue	234,156	243,236	33,470	4%

Income from operations	42,490	35,989	4,952	(15)%⁽²⁾
Operating margin	18%	15%
Adjusted EBITDA⁽¹⁾	52,052	51,161	7,040	(2)%⁽³⁾
Adjusted EBITDA margin⁽¹⁾	22%	21%
Adjusted EBITA⁽¹⁾	45,371	45,035	6,197	(1)%⁽³⁾
Adjusted EBITA margin⁽¹⁾	19%	19%

Net income	33,000	24,022	3,306	(27)%⁽⁴⁾
Net income attributable to ordinary shareholders	34,332	24,269	3,340	(29)%⁽⁴⁾
Non-GAAP net income⁽¹⁾	44,922	40,691	5,599	(9)%⁽⁴⁾

Diluted earnings per share⁽⁵⁾	1.66	1.24	0.17	(26)%⁽⁴⁾⁽⁶⁾
Diluted earnings per ADS⁽⁵⁾	13.30	9.89	1.36	(26)%⁽⁴⁾⁽⁶⁾
Non-GAAP diluted earnings per share^{(1) (5)}	2.17	2.05	0.28	(5)%⁽⁴⁾⁽⁶⁾
Non-GAAP diluted earnings per ADS^{(1) (5)}	17.37	16.44	2.26	(5)%⁽⁴⁾⁽⁶⁾

____________________
(1)		See the sections entitled "Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures" for more information about the non-GAAP measures referred to within this results announcement.
(2)		The year-over-year decrease was primarily due to a reversal of share-based compensation expense of RMB6,901 million during the quarter ended June 30, 2023, as discussed in "June Quarter Other Financial Results" below.
(3)		The year-over-year decreases were primarily attributable to the increase in investments in our e-commerce businesses, partly offset by improved operating efficiency.
(4)		The year-over-year decreases were primarily due to a decrease in income from operations and the increase in impairment of our investments, partly offset by the mark-to-market changes from our equity investments, while net income attributable to ordinary shareholders and earnings per share/ADS would further take into account the net loss attributable to noncontrolling interests. We excluded non-cash share-based compensation expense, gains/losses of investments, impairment of goodwill and intangible assets, and certain other items from our non-GAAP measurements.
(5)		Each ADS represents eight ordinary shares.
(6)		The year-over-year percentages as stated are calculated based on the exact amount and there may be minor differences from the year-over-year percentages calculated based on the RMB amounts after rounding.

JUNE QUARTER SEGMENT RESULTS

Revenue for the quarter ended June 30, 2024 was RMB243,236 million (US$33,470 million), an increase of 4% year-over-year compared to RMB234,156 million in the same quarter of 2023.

The following table sets forth a breakdown of our revenue by segment for the periods indicated⁽¹⁾:

	Three months ended June 30,
	2023	2024		YoY %
	RMB	RMB	US$	Change
	(in millions, except percentages)
Taobao and Tmall Group:
China commerce retail
- Customer management	79,661	80,115	11,024	1%
- Direct sales and others⁽²⁾	30,167	27,306	3,758	(9)%
	109,828	107,421	14,782	(2)%
China commerce wholesale	5,125	5,952	819	16%
Total Taobao and Tmall Group	114,953	113,373	15,601	(1)%

Cloud Intelligence Group	25,065	26,549	3,653	6%

Alibaba International Digital Commerce Group:
International commerce retail	17,138	23,691	3,260	38%
International commerce wholesale	4,985	5,602	771	12%
Total Alibaba International Digital Commerce Group	22,123	29,293	4,031	32%

Cainiao Smart Logistics Network Limited	23,164	26,811	3,689	16%
Local Services Group	14,450	16,229	2,233	12%
Digital Media and Entertainment Group	5,381	5,581	768	4%
All others⁽³⁾	45,798	47,001	6,468	3%
Total segment revenue	250,934	264,837	36,443	6%
Unallocated	249	419	58
Inter-segment elimination	(17,027)	(22,020)	(3,031)
Consolidated revenue	234,156	243,236	33,470	4%

____________________
(1)		Starting from the quarter ended September 30, 2023, we reclassified the revenue of our DingTalk business, which was previously reported under Cloud Intelligence Group, to All others, the purpose of which was to provide DingTalk with greater autonomy to promote innovation and enhance competitiveness. Our CODM started to review information under this new reporting structure and segment reporting has been updated to conform to this change as well as the way we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.
(2)		Direct sales and others revenue under Taobao and Tmall Group primarily represents Tmall Supermarket, Tmall Global and other direct sales businesses, where revenue and cost of inventory are recorded on a gross basis.
(3)		All others include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent Information Platform (which mainly consists of UCWeb and Quark businesses), Fliggy, DingTalk (previously reported under Cloud Intelligence Group segment) and other businesses. The majority of revenue within All others consists of direct sales revenue, which is recorded on a gross basis.

The following table sets forth a breakdown of our adjusted EBITA by segment for the periods indicated⁽¹⁾:

	Three months ended June 30,
	2023	2024		YoY %
	RMB	RMB	US$	Change⁽⁴⁾
	(in millions, except percentages)
Taobao and Tmall Group	49,319	48,810	6,716	(1)%
Cloud Intelligence Group	916	2,337	322	155%
Alibaba International Digital Commerce Group	(420)	(3,706)	(510)	(782)%
Cainiao Smart Logistics Network Limited	877	618	85	(30)%
Local Services Group	(1,982)	(386)	(53)	81%
Digital Media and Entertainment Group	63	(103)	(14)	N/A
All others⁽²⁾	(1,733)	(1,263)	(174)	27%
Total segment adjusted EBITA	47,040	46,307	6,372	(2)%
Unallocated⁽³⁾	(1,463)	(871)	(120)
Inter-segment elimination	(206)	(401)	(55)
Consolidated adjusted EBITA	45,371	45,035	6,197	(1)%
Less: Non-cash share-based compensation expense	1,629	(4,109)	(565)
Less: Amortization and impairment of intangible assets	(2,479)	(1,792)	(247)
Less: Impairment of goodwill	(2,031)	–	–
Less: Provision for the shareholder class action lawsuits	–	(3,145)	(433)
Income from operations	42,490	35,989	4,952	(15)%

____________________
(1)		Starting from the quarter ended September 30, 2023, we reclassified the results of our DingTalk business, which was previously reported under Cloud Intelligence Group, to All others, the purpose of which was to provide DingTalk with greater autonomy to promote innovation and enhance competitiveness. Our CODM started to review information under this new reporting structure and segment reporting has been updated to conform to this change as well as the way we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.
(2)		All others include Sun Art, Freshippo, Alibaba Health, Lingxi Games, Intime, Intelligent Information Platform (which mainly consists of UCWeb and Quark businesses), Fliggy, DingTalk (previously reported under Cloud Intelligence Group segment) and other businesses.
(3)		Unallocated primarily relates to certain costs incurred by corporate functions and other miscellaneous items that are not allocated to individual segments.
(4)		For a more intuitive presentation, widening of loss in YoY% is shown in terms of negative growth rate, and narrowing of loss in YoY% is shown in terms of positive growth rate.

Taobao and Tmall Group

(i) Segment revenue

China Commerce Retail Business Revenue from our China commerce retail business in the quarter ended June 30, 2024 was RMB107,421 million (US$14,782 million), a decrease of 2% compared to RMB109,828 million in the same quarter of 2023 due to the 9% decrease in direct sales revenue described below. Customer management revenue increased by 1% year-over-year, primarily due to a high-single-digit year-over-year growth in online GMV, partly offset by a decline in take rate. The year-over-year decrease in take rate was primarily due to increasing proportion of GMV generated from new models that currently have lower monetization rates. Direct sales and others revenue under China commerce retail business in the quarter ended June 30, 2024 was RMB27,306 million (US$3,758 million), a decrease of 9% compared to RMB30,167 million in the same quarter of 2023, primarily attributable to the decline in sales of consumer electronics and appliances due to our planned reduction of certain direct sales businesses, partly offset by the increase in sales of groceries.

China Commerce Wholesale Business Revenue from our China commerce wholesale business in the quarter ended June 30, 2024 was RMB5,952 million (US$819 million), an increase of 16% compared to RMB5,125 million in the same quarter of 2023, primarily due to an increase in revenue from value-added services provided to paying members.