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BABA Earnings: Key quarterly highlights from Alibaba’s Q1 2023 financial results

Updated: Aug 18, 2022

To download BABA's Q1 2023 financial report

Hong Kong, China, August 4, 2022—Alibaba Group Holdings Limited (New York Stock Exchange Code: BABA and Hong Kong Stock Exchange Code: 9988, “Alibaba” or “Alibaba Group” or the “Group”) today announced its results for the quarter ended June 30, 2022 (“First quarter of Fiscal Year 2023” or “June Quarter”).

Zhang Yong, chairman of the board of directors and CEO of Alibaba Group, said: “In the past quarter, we have actively responded to various changes in the macro environment, and by continuously strengthening our ability to create value for our customers, we have always focused on long-term strategies.Although the growth rate of our business slowed relatively in April and May, we have seen signs of improvement in June.Based on the high-quality consumer groups we have and the resilience of diversified businesses that meet the different needs of our customers, we are full of confidence in the long-term growth in the future.”

Xu Hong, chief financial officer of Alibaba Group, said: “Despite the repeated challenges posed by the new Crown pneumonia epidemic, our revenue has performed steadily year-on-year. Through continuous improvement of operational efficiency and a greater focus on cost optimization, losses in key strategic businesses have narrowed.We recently announced our plan to apply for the addition of Hong Kong as another major listing place.By realizing the main listing on the exchanges of Hong Kong and New York, we will further expand and enrich our investor base.”

In the June quarter, the group's revenue was 205.555 billion yuan (RMB, the same below), which remained stable year-on-year.In the 12 months ended June 30, 2022, more than 123 million annual active consumers each spent more than 10,000 yuan on Taobao and Tmall; compared with the past 12 months, about 98% continued to remain active.As of this quarter, the Group had 25 million 88VIP members, and the average annual consumption of each member was more than 57,000 yuan.

In the quarter, non-GAAP net profit fell 30% year-on-year to 30.252 billion yuan, and non-GAAP diluted earnings per American depositary share fell 29% year-on-year to 11.73 yuan.Adjusted EBITDA (a non-GAAP financial measure) decreased by 15% year-on-year to RMB41.114 billion.Adjusted EBITA (a non-GAAP financial measure) fell 18% year-on-year to 34.419 billion yuan.

According to the share repurchase plan, the Group repurchased approximately 38.6 million U.S. depositary shares (equivalent to approximately 308.7 million common shares) for approximately US33.5 billion in the quarter; as of June 30, 2022, the group's share repurchase plan still has an unused quota of US112 billion.As of June 30, 2022, the Group's cash, cash equivalents and short-term investments amounted to RMB453.193 billion.

In the quarter, the revenue of the China Commercial Segment was 141.935 billion yuan.Despite the short-term challenges brought about by the new crown pneumonia epidemic, Taobao and Tmall consumers continue to achieve high retention rates, especially consumers with high spending power.In late May, with the normalization of logistics capacity and the strong support of merchants and loyal consumers for the Tmall 618 Ideal Life Carnival Season (Tmall 618), the group saw that GMV was recovering.Tmall 618 has achieved positive year-on-year growth in payment GMV, and the group has also seen that the purchasing power of 88VIP users is very strong.

Taote has been helping more and more factories to sell directly to consumers (M2C) on Taobao and Taote. In the June quarter, the payment GMV generated by M2C products on Taobao and Taote increased by more than 40% year-on-year.In this quarter, Taote's investment in optimizing user acquisition and increasing the average consumption of active consumers caused its losses to narrow significantly year-on-year and sequentially.Taocaicai quickly entered areas with high population density and considerable purchasing power.In the June quarter, Taocaicai's GMV grew rapidly, exceeding 200% year-on-year.In addition, driven by optimizing pricing strategies, improving procurement capabilities and reducing operating costs, Taocaicai's losses narrowed significantly sequentially.

In the quarter, the group's direct sales and other revenue increased by 8% year-on-year to 64.714 billion yuan, mainly due to Box Horse, Tmall supermarket and Gaoxin Retail benefiting from the strong growth in online purchases of food, groceries, and FMCG daily necessities.In this quarter, Box Horse and Gaoxin Retail accounted for 68% and 36% of online sales, respectively.With the group's multiple direct sales businesses and on-demand distribution facilities, the Group believes that in the future it has the ability to better meet the growing on-demand distribution needs of consumers for food, groceries and daily necessities.

The quarterly revenue of the International business segment increased by 2% year-on-year to 15.451 billion yuan.International retail commercial businesses include Lazada, Aliexpress, Trendyol and Daraz.The revenue of the international retail commercial business in the quarter was 10.524 billion yuan; in the quarter, Lazada's orders in Southeast Asia recorded a healthy year-on-year growth of 10%.Due to the lifting of restrictions on the new crown pneumonia epidemic in the region, offline channel shopping activities returned to normal, and order growth slowed year-on-year.By continuing to focus on improving operational efficiency, Lazada achieved a narrowing of losses sequentially and year-on-year in the quarter.In addition, in this quarter, Trendyol's overall orders increased by 46% year-on-year.In order to better serve the main consumer customer base, Trendyol continues to invest and expand into the high-frequency local life service business.As of June 30, 2022, Trendyol served more than 225,000 merchants through its market platform.

In the international wholesale business, revenue in the quarter increased by 12% year-on-year to 4.927 billion yuan, mainly due to the increase in value-added service revenue related to cross-border business.Alibaba.The transaction volume completed by com increased by 16% year-on-year, mainly benefiting from the steady growth of industrial product transactions.

The quarterly revenue of the local life service division increased by 5% year-on-year to 10.632 billion yuan; affected by the recurrence of the new crown pneumonia epidemic and epidemic prevention measures, the overall order volume in the quarter decreased by 5% year-on-year.In the ”Home to Home" business, Hungry continues to focus on strategic cities to improve user retention and operational efficiency, and increase the growth of non-meal delivery services; Hungry's non-meal delivery orders recorded steady growth in this quarter.In this quarter, the unit economic benefits of Hungry were positive, mainly due to the year-on-year increase in the average order amount, as well as the continuous focus on optimizing user acquisition investment and reducing the cost of delivery per order.

In terms of the ”To Destination" business (including Gaode and Flying Pig), Gaode recorded strong growth in June, with Gaode's average daily active users reaching a new high of more than 120 million, mainly due to the alleviation of the impact of the new crown pneumonia epidemic and the continuous enrichment of local content and services. Driven by this, Gaode users can discover, connect and visit local businesses; and Gaode's orders have also grown strongly.

The revenue of the Cainiao division in the current quarter (after offsetting the impact of cross-division transactions) increased by 5% year-on-year to 12.142 billion yuan, mainly due to the increase in revenue from logistics performance solutions and value-added services provided to China's retail commercial businesses.In this quarter, 70% of Cainiao's total revenue came from external customers.In China, Cainiao continues to expand value-added services, including door-to-door delivery services, and enhance the consumer experience through Cainiao Station, which complements China's commercial business.As of June 30, 2022, about 70% of Cainiao stations can provide home delivery services to consumers (excluding rural areas and universities, etc.).

Cainiao continues to expand its international logistics infrastructure by strengthening end-to-end logistics capabilities, including eHubs, trunk lines, sorting centers, and last-mile delivery networks.In July 2022, a new international sorting center of Cainiao was put into service in Israel, bringing the total number of overseas sorting centers of Cainiao to 10.In order to improve the distribution experience of global consumers, Cainiao continues to build and invest in capacity, and enriches its value proposition for cross-border merchants. For example, it increased the capacity of smart cabinets in this quarter and made complementary acquisitions to enhance the distribution capacity of the last kilometer in Europe.As of this quarter, Cainiao has more than 7,700 smart cabinets in service in Europe.

The quarterly revenue of the cloud business segment (after offsetting the impact of cross-segment transactions) increased by 10% year-on-year to 17.685 billion yuan.The year-on-year revenue growth of the Alibaba Cloud division reflects the recovery in the growth of the overall non-Internet industry, which is mainly driven by the financial services, public services, and telecommunications industries.In this quarter, customer revenue from the non-Internet industry accounted for 53% of Alibaba Cloud's total revenue (after offsetting the impact of cross-segment transactions), an increase of more than 5 percentage points over the same period last year.During the quarter, the adjusted EBITA (a non-GAAP financial measure) of the cloud business was 247 million yuan, mainly due to the group's increased investment in technology.

Alibaba Cloud continues to develop, expand and support our partners to better serve corporate customers; it also emphasizes measures to strengthen the ecosystem, and it is expected that the revenue contribution from ecological partners will be further expanded through these measures.In addition, Alibaba Cloud released a Cloud Infrastructure Processing Units (CIPU), a cloud infrastructure system independently developed and designed for cloud-native data centers, which has achieved many performance improvements such as network, storage, security, and computing power.Together with the Feitian Cloud operating system, the CIPU system is expected to become the core of our next-generation cloud computing infrastructure.Since the outbreak of the new crown pneumonia in March 2022, the hybrid office model has been more widely adopted in China, prompting companies, schools and institutions to use Dingding's products and services more, helping to strengthen long-term customer value and enhance user stickiness.

The Digital Media and Entertainment Division's revenue in the quarter was 7.231 billion yuan.In this quarter, Youku's average daily paid users increased by 15% year-on-year, mainly driven by high-quality content and continuous contributions from the 88VIP membership program.Through prudent investment in content and production capabilities, Youku continued to improve operational efficiency, resulting in a year-on-year narrowing of losses for five consecutive quarters in this quarter.

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