BABA - Alibaba's Mixed Q4 2024 Results Highlight Profitability Woes Entering FY 2025

2024-05-14 13:34:53 ET

Summary

• Alibaba Group Holding Limited reported mixed fiscal Q4 results. The robust revenue beat was largely overshadowed by the steep 86% y/y plunge in net income attributable to ordinary shares.
• While the latest results show progress in Alibaba's prioritization of growth restoration in core e-commerce and cloud, diminishing profitability is raising investors' angst over implications of an intensifying "low-cost battleground."
• However, the continued ramp of returns coming out of Alibaba's investment cycle through calendar 2024, alongside moderating non-recurring impairment headwinds, will likely be margin accretive through 2025.

Despite Alibaba Group Holding Limited’s ( BABA ) mixed fiscal Q4 results and the post-earnings pullback, the stock has largely maintained its steep gains realized since mid-April. The company reported a revenue increase of 8% y/y to RMB 241.8 billion ($30.7 billion) for Q4, outperforming the average consensus estimate of $30.4 billion. Meanwhile, non-GAAP diluted EPS totaled RMB 10.14 ($1.40), missing the average consensus estimate of $1.42. More importantly, Q4 net income attributable to ordinary shareholders totaled RMB 23.5 billion, plunging 86% y/y. This has accordingly raised investors’ fears over substantial margin erosion risks amid a “ low-cost battleground ” in the local e-commerce market....

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