$Alibaba(BABA)$ $Alibaba(09988)$ revealed its Q4 results for fiscal year 2024 (ending March 31st) just now, which missed expectations, and its stock price fell 5% in pre-market:
Specifically, Their revenue was 2218.7 billion yuan, a 6.6% increase year-on-year, slightly exceeding analysts' expectations of 2198 billion yuan.
Looking at the different segments:
Revenue for the Taobao and Tmall Group rose 3.7% year on year to 93.2 billion yuan;
Revenue for the International Digital Commerce Group was 27.4 billion yuan, a whopping 45% increase;
Revenue for the Local Services Group was 14.6 billion yuan, up 18.5%;
Revenue for Cainiao was 24.56 billion yuan, a 29.8% increase;
Revenue for the Cloud Intelligence Group was 25.6 billion yuan, up 3.4%;
Revenue for the Digital Media and Entertainment Group slipped 0.9%, and Other segments dipped 3.5%.
Compared with analyst expectations, except for Entertainment, the other business revenue exceeded expectations.
But, shockingly, Alibaba's profit margin collapsed!
Their net profit in 24Q4 was just 900 million yuan, down 96% year-on-year. After excluding one-time costs like investment losses and equity incentives, adjusted net profit was 24.4 billion yuan, still down 11%.
Operating profit, which gives a true picture of their business, was 14.77 billion yuan, down 3% and below analysts' estimates.
By segments, operating profit of Taobao and Tmall fell 1% year-on-year, International Digital fell 88%, Cainiao fell 321%, other fell 52%. At the same time, Cloud increased 45% year-on-year, Local Services rose 21%, Entertainment increased 22% :
Digging deeper, Taobao and Tmall's profits slipped due to increased investments in user experience and tech infrastructure. International Digital saw a similar dip due to investments in shorter delivery times and maintaining price competitiveness. Cloud Intelligence's profits rebounded as Alibaba ditched less profitable projects.
Cainiao's losses widened due to one-time retention incentives for employees after the IPO cancellation, but they're expected to break even in the future. Local Services and Entertainment, not Alibaba's core segments, didn't affect the share price much, so we can overlook them for now.
Apart from increased investments, Alibaba also splurged on sales and marketing, spending 288 billion yuan, up 15.6%, far outpacing their overall revenue growth.
In general, Alibaba's strategy of increasing investments to boost revenue seems to have backfired. Instead of efficient cost-cutting, they're now increasing costs and reducing profits. That's why the share price is tanking!
But on the bright side, Alibaba repurchased $4.8 billion worth of shares in Q1 and announced a dividend of $4 billion. If they continue with these buybacks, it could help support the share price.
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