I’ve just finished digesting the BABA earnings report and conference call. It was a disappointing quarter, with only 10% revenue growth and ~25% decline in adjusted net income, which excludes a big write-down in goodwill on their media and entertainment business. GAAP net income was down 75%. Income from operations was down 86%, 34% excluding the impairment of goodwill, with other decrease from increased investments and support of merchants.
That said, the business was still quite profitable, with $3.2 billion GAAP net income attributable to ordinary shareholders, and net cash from operations $12.6 billion. They have a huge cash war chest and are investing heavily in a foundation for future growth on many fronts. They are buying back tons of shares with the price down so low. Their cloud business grew 20% year over year, and I think this is the last quarter which will directly reflect the loss of a large foreign customer due to non-product reasons (probably US privacy/security regulations).
This is not the growth picture I thought I was buying last year, but it still looks like a strong value at recent prices so I’m not selling. China is looking at some serious macroeconomic problems from the real estate sector, from what I’ve read superficially, and Covid continues to muck up their economy, so I don’t expect robust growth to return soon, but it’s still a powerhouse of a business perfectly situated to grow as China continues to modernize and become more wealthy. They are on track to hit 1 billion active Chinese customers this year.