Alibaba Earnings: BABA Crushes Wall Street's Q3 Earnings, Revenue Estimates

Alibaba announced earnings ()

Alibaba announced earnings ()

Shares of Alibaba (BABA) are rising more than 3% in Tuesday’s pre-market session after the company reported third quarter fiscal 2017 financial results that beat Wall Street estimates on both revenue and profits.

The Chinese e-commerce giant, which posted a 54% jump in quarterly revenue, benefited from a combination of factors including higher sales during its Single's Day shopping event. And the fact that the company beat on the bottom line by a whopping 17 cents underscores the extent to which analysts misjudged how quickly founder/executive chairman Jack Ma and CEO Daniel Zhang can accelerate profit margins.

In that vein, while BABA shares — already up 12% this year — are not a screaming bargain, good luck betting against it. Let’s go through the numbers.

“We reported another excellent quarter, with robust revenue growth of 54%. With three quarters of the year coming in ahead of expectations, we are adjusting up our 2017 fiscal year revenue guidance from 48% to 53% year-over-year growth,” said CFO Maggie Wu in a statement.

In the three months that ended December, Alibaba reported reported fiscal third-quarter profit of $2.57 billion, or $1 per share. On an adjusted basis, when taking out one-time gains and costs, earnings were $1.30 per share, which beats Thomson Reuters consensus estimates of $1.13 per share. The Hong Kong-based online retailer posted revenue of $7.67 billion, which also topped Street forecasts by about $375 million.

“Our robust December quarter demonstrates the strength of the Chinese consumer and Alibaba’s ability to create value across our vast ecosystem,” CEO Daniel Zhang said.

Beyond Single’s Day, the strong revenue beat was driven by the company’s emergence in the cloud, which posted a 115% year-over-year jump in revenue of RMB 1.76 billion (US $254 million). Not only is Alibaba enjoying an increase in the number of paying customers, the customers are also spending higher than usual, reflecting increased usage of services. Alibaba entered 2017 with a goal of challenging the likes of Amazon (AMZN) and Microsoft (MSFT) for cloud dominance. In that vein, this was a solid first step.

The company began reporting on each segment since the first quarter of fiscal 2017, breaking down the performances in four crucial areas. Growth its dominant core e-commerce segment continue to drive better-than-expected results. Plus, with revenue from the core e-commerce business growing 45% year over year, marking a more than the 41% jump sequentially, Alibaba — combined with its cloud growth — has tons of momentum heading into 2017 to send the share price higher. And the fact that Alibaba has friends in high places won’t hurt either.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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