Alibaba reveals $6 billion share buyback as misses EPS forecast

Alibaba reveals $6 billion share buyback as misses EPS forecast

"Alibaba has done a lot of acquisitions this past year, so revenue growth might not be as fast as people expect". Alibaba generated CNY10 billion of free cash flow in fiscal 2017 and announced a $6 billion share buyback to offset stock option grants.

Alibaba's shares fell 2.7 per cent Wednesday in NY trading before earnings were announced. Initially, Alibaba shares fell as much as 5.6% to $114 in NY, the biggest intraday drop in nearly a year.

Revenue at e-commerce giant Alibaba jumped 60% in the first three months of the year, powered by a growing customer base in China.

While Chinese consumption remains strong, the world's second largest economy showed signs of cooling as retail sales and industrial output growth sputtered in April with regulators cracking down on swelling financial leverage. Net income attributable to shareholders rose to 10.65 billion yuan, or 60 cents per share, from 5.37 billion yuan in the year-earlier quarter.

"The March quarter is usually a slow season for e-commerce so margins usually come down a bit", said Ray Zhao, a Shenzhen-based analyst at Guotai Junan Securities Co. The increases were mainly driven by the robust revenue growth of its China commerce retail business and Alibaba Cloud, as well as the consolidation of recently acquired businesses Youku Tudou and Lazada, the company said. That is helping fuel billionaire founder Jack Ma's global expansion plan, which includes helping a million American businesses tap Chinese consumers, buying control of South-east Asian start-up Lazada Group, and reaching foreign shoppers through AliExpress. Despite stiff competition, Alibaba sees rural investment as manageable due to its franchise model, "where it passes on all commissions to local partners, but incurs limited losses", Leung said. While revenue in those nascent divisions is surging, they are yet to make money and costs are soaring as Tencent and Baidu Inc. vie with Alibaba for licensed content.

Revenue from the firm's core e-commerce business unit increased 47% to 31.57 billion yuan, above the previous quarter's 45% rise.

Alibaba's cloud business continued its run of triple-digit growth, recording revenue of 2.2 billion yuan for the quarter, up 103 percent from a year earlier.

"This strong mobile user growth reflects our efforts to establish the Taobao app as a destination platform not only for shopping, but also for sharing product knowledge and lifestyle content, which drives effective user engagement and retention", said Zhang.

"Our robust results demonstrate the strength of our core businesses, as well as the positive momentum of our emerging businesses", said Maggie Wu, the firm's chief financial officer.