Heading into the report, the stock had been on a little run, up 5% since August 15. Looking further back, BABA has been mired in a bit of slump, sliding 18% since mid-June. Headline risk regarding trade and tariffs has resulted in a more sour sentiment for BABA, as well as other Chinese stocks. Furthermore, several other Chinese internet names, like HUYA, WB, and JD, have issued cautious outlooks during this earnings season. Consequently, enthusiasm and expectations for the stock were ratcheted lower over the past few weeks. With that lower bar to hurdle, the stock was in good position for a pop on a decent report, which is what BABA delivered, overall.
Taking a closer look at the numbers, BABA posted EPS of $1.22, missing estimates by $0.02, and up just 1% year/year. Adjusted EBITDA showed better growth, climbing by 17% to $4.4 bln. However, Adjusted EBITDA margin slid sharply to 36% from 50% in the year ago period, continuing some weakness seen last quarter. Specifically, in Q4 Adjusted EBITDA fell to 31% from 43% in the year ago quarter.
A primary headwind here is that Cost of Revenue, as a percentage of revenue, jumped significantly to 54% from 35% in 1Q17. This is mainly due to investments regarding the consolidation of its Cainiao Network and the inclusion of the cost of inventory and logistics for its new retail businesses and Lazada.
The bright spot, though, came on the topline as revenue spiked by 61%, matching Q4's growth rate, to $12.23 bln, ahead of the $12.02 bln consensus. Breaking it down by segment, core commerce was up 61% (86% of revenue), cloud computing surged by 103% (6%), digital media jumped 46% (7%), and innovation initiatives were higher by 64%.
Outside of the headline numbers, there are also a couple key operating metrics that investors keep a close eye on. These include Annual active consumers and mobile monthly active users, and both showed solid growth. Specifically, annual active consumers increased by 24 mln from the 12-month period ended March 31, 2018, to 576 mln. This followed growth of 37 mln new active consumers in Q4.
Meanwhile, mobile monthly active users increased by 17 mln to 634 mln, which were also up 37 mln last quarter.
Lastly, the company did not provide an updated outlook for FY19. Last quarter, in its earnings press release, it commented that it expected FY19 revenue growth above 90%, equating to revenue of at least $63.8 bln vs. the $54.5 bln consensus.
All in all, it was a mixed report, but the main item investors are focused on with BABA is growth. With revenue up 61% again, the company didn't disappoint, which has shares popping higher today in early morning trade.