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Alibaba's Cloud Growth Outperforms Amazon And Microsoft: CNBC

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Alibaba's Cloud Growth Outperforms Amazon And Microsoft: CNBC

Chinese tech giant Alibaba Group Holdings Ltd (NYSE: BABA) had reported its second-quarter earnings above expectations.

In Thursday's earnings release, Alibaba posted a 30% year-over-year revenue growth to $22.8 billion, with the core commerce segment representing 84% of the total revenue share, and the Cloud Computing business accounting for a 9.6% revenue share.

Reported diluted Earnings Per ADS of $1.54 fell 62% YoY, and diluted earnings per share were HK$ 1.31 (approximately US$0.19). Each ADS is equivalent to eight ordinary shares of the company.

What Happened: Alibaba's cloud segment posted $2.19 billion in quarterly revenues, growing at 60% YoY, spurred by a rise in retail, finance, and internet businesses.

According to CNBC, the growth rate is much higher compared to Cloud market leaders Amazon Inc's (NASDAQ: AMZN) AWS and Microsoft Corporation's (NASDAQ: MSFT) Azure. AWS had grown by 29%, and Azure grew by 48% YoY in their last quarter — CNBC.

Why Does It Matter: Many of Alibaba's cloud services customers increased their spend up to 45% higher YoY this quarter.

At the end of Q2, its cloud portfolio serviced around 60% of A-listed companies. The company reported a Q2 operating loss of CNY 3.8 billion (roughly $570 million) from the cloud segment.

Alibaba CFO Maggie Wu expects the cloud segment to cross over the break-even threshold and achieve profitability in the upcoming two quarters, CNBC reported. Wu pointed to EBITDA as the profitability indicator. 

Alibaba's cloud segment reported a -1% EBITDA margin in the current quarter, improving from -6% in the last year, as it benefited from economies of scale.

Price Action: BABA ADR shares fell 2.69% to close at $287.75 on Thursday.

Image Courtesy: Wikimedia

 

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