Market Overview

Alibaba Group Announces June Quarter 2017 Results

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Alibaba Group Holding Limited (NYSE:BABA) today announced its financial
results for the quarter ended June 30, 2017.

"Alibaba had a strong start to fiscal 2018, reflecting the strength and
diversity of our businesses and the value we bring to customers on our
platforms. Our technology is driving significant growth across our
business and strengthening our position beyond core commerce," said
Daniel Zhang, Chief Executive Officer of Alibaba Group. "We are excited
about the future as we continue to innovate and drive synergies among
the businesses throughout the Alibaba ecosystem."

"We delivered excellent results in the first quarter, with robust
revenue growth of 56%. The significant growth in customer management
revenue represents the differentiated business value we provide to our
customers," said Maggie Wu, Chief Financial Officer of Alibaba Group.
"It is our intention to continue investing in long-term growth
opportunities, some of which are already delivering significant value to
customers and investors."

BUSINESS HIGHLIGHTS

In the quarter ended June 30, 2017:

  • Revenue was RMB50,184 million (US$7,403 million), an increase
    of 56% year-over-year.
  • Revenue from core commerce increased 58% year-over-year to RMB43,027
    million (US$6,347 million).
  • Revenue from cloud computing increased 96% year-over-year to RMB2,431
    million (US$359 million).
  • Revenue from digital media and entertainment increased 30%
    year-over-year to RMB4,081 million (US$602 million).
  • Revenue from innovation initiatives and others increased 21%
    year-over-year to RMB645 million (US$95 million).
  • Annual active consumers (formerly annual active buyers) on our
    China retail marketplaces reached 466 million, an increase of 12
    million from the 12-month period ended March 31, 2017.
  • Mobile MAUs on our China retail marketplaces reached 529
    million in June, an increase of 22 million over March 2017.
  • The number of paying customers of our cloud computing business
    grew to 1,011,000 from 874,000 in the previous quarter. Operating loss
    from cloud computing was RMB532 million (US$78 million) and adjusted
    EBITA loss was RMB103 million (US$15 million).
  • Net income was RMB14,031 million (US$2,070 million), income
    from operations
    was RMB17,513 million (US$2,583 million) and adjusted
    EBITDA
    was RMB25,124 million (US$3,706 million). Operating
    margin
    was 35%, adjusted EBITDA margin was 50% and adjusted
    EBITA margin for core commerce
    was 63%.
  • Diluted EPS was RMB5.65 (US$0.83) and non-GAAP diluted EPS
    was RMB7.95 (US$1.17).
  • Net cash provided by operating activities was RMB25,311 million
    (US$3,733 million) and non-GAAP free cash flow was RMB22,149
    million (US$3,267 million).

BUSINESS AND STRATEGIC UPDATES

Core Commerce

Core Commerce – consumer engagement and technology drive
monetization.
Revenue acceleration in our China retail marketplaces
continues to benefit from robust growth in average spending per merchant
and the number of paying merchants, which reached a historical high
during the quarter. At the core of our broader value proposition to
merchants is the consumer insights gathered from providing e-commerce
and entertainment services to consumers within our ecosystem, which
enable our merchants to target, engage and manage their customer assets
along the entire consumer journey. This broader value proposition is
recognized by the merchants and reflected in our customer management
revenue (formerly online marketing service revenue).

Taobao – a vibrant ecosystem driven by personalized content and
innovation.
Taobao App's highly relevant and engaging content
continues to drive robust growth in active users and engagement. In the
quarter ended June 30, 2017, mobile MAUs on our China retail
marketplaces increased by 22 million to a total of 529 million mobile
MAUs, driven by the strength of the Taobao App. In May, we rolled out a
new mobile Taobao user interface that integrates the latest in
personalization technology, which we believe will continue to improve
user experience and enhance engagement.

Taobao is a vibrant ecosystem that promotes, enables and benefits from
the innovation of China's SME's and entrepreneurs. In July, we held the
second annual Taobao Maker Festival in Hangzhou, which showcased
original quality designs and trend setting products from millennial
entrepreneurs who embody the innovative thinking of China's younger
generation. Tens of millions of consumers attended the five-day event
virtually and in person.

Tmall – gaining B2C market share in core categories and more
collaboration with brands.
Tmall recorded 49% year-over-year growth
for physical goods GMV in the quarter ended June 30, 2017. Fashion and
apparel, consumer electronics and fast moving consumer goods, or FMCG,
were among the key categories that experienced robust and reaccelerating
GMV growth during the quarter.

We have established Tmall as a leading brand-building and distribution
platform that is capturing increasing digital marketing and commerce
spending from owners of both domestic and international branded products
that are doing business in China. During the quarter, international
brands such as Moet Hennessy, Victoria's Secret, Roland and Abercrombie
& Fitch established Tmall flagship stores to engage with and sell their
products to consumers on our platforms.

New Retail – seamless integration of online and offline retail
experience.
In May 2017, we completed the privatization and the
acquisition of a controlling stake in Intime Retail Group for HK$12.6
billion (US$1.6 billion). Intime is a leading department store and mall
operator in China with 49 department stores and shopping malls as of
June 30, 2017. We expect Intime to support our strategy to transform
conventional retail, especially in soft goods and branded products, by
leveraging our substantial consumer reach, insight and technology.

In the fresh food category, we incubated Hema in 2015 to digitize and
transform the traditional supermarket and big-box retail format in
China, using technology to offer consumers a more efficient and flexible
shopping experience whether they are online or in the store. As part of
our New Retail strategy, Hema leverages our consumer insight, mobile
technologies and other proprietary in-store technologies to provide a
seamless omni-channel experience for consumers. Hema stores double as
warehouses for online orders, and our proprietary fulfillment system
enables 30-minute delivery to customers.

International – laying the foundation for long-term growth. Our
cross-border and international consumer businesses continue to exhibit
robust growth. Revenue from our international commerce retail business
reached meaningful scale at RMB2,638 million (US$389 million) in the
quarter ended June 30, 2017, representing a 136% year-on-year growth,
driven by strong growth in our Southeast Asian platform Lazada and our
China outbound platform AliExpress. The growth of Lazada and AliExpress
further expands our customer base outside China.

During the quarter we increased our ownership in Lazada to 83%,
reflecting confidence in the growth potential of its businesses and the
Southeast Asian markets. During the quarter, Lazada launched the
"LiveUp" subscription-based membership program in Singapore, with free
shipping for eligible products and grocery deliveries within 24 hours.
Members also enjoy free trial subscriptions from Netflix and VIP
benefits from Uber and UberEats. Under cooperation with Taobao
Marketplace, Lazada launched "Taobao Collection" in Singapore and
Malaysia, which expands Lazada's product offering by giving local
customers access to high-quality products from China. We will continue
to aggressively invest in the high potential markets of Southeast Asia
as well as launch innovative services to benefit consumers in the region.

This quarter, we made significant progress in educating the US market on
Alibaba and the opportunities we enable for businesses of all sizes to
use our platform to build their brands and sell their products to
millions of Chinese consumers who desire quality American goods. In
June, we hosted Gateway '17 in Detroit, Michigan – a conference where
3000 U.S. small businesses, farmers, brands and entrepreneurs attended
to learn about how to sell to China using Alibaba as their gateway.
Businesses such as Gerber, Stadium Goods, and 100% Pure shared their
experiences on how Alibaba has helped them grow their businesses by
tapping into the China market, which is good for the Chinese consumer as
well as for business growth and job creation in the United States. On
September 25, we will host a similar event in Canada to educate and
engage Canadian businesses in selling to China.

In August, with Marriott, we established a joint venture to provide a
completely new travel experience for hundreds of millions of Chinese
consumers with personalized VIP experiences, cashless travel and an
integrated loyalty program. Marriott's award-winning loyalty platform
coupled with our unparalleled digital consumption ecosystem in China
present tremendous opportunities to create the best-in-class membership
platform for over 500 million active mobile users on our China retail
marketplaces.

Cloud Computing

Alibaba Cloud reached a key milestone of exceeding one million paying
customers, an increase of 137,000 from the previous quarter. Cloud
computing revenue grew 96% year-over-year to RMB2,431 million (US$359
million), driven by robust paying customer growth and improving revenue
mix of higher valued-added services, as reflected by ongoing ARPU
expansion. Market expansion remains our top priority, and we will
continue to invest to acquire customers by developing innovative
solutions and deploying efficient and cost effective products and
services.

During the quarter, Alibaba Cloud launched several new products that
lower the barrier of migrating large-scale data to cloud services for
traditional companies. For example, Cloud Storage Gateway allows
customers to seamlessly connect their on-premise storage with Alibaba
Cloud storage. Lightning Cube, a petabyte-scale data transport solution,
helps enterprises to transfer large amounts of data at high speed
between their data centers and Alibaba Cloud through portable storage
appliances. Alibaba Cloud also continues to expand its Elastic Computing
Service product portfolio. As of mid-August 2017, Alibaba Cloud is
providing 19 types of Elastic Computing Service products that can be
applied to 173 application scenarios, such as artificial intelligence,
healthcare, video streaming, finance, e-commerce, and IoT.

Our cloud computing customer base spans a variety of industries and
businesses from startups to large corporations, covering industry
segments across consumer brands, energy, financial institutions,
healthcare, manufacturing, media and retail. Selected enterprise
customers in China include:

  • CITIC Group, a major state-owned multinational diversified company in
    China, is using our hybrid cloud solutions to enhance the integration
    of internal processes;
  • China Huaneng Group, a fortune 500 company, adopted our hybrid cloud
    solution to digitize and upgrade its global procurement system;
  • ofo, a leading, rapidly growing bike sharing company in China, is
    expanding the range of cloud services including security, storage and
    big data, to support its business expansion; and
  • PICC Finance, a subsidiary of PICC, one of the largest insurance
    companies in Asia, will adopt our financial vertical solution to
    support its expansion into Internet financing services.

On the international front, Alibaba Cloud continues to expand its global
footprint and customer base. During the quarter, we announced plans to
build two new data centers in Malaysia and Indonesia, adding to our
presence in over 14 countries and regions to serve customers worldwide.
For example, AirAsia, a Pan-Asian airline based in Malaysia and the
largest low-cost carrier in Asia in terms of fleet size, began to
operate their business on our cloud computing platform, utilizing
security and content delivery network services.

Digital Media and Entertainment

During the quarter, the management focus of our digital media and
entertainment segment was on broadening our access to quality content,
developing Youku's subscription based business, and expanding the
products and services of UCWeb.

Our strategy of acquiring and developing a mixture of licensed and
original content yielded hit drama and variety shows during the quarter.
In addition, daily average subscribers of Youku video subscriptions
increased over 100% year-on-year in the quarter ended June 30, 2017. We
believe a strong pipeline of content, especially with a focus on
original content with visibility of content availability and broadcast
timing flexibility, will bring us sustainable long-term advantages in
video entertainment.

UCWeb continues its strategy of deepening its products and services
beyond the browser. We saw increased engagement of value-added services
of UCWeb. We will continue to invest in product expansion as well as the
international footprint of UCWeb.

Innovation Initiatives

We continue to deliver innovative products that serve the day-to-day
needs of our customers. In July we launched our first AI-powered voice
assistant, Tmall Genie, which was developed by our AI Lab leveraging our
group's proprietary AI technology. The Tmall Genie assists with
shopping, ordering local services, searching for information,
controlling smart appliances and playing multi-media content, including
educational stories and music for children. Tmall Genie is equipped with
our proprietary "voice-print payment" technology that accurately
identifies a user's voice (analogous to using finger-print to identify
individuals) to authenticate the user and complete the payment process.

Commitment to Intellectual Property Protection

In August, 180 brand representatives attended our second Brand Rights'
Holder Day in Beijing. The event featured presentations from our
brand-protection team and workshops detailing our initiatives in
intellectual property protection. Brands and rights holders see
increasing benefits from the unique aspects of our technology to monitor
and to protect the integrity of our platforms. In the first month after
the recent implementation of technology enhancements on our IP
protection platform, almost all cases submitted by rights holders were
handled and closed within 24 hours.

We also announced a partnership with French luxury group Kering to
cooperate in intellectual property protection. The two companies have
established a joint task force to collaborate fully, exchange
information, and work closely with law enforcement to take appropriate
action against infringers of Kering's brands identified with Alibaba's
advanced technology capabilities. As part of the agreement, Kering
dismissed the lawsuit against us and our affiliate Alipay in the federal
district court in New York.

Updates on Equity Investees and Others

Cainiao Network – data enabled logistics network. During the
quarter, Cainiao Network's platform enabled the delivery of an average
of 55 million packages per day on our China retail marketplaces. Cainiao
Network continues to focus on improving user experience and merchant
efficiency. For example, in June, Cainiao Network launched automated
guided vehicles in a fulfillment center in Guangdong, which improved
sorting efficiency.

Koubei and Ele.me – restaurant, food delivery and local services.
Koubei, our local services joint venture with Ant Financial, generated
RMB92 billion (US$14 billion) in payment volume transacted through
Alipay during the quarter ended June 30, 2017, compared to RMB75 billion
in the prior quarter, achieving a sequential growth rate of 23%. During
this quarter, we and Ant Financial jointly invested further capital into
food delivery company Ele.me, an equity investee, to fuel its rapid
expansion. Ele.me currently provides services in over 2,000 cities and
counties.

Social Impact

Job training for women. In June, the Alibaba Foundation expanded
its job creation program to Hubei Province to support and train
impoverished mothers with professional skills to enter the e-commerce
industry. As of July 2017, the program, which the Alibaba Foundation
started in 2010, has helped more than 5,000 mothers in different Chinese
cities gain employment.

Recovery of missing children. The "Reunion" platform that helps
locate missing children across China celebrated its first anniversary in
May 2017. The Reunion platform is an ecosystem of connected Alibaba and
partner mobile apps that provides the infrastructure for law enforcement
authorities to receive crowd-sourced information from the public in
order to more effectively conduct searches for missing children.
According to the Chinese authorities, the platform had successfully
located 1,274 missing children since inception in May 2016, with a 97%
success rate.

Cash Flow from Operating Activities and Free
Cash Flow

Net cash provided by operating activities in the quarter ended June 30,
2017 was RMB25,311 million (US$3,733 million), an increase of 69%
compared to RMB14,958 million in the same quarter of 2016. Free cash
flow, a non-GAAP measurement of liquidity, in the quarter ended June 30,
2017 was RMB22,149 million (US$3,267 million), an increase of 74%
compared to RMB12,745 million in the same quarter of 2016. A
reconciliation of net cash provided by operating activities to free cash
flow is included at the end of this results announcement.

KEY OPERATIONAL METRICS*

   

June 30,
2016

   

March 31,
2017

   

June 30,
2017

    % Change
YoY     QoQ
 
China Commerce Retail:
Annual active consumers(1) (in millions) 434 454 466 7% 3%
Mobile monthly active users (MAUs)(2) (in millions) 427 507 529 24% 4%
Cloud Computing:
Paying customers(3) (in thousands) 577 874 1,011 75% 16%

_________________

*     For definitions of terms used but not defined in this results
announcement, please refer to our annual report on Form 20-F for the
fiscal year ended March 31, 2017.
(1) For the twelve months ended on the respective dates.
(2) For the month ended on the respective dates.
(3) As of the respective dates.
 

SUMMARY FINANCIAL RESULTS

    Three months ended June 30,    
2016       2017
RMB RMB     US$(1) YoY % Change
(in millions, except percentages and per share amounts)
 
Revenue 32,154 50,184 7,403 56 %
 
Income from operations 8,814 17,513 2,583 99 %
Operating margin 27 % 35 %
Adjusted EBITDA(2) 14,963 25,124 3,706 68 %
Adjusted EBITDA margin(2) 47 % 50 %
Adjusted EBITA(2) 13,759 23,518 3,469 71 %
Adjusted EBITA margin(2) 43 % 47 %
 
Net income 7,142 14,031 2,070 96 %
Non-GAAP net income(2) 11,991 20,019 2,953 67 %
 
Diluted earnings per share/ADS (EPS) 2.94 5.65 0.83 92 %
Non-GAAP diluted EPS(2) 4.83 7.95 1.17 65 %

_______________

(1)     This results announcement contains translations of certain Renminbi
("RMB") amounts into U.S. dollars ("US$") for the convenience of the
reader. Unless otherwise stated, all translations of RMB into US$
were made at RMB6.7793 to US$1.00, the exchange rate on June 30,
2017 as set forth in the H.10 statistical release of the Federal
Reserve Board. The percentages stated in this announcement are
calculated based on the RMB amounts.
(2) See the sections entitled "Information about Segments," "Non-GAAP
Financial Measures" and "Reconciliations of Non-GAAP Measures to the
Nearest Comparable GAAP Measures" for more information about the
non-GAAP measures referred to within this results announcement.
 

INFORMATION ABOUT SEGMENTS

The table below sets forth selected financial information of our
operating segments for the periods indicated:

    Three months ended June 30, 2017

 

   

 

    Digital media     Innovation        

Core

Cloud

and initiatives

 

 

commerce

computing

entertainment and others

Unallocated(1)

Consolidated

RMB RMB RMB RMB RMB RMB     US$
(in millions, except percentages)
Revenue 43,027 2,431 4,081 645 50,184 7,403
 
Income (loss) from operations

24,808

(532)

(3,388)

(1,612)

(1,763)

17,513

2,583

Add: Share-based compensation expense 1,560 428 502 816 713 4,019 593
Add: Amortization of intangible assets 602 1 1,138 162 83 1,986 293
 
Adjusted EBITA 26,970 (103) (1,748) (634) (967) 23,518 3,469
Adjusted EBITA margin 63% (4)% (43)% (98)%

 

47%
 
Three months ended June 30, 2016

 

 

Digital media Innovation

Core

Cloud

and initiatives

 

 

commerce

computing

entertainment and others

Unallocated(1)

Consolidated

RMB RMB RMB RMB RMB RMB
(in millions, except percentages)
Revenue 27,241 1,243 3,135 535 32,154
 
Income (loss) from operations 14,682 (439) (1,853) (1,572) (2,004) 8,814
Add: Share-based compensation expense 1,456

 

280

 

334

520

 

1,104

3,694
Add: Amortization of intangible assets 486 1 523 165 76 1,251
 
Adjusted EBITA 16,624 (158) (996) (887) (824) 13,759
Adjusted EBITA margin 61% (13)% (32)% (166)% 43%

____________________

(1)     Unallocated expenses are primarily related to corporate
administrative costs and other miscellaneous items that are not
allocated to individual segments.
 

JUNE QUARTER OPERATIONAL AND FINANCIAL RESULTS

Revenue

Revenue for the quarter ended June 30, 2017 was RMB50,184 million
(US$7,403 million), an increase of 56% compared to RMB32,154 million in
the same quarter of 2016. The increase was mainly driven by the robust
revenue growth of our China commerce retail business, international
commerce retail business and Alibaba Cloud.

The following table sets forth a breakdown of our revenue by segment for
the periods indicated:

    Three months ended June 30,    
2016     2017
   

% of

        % of YoY %
RMB

Revenue

RMB US$ Revenue Change
(in millions, except percentages)
Core commerce:
China commerce retail
- Customer management 15,882 49% 26,220 3,868 52% 65%
- Commission 6,926 22% 8,878 1,309 18% 28%
- Others 575 2% 1,614 238 3% 181%
23,383 73% 36,712 5,415 73% 57%
China commerce wholesale 1,261 4% 1,641 242 3% 30%
International commerce retail 1,117 4% 2,638 389 6% 136%
International commerce wholesale 1,432 4% 1,609 237 3% 12%
Others 48 0% 427 64 1% 790%
Total core commerce 27,241 85% 43,027 6,347 86% 58%
 
Cloud computing 1,243 4% 2,431 359 5% 96%
Digital media and entertainment 3,135 10% 4,081 602 8% 30%
Innovation initiatives and others 535 1% 645 95 1% 21%
Total 32,154 100% 50,184 7,403 100% 56%
 

Core commerce

  • China commerce retail business

    Revenue
    Revenue from our China commerce retail business in the quarter ended
    June 30, 2017 was RMB36,712 million (US$5,415 million), or 73% of
    total revenue, an increase of 57% compared to RMB23,383 million in the
    same quarter of 2016. The increase in revenue was due to robust growth
    of customer management revenue (formerly online marketing service
    revenue), as well as growth in commission revenue. Customer management
    revenue grew by 65% year-over-year, driven primarily by increases in
    the volume of clicks, reflecting mobile user growth and our ability to
    deliver more relevant content to consumers through our enhancements in
    personalization technology. This growth resulted in higher average
    spending on our customer management services by an increasing number
    of merchants. Commission revenue, representing 24% of China commerce
    retail revenue in the quarter ended June 30, 2017, grew by 28%
    year-over-year, while Tmall recorded 49% year-over-year growth for
    physical goods GMV for the same period. The relatively lower growth
    rate of reported commission revenue was primarily due to the
    netting-off of expenditures against commissions paid by merchants as a
    result of new promotion initiatives for customer acquisition and
    retention. In mid-May, we started consolidating Intime, which
    contributed primarily to the increase in other revenue for our China
    commerce retail business.

    Our annual China commerce retail
    revenue per annual active consumer increased from RMB202 for the
    quarter ended June 30, 2016 to RMB273 (US$40) for the quarter ended
    June 30, 2017, and mobile revenue per mobile MAU grew from RMB140 for
    the quarter ended June 30, 2016 to RMB196 (US$29) for the quarter
    ended June 30, 2017, as illustrated in these charts
    and the table at the end of this announcement.

    Annual
    active consumers
    Our China retail marketplaces had 466
    million annual active consumers in the 12 months ended June 30, 2017,
    compared to 454 million in the 12 months ended March 31, 2017,
    representing a net addition of 12 million from the prior quarter, and
    a 7% increase from 434 million in the 12 months ended June 30, 2016.
    Average annual spend per active consumer for the 12 months ended June
    30, 2017 also continued to increase from prior quarters. The longer
    consumers have been with our platform, the more they spend, placing
    more orders across more product categories.

    Mobile MAUs –
    Mobile MAUs on our China retail marketplaces grew to 529 million in
    June 2017, compared to 507 million in March 2017, representing a net
    addition of 22 million MAUs in the quarter and a 24% increase from 427
    million in June 2016.
  • China commerce wholesale business

    Revenue
    from our China commerce wholesale business in the quarter ended June
    30, 2017 was RMB1,641 million (US$242 million), an increase of 30%
    compared to RMB1,261 million in the same quarter of 2016. The increase
    was primarily due to an increase in the average revenue from paying
    members on our 1688.com platform.
  • International commerce retail business

    Revenue
    from our international commerce retail business in the quarter ended
    June 30, 2017 was RMB2,638 million (US$389 million), an increase of
    136% compared to RMB1,117 million in the same quarter of 2016. The
    increase was primarily due to the growth in revenue generated from
    Lazada and AliExpress, driven by robust GMV growth in these two
    marketplaces.
  • International commerce wholesale business

    Revenue
    from our international commerce wholesale business in the quarter
    ended June 30, 2017 was RMB1,609 million (US$237 million), an increase
    of 12% compared to RMB1,432 million in the same quarter of 2016. The
    increase was due to growth in revenue generated by import/export
    related value-added services and online marketing revenue.

Cloud computing

Revenue from our cloud computing business in the quarter ended June 30,
2017 was RMB2,431 million (US$359 million), an increase of 96% compared
to RMB1,243 million in the same quarter of 2016, primarily driven by an
increase in the number of paying customers to 1,011,000, representing a
year-over-year increase of 75%, and also by an increase in their
usage of our cloud computing services including more complex offerings,
such as our database services and content delivery network, as reflected
in the increase of average revenue per paying customer to RMB2,405
(US$355) in the quarter ended June 30, 2017 from RMB2,154 in the same
quarter of 2016.

Digital media and entertainment

Revenue from our digital media and entertainment business in the quarter
ended June 30, 2017 was RMB4,081 million (US$602 million), an increase
of 30% compared to RMB3,135 million in the same quarter of 2016. The
increase was primarily due to an increase in revenue from mobile
value-added services provided by UCWeb, such as news feeds and mobile
search. Youku Tudou is a core part of our digital entertainment
strategy, and we will continue to invest in digital entertainment
content on Youku Tudou to drive user and paying subscription growth. We
will continue to leverage the cross selling opportunities between our
digital media and entertainment business and core commerce businesses
presented by the vast consumer base of our ecosystem.

Innovation initiatives and others

Revenue from innovation initiatives and others in the quarter ended June
30, 2017 was RMB645 million (US$95 million), an increase of 21% compared
to RMB535 million in the same quarter of 2016, primarily due to an
increase in revenue from AutoNavi. Starting this quarter, we
reclassified revenue from our fresh food stores Hema, previously
reported under this segment, as revenue from China commerce retail
because Hema has moved beyond the incubation stage.

Costs and Expenses

The following tables set forth a breakdown of our costs and expenses,
share-based compensation expense and costs and expenses excluding
share-based compensation expense by function for the periods indicated.

    Three months ended June 30,    

% of
Revenue
YoY
change

2016     2017
RMB    

% of
Revenue

RMB     US$    

% of
Revenue

(in millions, except percentages)
Costs and expenses:
Cost of revenue 11,744 37% 17,460 2,576 35% (2)%
Product development expenses 3,988 12% 4,696 693 9% (3)%
Sales and marketing expenses 3,614 11% 4,850 715 10% (1)%
General and administrative expenses 2,743 9% 3,679 543 7% (2)%
Amortization of intangible assets 1,251 4% 1,986 293 4% 0%
Total costs and expenses 23,340 73% 32,671 4,820 65% (8)%
 
Share-based compensation expense by function:
Cost of revenue 894 3% 1,128 166 2% (1)%
Product development expenses 1,276 4% 1,332 197 3% (1)%
Sales and marketing expenses 447 1% 396 58 1% 0%
General and administrative expenses 1,077 3% 1,163 172 2% (1)%
Total share-based compensation expense 3,694 11% 4,019 593 8% (3)%
 
Costs and expenses excluding share-based compensation expense:
Cost of revenue 10,850 34% 16,332 2,410 33% (1)%
Product development expenses 2,712 8% 3,364 496 6% (2)%
Sales and marketing expenses 3,167 10% 4,454 657 9% (1)%
General and administrative expenses

1,666

6% 2,516 371 5% (1)%
Amortization of intangible assets 1,251 4% 1,986 293 4% 0%

Total costs and expenses excluding share-based compensation expense

19,646 62% 28,652 4,227 57% (5)%
 

Cost of revenue – Cost of revenue in the quarter ended June 30,
2017 was RMB17,460 million (US$2,576 million), or 35% of revenue,
compared to RMB11,744 million, or 37% of revenue, in the same quarter of
2016. Without the effect of share-based compensation expense, cost of
revenue as a percentage of revenue would have decreased from 34% in the
quarter ended June 30, 2016 to 33% in the quarter ended June 30, 2017.
The decrease was primarily due to increased operating leverage, partly
offset by an increase in costs of inventory of Lazada, content
acquisition costs of Youku Tudou and logistics costs paid to Cainiao
Network relating to fulfillment services provided to Tmall Supermarket.

Product development expenses – Product development expenses in
the quarter ended June 30, 2017 were RMB4,696 million (US$693 million),
or 9% of revenue, compared to RMB3,988 million, or 12% of revenue, in
the same quarter of 2016. Without the effect of share-based compensation
expense, product development expenses as a percentage of revenue would
have decreased from 8% in the quarter ended June 30, 2016 to 6% in the
quarter ended June 30, 2017, reflecting operating leverage.

Sales and marketing expenses – Sales and marketing expenses in
the quarter ended June 30, 2017 were RMB4,850 million (US$715 million),
or 10% of revenue, compared to RMB3,614 million, or 11% of revenue, in
the same quarter of 2016. Without the effect of share-based compensation
expense, sales and marketing expenses as a percentage of revenue would
have decreased from 10% in the quarter ended June 30, 2016 to 9% in the
quarter ended June 30, 2017, reflecting operating leverage.

General and administrative expenses – General and administrative
expenses in the quarter ended June 30, 2017 were RMB3,679 million
(US$543 million), or 7% of revenue, compared to RMB2,743 million, or 9%
of revenue, in the same quarter of 2016. Without the effect of
share-based compensation expense, general and administrative expenses as
a percentage of revenue would have decreased from 6% in the quarter
ended June 30, 2016 to 5% in the quarter ended June 30, 2017, reflecting
operating leverage.

Share-based compensation expense –Total share-based compensation
expense included in the cost and expense items above in the quarter
ended June 30, 2017 was RMB4,019 million (US$593 million), an increase
of 9% compared to RMB3,694 million in the same quarter of 2016.
Share-based compensation expense as a percentage of revenue decreased to
8% in the quarter ended June 30, 2017 from 11% in the same quarter of
2016. The following table sets forth our analysis of share-based
compensation expense for the quarters indicated by type of share-based
awards:

    Three months ended    
June 30, 2016     March 31, 2017     June 30, 2017 % Change
    % of     % of         % of    
RMB Revenue RMB Revenue RMB US$ Revenue YoY QoQ
(in millions, except percentages)
By type of awards:
Alibaba Group share-based awards granted to:

- Our employees

2,457 7% 3,180 8% 3,023 446 6% 23% (5)%

- Ant Financial employees and other consultants(1)

234 1% 579 2% 452 67 1% 93% (22)%

Ant Financial share-based awards granted to our employees(1)

873 3% 339 1% 297 44 1% (66)% (12)%
Others 130 0% 208 0% 247 36 0% 90% 19%
Total share-based compensation expense 3,694 11% 4,306 11% 4,019 593 8% 9% (7)%

___________________

(1)    

Awards subject to mark-to-market accounting treatment.

 

Share-based compensation expense related to Alibaba Group share-based
awards granted to our employees and consultants decreased in this
quarter compared to the previous quarter. This decrease primarily
reflected annual performance-based equity awards that became vested and
ceased to incur share-based compensation expense during this quarter.

We expect that our share-based compensation expense will continue to be
affected by changes in the fair value of our shares and Ant Financial
shares, as well as the quantity of awards we grant to our employees and
consultants in the future. Due to the accounting treatment of Ant
Financial share-based awards granted to our employees, if the fair value
of Ant Financial equity continues to increase in the future, our
share-based compensation expense will likely increase, although any such
increase will be non-cash and will not result in any economic cost or
equity dilution to our shareholders.

Amortization of intangible assets – Amortization of intangible
assets in the quarter ended June 30, 2017 was RMB1,986 million (US$293
million), an increase of 59% from RMB1,251 million in the same quarter
of 2016. The increase was due to an increase in intangible assets
recognized relating to our strategic acquisitions and investments.

Income from operations and operating margin

Income from operations in the quarter ended June 30, 2017 was RMB17,513
million (US$2,583 million), or 35% of revenue, an increase of 99%
compared to RMB8,814 million, or 27% of revenue, in the same quarter of
2016.

Adjusted EBITDA and Adjusted EBITDA margin

Adjusted EBITDA increased by 68% to RMB25,124 million (US$3,706 million)
in the quarter ended June 30, 2017, compared to RMB14,963 million in the
same quarter of 2016. Adjusted EBITDA margin increased to 50% in the
quarter ended June 30, 2017 from 47% in the same quarter of 2016, mainly
due to increased operating leverage. A reconciliation of net income to
adjusted EBITDA is included at the end of this results announcement.

As many of our newly developed and acquired businesses have different
cost structures and lower margins, we expect that our margin will
continue to be negatively impacted by these new businesses.

Adjusted EBITA and adjusted EBITA margin by
segments

Adjusted EBITA and adjusted EBITA margin by segments are set forth in
the table below. See the section entitled "Information about Segments"
above for a reconciliation of income from operations to adjusted EBITA.

    Three months ended June 30,
2016     2017
RMB     % of Revenue RMB     US$     % of Revenue
(in millions, except percentages)
 
Core commerce 16,624 61% 26,970 3,978 63%
Cloud computing (158) (13)% (103) (15) (4)%
Digital media and entertainment (996) (32)% (1,748) (258) (43)%

Innovation initiatives and others

(887)

(166)%

(634)

(93)

(98)%

Core commerce segment – Adjusted EBITA increased by 62% to
RMB26,970 million (US$3,978 million) in the quarter ended June 30, 2017,
compared to RMB16,624 million in the same quarter of 2016. Adjusted
EBITA margin improved to 63% in the quarter ended June 30, 2017, as
compared to 61% in the same quarter of 2016, reflecting operating
leverage achieved, primarily offset by the consolidation of Intime and
an increase in costs of inventory of Lazada.

Cloud computing segment – Adjusted EBITA in the quarter ended
June 30, 2017 was a loss of RMB103 million (US$15 million), compared to
a loss of RMB158 million in the same quarter of 2016. Adjusted EBITA
margin improved to negative 4% in the quarter ended June 30, 2017 from
negative 13% in the quarter ended June 30, 2016, primarily due to robust
growth in revenue and economies of scale.

Digital media and entertainment segment – Adjusted EBITA in the
quarter ended June 30, 2017 was a loss of RMB1,748 million (US$258
million), compared to a loss of RMB996 million in the same quarter of
2016. Adjusted EBITA margin decreased to negative 43% in the quarter
ended June 30, 2017 from negative 32% in the quarter ended June 30,
2016, primarily due to an increase in content acquisition costs of Youku
Tudou.

Innovation initiatives and others segment – Adjusted EBITA in the
quarter ended June 30, 2017 was a loss of RMB634 million (US$93
million), compared to a loss of RMB887 million in the same quarter of
2016. Adjusted EBITA margin improved to negative 98% in the quarter
ended June 30, 2017, compared to negative 166% in the quarter ended June
30, 2016, primarily due to increase in revenue from new business
initiatives.

Interest and investment income, net

Interest and investment income, net in the quarter ended June 30, 2017
was RMB1,472 million (US$217 million), a significant increase from
RMB750 million in the same quarter of 2016, primarily due to a
non-recurring gain of RMB1,861 million arising from revaluation of our
previously held equity interest in Intime, when we obtained control over
Intime in May 2017. The revaluation gain was partly offset by impairment
loss on certain investments of RMB952 million.

Other income, net

Other income, net in the quarter ended June 30, 2017 was RMB1,887
million (US$279 million), compared to RMB1,763 million in the same
quarter of 2016. The increase was primarily due to an increase in
royalty fees and software technology service fees received from Ant
Financial under our profit sharing arrangement, which amounted to
RMB1,966 million (US$290 million) in the quarter ended June 30, 2017,
offset by an increase in exchange loss.

Income tax expenses

Income tax expenses in the quarter ended June 30, 2017 were RMB4,653
million (US$686 million), an increase of 123% compared to RMB2,091
million in the same quarter of 2016. Our effective tax rate was 23% in
the quarter ended June 30, 2017, compared to 20% in the same quarter of
2016. Excluding share-based compensation expense, impairment of
investments and other unrealized investment gain/loss, our effective tax
rate would have been 20% in the quarter ended June 30, 2017, compared to
15% in the same quarter of 2016. In connection with our investment in
Suning, from the quarter ended March 31, 2016 to the quarter ended
December 31, 2016, we reserved a portion of our earnings for permanent
reinvestment in China, and therefore we were not required to accrue
withholding tax for that portion of earnings during that period. This
quarter, we accrued the 5% withholding tax on all the earnings
distributable by our PRC operations, which lead to an increase in our
effective tax rate.

Share of results of equity investees

Share of results of equity investees in the quarter ended June 30, 2017
was a loss of RMB1,388 million (US$205 million), compared to a loss of
RMB1,468 million in the same quarter of 2016 and a loss of RMB1,444
million in the quarter ended March 31, 2017. We record our share of
results of equity investees one quarter in arrears. Share of results of
equity investees in the quarter ended June 30, 2017 and the comparative
periods consisted of the following:

    Three months ended
June 30, 2016     March 31, 2017     June 30, 2017
RMB RMB RMB     US$
(in millions)
Share of loss of equity investees:

- Koubei

(245) (505) (391) (58)

- Cainiao Network

(227) (375) (245) (36)

- Other equity investees

(264) (41) (311) (46)
Impairment loss (4)
Dilution losses (239) (61) (29) (4)
Others(1) (489) (462) (412) (61)
Total (1,468) (1,444) (1,388) (205)

________________

(1) Others mainly include amortization of intangible assets of equity
investees and share-based compensation expense.

The share of results of equity investees in the quarter ended June 30,
2017 was a loss of RMB1,388 million (US$205 million), compared to a loss
of RMB1,444 million in the quarter ended March 31, 2017, primarily due
to a decrease in our share of losses of Koubei and Cainiao Network,
partially offset by an increase in our share of losses from other equity
investees.

Net income and Non-GAAP net income

Our net income in the quarter ended June 30, 2017 was RMB14,031 million
(US$2,070 million), an increase of 96% compared to RMB7,142 million in
the same quarter of 2016. Excluding share-based compensation expense,
non-cash revaluation gain and certain other items, non-GAAP net income
in the quarter ended June 30, 2017 was RMB20,019 million (US$2,953
million), an increase of 67% compared to RMB11,991 million in the same
quarter of 2016. A reconciliation of net income to non-GAAP net income
is included at the end of this results announcement.

Net income attributable to ordinary shareholders

Net income attributable to ordinary shareholders in the quarter ended
June 30, 2017 was RMB14,683 million (US$2,166 million), an increase of
94% compared to RMB7,550 million in the same quarter of 2016.

Diluted EPS and non-GAAP diluted EPS

Diluted EPS in the quarter ended June 30, 2017 was RMB5.65 (US$0.83) on
a weighted average of 2,599 million diluted shares outstanding during
the quarter, an increase of 92% compared to RMB2.94 on a weighted
average of 2,568 million diluted shares outstanding during the same
quarter of 2016. Excluding share-based compensation expense, non-cash
revaluation gain and certain other items, non-GAAP diluted EPS in the
quarter ended June 30, 2017 was RMB7.95 (US$1.17), an increase of 65%
compared to RMB4.83 in the same quarter of 2016. A reconciliation of
diluted EPS to non-GAAP diluted EPS is included at the end of this
results announcement.

Cash, cash equivalents and short-term
investments

As of June 30, 2017, cash, cash equivalents and short-term investments
were RMB148,152 million (US$21,854 million), compared to RMB146,747
million as of March 31, 2017. The increase in cash, cash equivalents and
short-term investments during the quarter ended June 30, 2017 was
primarily due to free cash flow generated from operations of RMB22,149
million (US$3,267 million), primarily offset by cash used in investing
activities, including the privatization of Intime and investments in
Ele.me and Lianhua Supermarket, and cash used to acquire additional
shares of Lazada.

Cash flow from operating activities and free
cash flow

Net cash provided by operating activities in the quarter ended June 30,
2017 was RMB25,311 million (US$3,733 million), an increase of 69%
compared to RMB14,958 million in the same quarter of 2016. Free cash
flow, a non-GAAP measurement of liquidity, in the quarter ended June 30,
2017 was RMB22,149 million (US$3,267 million), compared to RMB12,745
million in the same quarter of 2016. A reconciliation of net cash
provided by operating activities to free cash flow is included at the
end of this results announcement.

Net cash used in investing activities

During the quarter ended June 30, 2017, net cash used in investing
activities of RMB13,912 million (US$2,052 million) primarily reflected
cash outflow of RMB14,133 million (US$2,085 million) for investment and
acquisition activities, including the privatization of Intime and
investments in Ele.me and Lianhua Supermarket, as well as capital
expenditures and intangible assets of RMB3,589 million (US$529 million),
which included cash outflow for acquisition of land use rights and
construction in progress of RMB427 million (US$63 million), partially
offset by cash inflow of RMB3,758 million (US$554 million) from
disposals of various investments and liquidation of certain short-term
investments.

Employees

As of June 30, 2017, we had a total of 57,302 employees, compared to
50,097 as of March 31, 2017. The number of employees as of June 30, 2017
increased by 7,205 from March 31, 2017, primarily due to the addition of
approximately 7,600 employees from the consolidation of Intime.

WEBCAST AND CONFERENCE CALL INFORMATION

Alibaba Group's management will hold a conference call to discuss the
financial results at 7:30 a.m. U.S. Eastern Time (7:30 p.m. Hong Kong
Time) on August 17, 2017.

Details of the conference call are as follows:
International: +65
6713 5090
U.S.: +1 845 675 0437
U.K.: +44 203 621 4779
Hong
Kong: +852 3018 6771
Conference ID: 61383477

A live webcast of the earnings conference call can be accessed at http://www.alibabagroup.com/en/ir/earnings.
An archived webcast will be available through the same link following
the call. A replay of the conference call will be available for one week
(dial-in number: +61 2 8199 0299; conference ID: 61383477).

Our results announcement and accompanying slides are available at
Alibaba Group's Investor Relations website at http://www.alibabagroup.com/en/ir/home
on August 17, 2017.

ABOUT ALIBABA GROUP

Alibaba Group's mission is to make it easy to do business anywhere. The
company aims to build the future infrastructure of commerce. It
envisions that its customers will meet, work and live at Alibaba, and
that it will be a company that lasts at least 102 years.

SAFE HARBOR STATEMENTS

This announcement contains forward-looking statements. These statements
are made under the "safe harbor" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as "will," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates,"
"potential," "continue," "ongoing," "targets," "guidance" and similar
statements. Among other things, statements that are not historical
facts, including statements about Alibaba's strategies and business
plans, Alibaba's beliefs and expectations regarding the growth of its
business and its revenue, the business outlook and quotations from
management in this announcement, as well as Alibaba's strategic and
operational plans, are or contain forward-looking statements. Alibaba
may also make forward-looking statements in its periodic reports to the
U.S. Securities and Exchange Commission (the "SEC"), in press releases
and other written materials and in oral statements made by its officers,
directors or employees to third parties. Forward-looking statements
involve inherent risks and uncertainties. A number of factors could
cause actual results to differ materially from those contained in any
forward-looking statement, including but not limited to the following:
Alibaba's goals and strategies; Alibaba's future business development;
Alibaba's ability to maintain the trusted status of its ecosystem,
reputation and brand; risks associated with increased investments in
Alibaba's business and new business initiatives; risks associated with
strategic acquisitions and investments; Alibaba's ability to retain or
increase engagement of consumers, merchants and other participants in
its ecosystem and enable new offerings; Alibaba's ability to maintain or
grow its revenue or business; risks associated with limitation or
restriction of services provided by Alipay; changes in laws, regulations
and regulatory environment that affect Alibaba's business operations;
privacy and regulatory concerns; competition; security breaches; the
continued growth of the e-commerce market in China and globally; risks
associated with the performance of our business partners, including but
not limited to Ant Financial; and fluctuations in general economic and
business conditions in China and globally and assumptions underlying or
related to any of the foregoing. Further information regarding these and
other risks is included in Alibaba's filings with the SEC. All
information provided in this results announcement is as of the date of
this results announcement and are based on assumptions that we believe
to be reasonable as of this date, and Alibaba does not undertake any
obligation to update any forward-looking statement, except as required
under applicable law.

NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements, which are prepared
and presented in accordance with GAAP, we use the following non-GAAP
financial measures: for our consolidated results, adjusted EBITDA
(including adjusted EBITDA margin), adjusted EBITA (including adjusted
EBITA margin), non-GAAP net income, non-GAAP diluted EPS and free cash
flow. For more information on these non-GAAP financial measures, please
refer to the section entitled "Information about Segments" and the table
captioned "Reconciliations of Non-GAAP Measures to the Nearest
Comparable GAAP Measures" in this results announcement.

We believe that adjusted EBITDA, adjusted EBITA, non-GAAP net income and
non-GAAP diluted EPS help identify underlying trends in our business
that could otherwise be distorted by the effect of certain income or
expenses that we include in income from operations, net income and
diluted EPS. We believe that adjusted EBITDA, adjusted EBITA, non-GAAP
net income and non-GAAP diluted EPS provide useful information about our
core operating results, enhance the overall understanding of our past
performance and future prospects and allow for greater visibility with
respect to key metrics used by our management in our financial and
operational decision-making. We consider free cash flow to be a
liquidity measure that provides useful information to management and
investors about the amount of cash generated by our business that can be
used for strategic corporate transactions, including investing in our
new business initiatives, making strategic investments and acquisitions
and strengthening our balance sheet. Adjusted EBITDA, adjusted EBITA,
non-GAAP net income, non-GAAP diluted EPS and free cash flow should not
be considered in isolation or construed as an alternative to income from
operations, net income, diluted EPS, cash flows or any other measure of
performance or as an indicator of our operating performance. These
non-GAAP financial measures presented here may not be comparable to
similarly titled measures presented by other companies. Other companies
may calculate similarly titled measures differently, limiting their
usefulness as comparative measures to our data.

Adjusted EBITDA represents net income before (i) interest and
investment income, net, other income, net, interest expense, income tax
expenses and share of results of equity investees, and (ii) certain
non-cash expenses, consisting of share-based compensation expense,
amortization and depreciation, which we do not believe are reflective of
our core operating performance during the periods presented.

Adjusted EBITA represents net income before (i) interest and
investment income, net, other income, net, interest expense, income tax
expenses and share of results of equity investees, and (ii) certain
non-cash expenses, consisting of share-based compensation expense and
amortization, which we do not believe are reflective of our core
operating performance during the periods presented.

Non-GAAP net income represents net income before share-based
compensation expense, amortization, impairment of goodwill and
investments, gain on deemed disposals/disposals/revaluation of
investments, amortization of excess value receivable arising from the
restructuring of commercial arrangements with Ant Financial, immediate
recognition of unamortized professional fees and upfront fees upon
termination of bank borrowings and others, as adjusted for the tax
effects on non-GAAP adjustments.

Non-GAAP diluted EPS represents non-GAAP net income attributable
to ordinary shareholders divided by the weighted average number of
shares outstanding during the periods on a diluted basis, including
accounting for the effects of the assumed conversion of convertible
preference shares.

Free cash flow represents net cash provided by operating
activities as presented in our consolidated cash flow statement less
purchases of property and equipment and intangible assets (excluding
acquisition of land use rights and construction in progress) and others.

The section entitled "Information about Segments" and the table
captioned "Reconciliations of Non-GAAP Measures to the Nearest
Comparable GAAP Measures" in this results announcement have more details
on the non-GAAP financial measures that are most directly comparable to
GAAP financial measures and the related reconciliations between these
financial measures.

 
ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONSOLIDATED INCOME STATEMENTS
 
    Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions, except per share data)
Revenue 32,154 50,184 7,403
Cost of revenue (11,744) (17,460) (2,576)
Product development expenses (3,988) (4,696) (693)
Sales and marketing expenses (3,614) (4,850) (715)
General and administrative expenses (2,743) (3,679) (543)
Amortization of intangible assets (1,251) (1,986) (293)
 
Income from operations 8,814 17,513 2,583
Interest and investment income, net 750 1,472 217
Interest expense (626) (800) (118)
Other income, net 1,763 1,887 279
 
Income before income tax and share of results of equity investees 10,701 20,072 2,961
Income tax expenses (2,091) (4,653) (686)
Share of results of equity investees (1,468) (1,388) (205)
 
Net income 7,142 14,031 2,070
Net loss attributable to noncontrolling interests 408 652 96
 
Net income attributable to ordinary shareholders 7,550 14,683 2,166
 
Earnings per share attributable to ordinary shareholders
Basic 3.05 5.77 0.85
Diluted 2.94 5.65 0.83
 
Weighted average number of share used in calculating net income
per ordinary share
Basic 2,473 2,543
Diluted 2,568 2,599
 
ALIBABA GROUP HOLDING LIMITED
REVENUE
 

The following table sets forth our revenue by segments for the
periods indicated:

 
    Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions)
Core commerce(1) 27,241 43,027 6,347
Cloud computing(2) 1,243 2,431 359
Digital media and entertainment(3) 3,135 4,081 602
Innovation initiatives and others(4) 535 645 95
 
Total 32,154 50,184 7,403

____________________

(1)     Revenue from core commerce is primarily generated from our China
retail marketplaces, 1688.com, AliExpress, Alibaba.com and
Lazada.com.
(2) Revenue from cloud computing is primarily generated from the
provision of services, such as data storage, elastic computing,
database and large scale computing services, as well as web hosting
and domain name registration.
(3) Revenue from digital media and entertainment mainly represents
advertising and subscription revenue generated from our digital
entertainment business provided by Youku Tudou and mobile Internet
services revenue from UCWeb businesses.
(4) Revenue from innovation initiatives and others mainly represents
revenue generated by AutoNavi and YunOS, as well as fees from Ant
Financial related to the SME loan business.
 
 

ALIBABA GROUP HOLDING LIMITED

INFORMATION ABOUT SEGMENTS

 
The following table sets forth our income (loss) from operations by
segments for the periods indicated:
 
    Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions)

Core commerce

14,682

24,808

3,659

Cloud computing (439)

(532)

(78)

Digital media and entertainment (1,853)

(3,388)

(500)

Innovation initiatives and others (1,572)

(1,612)

(238)

Unallocated

(2,004)

(1,763)

(260)

 
Total 8,814

17,513

2,583

 

The following table sets forth our adjusted EBITA by segments for
the periods indicated:

 
Three months ended June 30,
2016 2017
RMB RMB US$
(in millions)
Core commerce 16,624 26,970 3,978
Cloud computing (158) (103) (15)
Digital media and entertainment (996) (1,748) (258)
Innovation initiatives and others (887) (634) (93)
Unallocated (824) (967) (143)
 
Total 13,759 23,518 3,469
 
 

ALIBABA GROUP HOLDING LIMITED

UNAUDITED CONSOLIDATED BALANCE SHEETS

 
   

As of March 31,

   

As of June 30,

2017

2017

RMB

RMB

   

US$

 
(in millions)
Assets
Current assets:
Cash and cash equivalents 143,736 145,144 21,410
Short-term investments 3,011 3,008 444
Restricted cash and escrow receivables 2,655 3,211 474
Investment securities 4,054 4,462 658
Prepayments, receivables and other assets(1) 28,408 30,569 4,509
Total current assets 181,864 186,394 27,495
 
Investment securities 31,452 30,888 4,556
Prepayments, receivables and other assets(1) 8,703 11,127 1,641
Investment in equity investees 120,368 118,971 17,549
Property and equipment, net 20,206 43,922 6,479
Land use rights, net 4,691 6,629 978
Intangible assets, net 14,108 16,244 2,396
Goodwill 125,420 129,539 19,108
Total assets 506,812 543,714 80,202
 
Liabilities, Mezzanine Equity and Shareholders' Equity
Current liabilities:
Current bank borrowings 5,948 7,660 1,130
Current portion of unsecured notes 8,949 8,795 1,297
Income tax payable 6,125 10,229 1,509
Escrow money payable 2,322 2,541 375
Accrued expenses, accounts payable and other liabilities(1) 46,979 51,988 7,668
Merchant deposits 8,189 8,481 1,251
Deferred revenue and customer advances 15,052 17,312 2,554
Total current liabilities 93,564 107,006 15,784

_____________________________

(1)     Certain reclassifications in prepayments, receivables and other
assets, accrued expenses, accounts payable and other liabilities and
deferred tax liabilities as of March 31, 2017 were retrospectively
adjusted as a result of the adoption of a new accounting standard
effective in the first quarter of fiscal 2018.
 
 
ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)
 
   

As of March 31,

   

As of June 30,

2017

2017

RMB

RMB     US$
(in millions)
 
Deferred revenue 641 812 120
Deferred tax liabilities(1) 10,361 12,968 1,913
Non-current bank borrowings 30,959 31,783 4,688
Unsecured senior notes 45,876 45,080 6,650
Other liabilities 1,290 1,660 245
Total liabilities 182,691 199,309 29,400
 
Commitments and contingencies

Mezzanine equity

2,992 763 112

Alibaba Group Holding Limited shareholders' equity:

Ordinary shares 1 1
Additional paid-in capital 164,585 170,707 25,181
Treasury shares at cost (2,823) (2,823) (416)
Restructuring reserve (624) (559) (82)
Subscription receivables (63) (160) (24)
Statutory reserves 4,080 4,051 598
Accumulated other comprehensive income 5,085 4,132 609
Retained earnings 108,558 123,271 18,183
 
Total Alibaba Group Holding Limited shareholders' equity 278,799 298,620 44,049
Noncontrolling interests 42,330 45,022 6,641
 
Total equity 321,129 343,642 50,690
 
Total liabilities, mezzanine equity and equity 506,812 543,714 80,202

_____________________________

(1)     Certain reclassifications in prepayments, receivables and other
assets, accrued expenses, accounts payable and other liabilities and
deferred tax liabilities as of March 31, 2017 were retrospectively
adjusted as a result of the adoption of a new accounting standard
effective in the first quarter of fiscal 2018.
 
 
ALIBABA GROUP HOLDING LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions)
 
Net cash provided by operating activities 14,958 25,311 3,733
Net cash used in investing activities (61,468) (13,912) (2,052)
Net cash provided by (used in) financing activities 21,312 (8,894) (1,312)
Effect of exchange rate changes on cash and cash equivalents 626 (1,097) (161)
 
(Decrease) Increase in cash and cash equivalents (24,572) 1,408 208
Cash and cash equivalents at beginning of period 106,818 143,736 21,202
 
Cash and cash equivalents at end of period 82,246 145,144 21,410
 
 
ALIBABA GROUP HOLDING LIMITED
RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE
GAAP MEASURES
 
The table below sets forth a reconciliation of our net income to
adjusted EBITA and adjusted EBITDA for the periods indicated:
   
Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions)
Net income 7,142 14,031 2,070
Less: Interest and investment income, net (750) (1,472) (217)
Add: Interest expense 626 800 118
Less: Other income, net (1,763) (1,887) (279)
Add: Income tax expenses 2,091 4,653 686
Add: Share of results of equity investees 1,468 1,388 205
Income from operations 8,814 17,513 2,583
Add: Share-based compensation expense 3,694 4,019 593
Add: Amortization of intangible assets 1,251 1,986 293
Adjusted EBITA 13,759 23,518 3,469
Add: Depreciation and amortization of property and equipment and
land use rights
1,204 1,606 237
Adjusted EBITDA 14,963 25,124 3,706
 
 
ALIBABA GROUP HOLDING LIMITED
RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE
GAAP MEASURES (CONTINUED)
 
The table below sets forth a reconciliation of our net income to
non-GAAP net income for the periods indicated:
 
    Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions)
 
Net income 7,142 14,031 2,070
Add: Share-based compensation expense 3,694 4,019 593
Add: Amortization of intangible assets 1,251 1,986 293
Add: Impairment of goodwill and investments 77 952 140
Less: Gain on deemed disposals/disposals/revaluation of investments
and others
(55) (1,089) (161)
Add: Amortization of excess value receivable arising from the
restructuring of commercial arrangements with Ant Financial
66 67 10
Add: Immediate recognition of unamortized professional fees and
upfront fees upon termination of bank borrowings
92 14
Adjusted for tax effects on non-GAAP adjustments(1) (184) (39) (6)
 
Non-GAAP net income 11,991 20,019 2,953

____________________________________

(1)     Tax effects on non-GAAP adjustments comprise of tax provisions on
the amortization of intangible assets and certain gains on disposal
of investments, as well as tax benefits from share-based awards.
Comparative figures were updated to conform to the current period
presentation.
 
 
ALIBABA GROUP HOLDING LIMITED
RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE
GAAP MEASURES (CONTINUED)
 
The table below sets forth a reconciliation of our diluted EPS to
non-GAAP diluted EPS for the periods indicated:
    Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions, except per share data)
Net income attributable to ordinary shareholders – basic 7,550 14,683 2,166
Dilution effect on earnings arising from option plans operated by an
equity investee
(3)
Net income attributable to ordinary shareholders – diluted 7,550 14,680 2,166
Add: Non-GAAP adjustments to net income(1) 4,849 5,988 883
 
Non-GAAP net income attributable to ordinary shareholders
for computing non-GAAP diluted EPS
12,399 20,668 3,049
 
Weighted average number of shares on a diluted basis 2,568 2,599
Diluted EPS(2) 2.94 5.65 0.83
Add: Non-GAAP adjustments to net income per share(3) 1.89 2.30 0.34
 
Non-GAAP diluted EPS(4) 4.83 7.95 1.17

___________________________

(1)

   

See the table above about the reconciliation of net income to
non-GAAP net income for more information of these non-GAAP
adjustments.

(2)

Diluted EPS is derived from net income attributable to ordinary
shareholders for computing diluted EPS divided by weighted average
number of shares on a diluted basis.

(3)

Non-GAAP adjustments to net income per share is derived from
non-GAAP adjustments to net income divided by weighted average
number of shares on a diluted basis.

(4)

Non-GAAP diluted EPS is derived from non-GAAP net income
attributable to ordinary shareholders for computing non-GAAP
diluted EPS divided by weighted average number of shares on a
diluted basis.

 

ALIBABA GROUP HOLDING LIMITED

RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE
GAAP MEASURES (CONTINUED)

 

The table below sets forth a reconciliation of net cash provided
by operating activities to free cash flow for the periods
indicated:

 
    Three months ended June 30,
2016     2017
RMB RMB     US$
(in millions)
Net cash provided by operating activities 14,958 25,311 3,733
Less: Purchase of property and equipment and intangible assets
(excluding land use rights and construction in progress)
(2,794) (3,162) (466)
Add: Others 581
 
Free cash flow 12,745 22,149 3,267
 
ALIBABA GROUP HOLDING LIMITED
SELECTED OPERATING DATA
 
Annual active consumers
 

The table below sets forth the number of active consumers on our
China retail marketplaces for the periods indicated:

 
    Twelve months ended
Sep 30,     Dec 31,     Mar 31,     Jun 30,     Sep 30,     Dec 31,     Mar 31,    

Jun 30,

2015 2015 2016 2016 2016 2016 2017

2017

(in millions)
Annual active consumers 386 407 423 434 439 443 454 466
 
Mobile
 

The table below sets forth the mobile MAUs on our China retail
marketplaces for the periods indicated:

 
    The month ended
Sep 30,     Dec 31,     Mar 31,     Jun 30,     Sep 30,     Dec 31,     Mar 31,    

Jun 30,

2015 2015 2016 2016 2016 2016 2017

2017

(in millions)
Mobile MAUs 346 393 410 427 450 493 507 529
 
Revenue per active consumer / mobile revenue per mobile MAU
 

The table below sets forth information with respect to annual
China commerce retail revenue per annual active consumer and
annualized mobile revenue per mobile MAU from China commerce
retail for the periods presented:

 

 
    Sep 30,     Dec 31,     Mar 31,     Jun 30,     Sep 30,     Dec 31,     Mar 31,     Jun 30,
2015 2015 2016 2016 2016 2016 2017 2017
(in RMB)
Annual China commerce retail revenue per annual active consumer(1) 174 184 189 202 215 241 251 273
 
Mobile revenue per mobile MAU from China commerce retail – Annualized(2) 87 108 123 140 151 166 179 196

 

 

 

_____________________

(1) China commerce retail revenue per active consumer for each of the
above periods is calculated by dividing the China commerce retail
revenue for the previous 12-month period by the annual active
consumers for the same 12-month period.
(2) Mobile revenue per mobile MAU from China commerce retail, annualized
is calculated by dividing mobile revenue from China commerce retail
for the previous 12-month period by the mobile MAUs for the last
month of the same period.
 
 
ALIBABA GROUP HOLDING LIMITED
SELECTED OPERATING DATA (CONTINUED)
 
Cloud computing paying customers
 
The table below sets forth the number of paying customers on cloud
computing as of the respective dates indicated:
   
Sep 30,     Dec 31,     Mar 31,     Jun 30,     Sep 30,     Dec 31,     Mar 31,     Jun 30,
2015 2015 2016 2016 2016 2016 2017 2017
(in thousands)
Paying customers 313 383 513 577 651 765 874 1,011

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