Is Alibaba’s business recovering in this quarter?

JC Project Freedom Alibaba
JC Project Freedom Alibaba

Alibaba China commerce – local business revenue is almost back on track RMB 141,935 million in Q2 2022 compared to RMB 144,029 million in Q2 2021.
International commerce – total revenue grew slightly by 2% to RMB 15,451 million in Q2 2022 compared to RMB 15,202 million in Q2 2021.
Local consumer services see moderate growth of 5% to RMB 10,632 million in Q2 2022 compared to RMB 10,099 million in Q2 2021. Local consumer services include “To-Home” and “To-Destination” businesses such as Ele.me, Amap, and Fliggyy.
Cainiao – the logistics business grew 5% to RMB 12,142 million in Q2 2022 compared to RMB 11,601 million in Q2 2021.
Cloud – revenue grew by 10% to RMB 17,685 million in Q2 2022 compared to RMB 16,051 million in Q2 2021.
Digital media and entertainment dropped 10% to 7,231 million in Q2 2022 compared to RMB 8,073 million.
Innovation initiatives are new businesses that shrunk by 30% to RMB 479 million in Q2 2022 compared to RMB 685 million.

Source: Alibaba’s Income Statement

Alibaba took an impairment of RMB 3,114 million in Q2 2022 to write down their investment. The Net Income has dropped by 53% from RMB 42,835 million in Q2 2021 to RMB 20,298 million in Q2 2022.

In this quarter ended June 30, 2022, net cash by operating activities was RMB 33,869 million which is on par with RMB33,603 million in the same quarter of 2021. Free cash flow was RMB 22,173 million which is an increase of 7% compared to RMB 20,683 million in the quarter of 2021. The increase reflected the dividend received from Ant Group of RMB 3,945 million in the quarter of 2022. FY22 was a challenging year for Alibaba due to a regulatory crackdown on the technology sector. With strong free cash flow, Alibaba is spending RMB 23.9 billion on stock buyback and investment in existing businesses. This reinforcement of its competitive advantage will help build its moat.

Net cash used in investing activities of RMB 27,607 million in the quarter of 2022 shows an increase in short-term investments by RMB 14,130 million and capital expenditure of RMB 11,843 million and cash outflow of RMB 4,537 million for investment and acquisition activities.

With the zero-COVID19 policy, China will continue to practice total lockdown. It will continue to weigh on Alibaba’s recovery in the near future. We will continue to monitor the free cash flow.

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