Alibaba Group 2Q earnings match estimates

Earnings HQ: FBN's Ashley Webster breaks down Alibaba's second-quarter earnings, its first report card to Wall Street.

Alibaba Misses Profit View Despite 54% Sales Increase

Earnings Reuters

Alibaba Group Holding Ltd (BABA) shares rose to a record high on Tuesday after the Chinese e-commerce company reported strong second-quarter results and said it would invest for the long term to expand its customer base.

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It was Alibaba's first quarterly report since its $25 billion listing in New York in September. Its shares rose about 2.7 percent to more than $104.50. The company listed in September at $68 a share.

"We delivered a strong quarter with significant growth across our key operating metrics," Jonathan Lu, chief executive officer of Alibaba, said in the earnings statement.

The non-GAAP net income of $1.11 billion for the July-September quarter - which excludes the share-based compensation expenses and amortization of intangible assets - compared with a consensus estimate of $1.17 billion based on a Thomson Reuters SmartEstimate poll of 21 analysts.

Revenue rose 53.7 percent to $2.74 billion, versus expected sales of $2.7 billion, its fastest growth in three quarters. Diluted earnings per share were $0.20, while non-GAAP diluted earnings per share were $0.45, up 9.4 percent year-on-year.

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But overall profit margins shrank to a two-year low of 18 percent, as extraordinary expenses the company chiefly attributed to share-based compensation charges of $490 million around the time of its initial public offering ate into profits.

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NON-STOP SHOP

Alibaba also indicated its shopping spree, in which it has spent more than $6 billion since the beginning of the year, might not yet be at an end as the company aims to increase its user base.

Alibaba "will continue to make strategic investments to grow our revenue... and to strengthen our eco-system for a long time," Chief Financial Officer Maggie Wu said in an earnings call with analysts.

These investments are geared toward adding more customers and converting them into users of Alibaba's core e-commerce businesses, as well as increasing the number of products and services Alibaba offers, Joe Tsai, the company's executive vice chair, said.

The company also said it would invest in new initiatives such as its mobile operating system, location-based services and digital entertainment.

Mobile revenue was more than ten times higher than in the same period last year and accounted for 22 percent of total revenues, as Alibaba continued to ramp up the money it makes from sales conducted via mobile phones.

Gross merchandise volume (GMV), or the total value of goods sold on Alibaba marketplaces, rose 48.7 percent year-on-year to $90.5 billion dollars. Mobile GMV accounted for 35.8 percent of the total, up from 14.7 percent in the same quarter of 2013. (Reporting by Paul Carsten; Editing by David Goodman, Elaine Hardcastle and Jane Merriman)