Alibaba Q4 Earnings Overview

% changes are year-over-year (YoY)

• Revenue +5% to RMB 260 billion versus an estimated RMB 261 billion
• Net Income RMB 11 billion
• Net Margin 4%
• Earnings per Share RMB 18.97 versus an estimated RMB 18.68

Alibaba beat estimates on its bottom line net income but missed estimates slightly on its top line revenue. The company also increased its share buyback program by $25 billion and extended the program to 2027. Taobao, Tmall, and Cloud all had positive results in the fourth quarter. After Singles Day, GMV in China E-Commerce grew by double digits YoY in the second half of the quarter.

CEO Eddie Wu said that “Our top priority is to reignite the growth of our core businesses, e-commerce and cloud computing. We will set up investment to improve users’ experience to drive growth in Taobao and Tmall Group and strengthen market leadership in the coming year.”

Market leadership and user experience are both important for Alibaba as investors have become concerned that they have been losing too much market share to Pinduoduo, which focuses heavily on in-app engagement and deals.

Key News

Asian equities were mixed but mostly higher as Mainland China outperformed the region and Hong Kong took a breather after yesterday’s strong move.

Alibaba’s results, specifically the positive boost in China E-Commerce after Singles Day, confirm that China’s consumer is alive in well. Nonetheless, the top line miss was enough to claw back the stock’s massive gains yesterday. Earnings came out after the close in Hong Kong, which is why the US listing is down significantly more than the Hong Kong listing was overnight. It will be interesting to see how the Hong Kong listing reacts tonight.

Real estate was lower in Hong Kong but higher in Mainland China on more policy support from the CSRC.

The electric vehicle ecosystem was mixed overnight despite policy support for them to contend with potential trade restrictions.

Pharmaceutical contract research manufacturers Wuxi Apptec and Wuxi Biologics have rebounded in the past two sessions. This is mainly due to lackluster support for the proposed US Congressional push to prevent federally funded medical providers from being their clients.

The Hang Seng and Hang Seng Tech Index closed lower by -0.34% and -1.64%, respectively, on volume that decreased -19% from yesterday. Mainland investors purchased a net $301 million worth of Hong Kong-listed stocks and ETFs via Southbound Stock Connect overnight. The top-performing sectors were Health Care, which gained +1.14%, Energy, which gained +0.29%, and Materials, which gained +0.11%. Meanwhile, the worst-performing sectors were Real Estate, which fell -3.89%, Consumer Discretionary, which fell -1.49%, and Information Technology, which fell -1.46%.

Shanghai, Shenzhen, and the STAR Board all closed higher by +1.44%, +1.47%, and +3.14%, respectively, on volume that increased +10% from yesterday. Foreign investors purchased a net $301 million worth of Mainland stocks overnight via Northbound Stock Connect. The top-performing sectors were Consumer Staples, which gained +3.57%, Materials, which gained +3.30%, and Industrials, which gained +3.13%. Meanwhile, the worst-performing sectors were Health Care, which fell -0.02%, Utilities, which gained +0.15%, and Real Estate, which gained +1.26%.

Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 7.19 versus 7.19 yesterday
• CNY per EUR 7.75 versus 7.73 yesterday
• Yield on 1-Day Government Bond 1.69% versus 1.69% yesterday
• Yield on 10-Year Government Bond 2.42% versus 2.45% yesterday
• Yield on 10-Year China Development Bank Bond 2.60% versus 2.64% yesterday