In a market environment of uncertainty and low expectations, a better-than-expected earnings report can provide an unexpected share price boost, especially for a giant whose share price has fallen 70 per cent from its peak.

On May 26th, BABA released his financial results for the fourth quarter of fiscal year 2022 (that is, Q1 2022) and the full year ending March 31, 2022. The financial report shows that:

• BABA's total revenue in that quarter reached 204.052 billion yuan (if not specified, all units are in RMB), an increase of 9% over the same period last year, exceeding analysts' expectations of 200.664 billion yuan.

• The adjusted EBITA was 15.811 billion yuan, down 30% from the same period last year and higher than the market expectation of 15.3 billion yuan.

After the release of the financial report, BABA's management said on the performance call thatDomestic business has been significantly affected by the resurgence of the epidemic in the mainland in March, and financial guidance for this year will not be provided given the risks and uncertainties posed by the uncontrollable and difficult to predict the epidemic.

In the past, such financial performance and expectations were difficult to ignite investor enthusiasm, but considering the great pressure of the environment and the occurrence of thunderstorms in giant financial reports from time to time, BABA still gave the market some surprises. BABA's share price rose nearly 15 per cent by the close of trading on May 26th EST.

Epidemic situation drags down GMVBut the user performance is eye-catching.

The Chinese business division is the basic part of BABA's business, Q4 in fiscal 22, which grew by only 8 per cent, below the 9 per cent growth rate of total revenue.

Taking the results apart, some of the business segments under the Chinese business segment are under pressure, but some have a good momentum of growth.

For Taobao Tmall, its GMV remained stable in January and February, but fell in March, mainly due to supply chain and logistics disruptions and reduced demand due to the impact of the epidemic; order growth in Taobao from January to March in 2022 also slowed because of the epidemic.BABA executives said on the earnings call that GMV is likely to fall by more than 10 per cent in April and will improve in May as the epidemic in Shanghai abates.

What keeps growing is Taocai, direct marketing and other businesses, as well as wholesale commerce in China. Among them, Amoy vegetable GMV achieved month-on-month growth from January to March, mainly due to an increase in average order prices; direct sales and other businesses increased by 14% compared with the same period last year, mainly driven by the growth of Gaoxin retail, Tmall supermarket and box horse business. China's wholesale business grew by 30%, mainly due to the increase in value-added service revenue.

In the earnings call, the management also pointed out that under the influence of the epidemic, users' consumption habits have changed significantly, the demand for fashion and consumer electronics products has decreased, while the demand for fast food and daily necessities has increased significantly, and new categories such as fitness and outdoor activities are growing rapidly. At the same time, due to the obvious tendency of users to hoard goods, the customer unit price of BABA's "near-field retail" has been significantly increased.

On the user side, the performance of China Business Division in attracting new users and maintaining user stickiness throughout fiscal year 2022 is noteworthy.

According to the financial report, the total number of annual active consumers in China's business business in the 12 months to March 31, 2022 was 903 million, with year-on-year and month-on-month net growth of 89 million and 21 million, respectively. BABA attributes the robustness of user data to the fact that its APP matrix creates personalized and immersive interactive experiences for different consumption scenarios and formats, thus attracting and retaining user groups with different backgrounds and shopping behaviors.

The user data of each segment of business also confirms this point. In terms of high net worth users, among the Taobao Tmall platform in fiscal year 2022, more than 124 million active consumers spent more than 10000 yuan on Taobao and Tmall per capita; among the annual active consumers who spent more than 10000 yuan in the last fiscal year, 98% continued to be active in this fiscal year. In the sinking market, Tate had more than 300 million annual active consumers in fiscal year 2022, and the proportion of new annual active consumers from less developed regions in the entire Chinese business division continued to exceed 70% of the total increase.

BABA's thinking on China's business segment mainly focuses on new business and consumer / business experience: continuous investment in new businesses such as Taocai and Amoy, especially in the compliance network. Since Dashan took office this year, she has also adjusted the core strategy of Taobao Tmall-including integrating Taobao Tmall, improving the strategic position of Taobao live streaming and shopping, and improving consumer experience and business certainty.

The growth rate of local life is leading.But the loss remains the same.

In the first three months of 2022, against the backdrop of single-digit growth in overall revenue, the local life business, including ele.me, Gao de, Fei Zhu and Taoxianda, grew 29% year-on-year, ahead of all other businesses.

Among them, the "home business" ele.me increased its average order volume in the second half of fiscal year 2022 due to the improvement of user retention and operational efficiency in key cities; at the same time, the order volume from non-food (fresh and medicine) benefited from the holiday market promotion and increased significantly. Benefiting from the improvement of Gao de's user transaction volume and loyalty, the growth of Gao de and Flying Pig business "to the destination" is more significant.

In terms of profitability, the adjusted EBITA loss of the local living services division narrowed this quarter, from 6.633 billion yuan to 5.483 billion yuan, but the loss rate was still as high as 52%, making it the division with the worst losses except for innovation business.

In addition, due to the impact of the COVID-19 epidemic in March, the order volume of Flying Pig and ele.me declined, and Gao de's order growth also slowed down.

Internal and external pressure on international business

In the first three months of 2022, BABA's international business division grew by 7%, which was mainly slowed down by the international retail business.

According to the financial report, the business grew by only 4% from January to March, and the year-on-year growth rate slowed on the one hand because Trendyol's income was negatively affected by the devaluation of the Turkish lira against the RMB exchange rate; in the European market, AliExpress orders were affected by the continued revision of EU value-added tax regulations and the impact of the conflict between Russia and Ukraine on the supply chain. During the earnings call, BABA's management also pointed out that the easing of the epidemic in Southeast Asia has led to a recovery in offline consumption, and Lazada's business has been hit in the region.

The international wholesale business under the international business division grew by 13% in the first three months of 2022 compared with the same period last year, which is higher than the overall growth rate of international commerce, mainly due to the growth of cross-border business-related value-added services and the increase in the number of paid members from Alibaba.com.

However, the year-on-year growth rate of international wholesale business has slowed compared with previous quarters because of the slowdown in Chinese export growth and the impact of the epidemic on the supply chain.

Cloud business growth slows downRealize annual profit for the first time

The cloud business has not escaped the impact of the epidemic.

The growth rate of cloud business, including Aliyun and Nail, slowed from January to March. In the three months to March 31, 2022, revenue from cloud business offset the impact of cross-segment transactions was 18.971 billion yuan, an increase of only 12% year-on-year, down from 20% in the previous quarter. Excluding the impact of losing a single major customer (that is, international business with bouncing bytes), the cloud business grew 15% year-on-year after offsetting the impact of cross-segment transactions in the quarter.

The customers of BABA cloud business come from various industries, and whether its growth is strong or not is mainly related to the demand of the industry where the customers are located.For example, from January to March 2022, growth in the cloud business was mainly driven by growth in the telecommunications, financial services and retail sectors, offset by weak customer demand in the Internet industry, particularly falling revenue from Internet verticals such as online education and entertainment.

Because of economies of scale, the cloud business achieved adjusted EBTIA profits from January to March; at the same time, in fiscal year 2022, the cloud business also made its first annual profit in 13 years, compared with an adjusted EBITA loss of 2.251 billion yuan in the previous fiscal year and a profit of 1.146 billion yuan in fiscal year 2022.

The rookie flapped his wingsRevenue from large-scale entertainment and innovation business declined

The rookie network grew by 16% in the first three months of 2022, second only to local life. Cainiao's rapid growth mainly comes from logistics compliance solutions for Chinese retail businesses such as Tmall, Taobao and Taote, as well as value-added services; in addition, the growth of external income is also the driver of Cainiao's growth, with revenue from outside merchants growing by more than 30 per cent from January to March 2022 compared with the same period a year earlier.

The big entertainment sector and "innovation and other" are the only two sectors in which BABA's performance has declined.

According to the financial report, the revenue of Digital Media and Entertainment was 8.005 billion yuan in the three months to 2022, down 1% from a year earlier. At the same time, due to the control of content and production investment, the business's adjusted EBITA loss narrowed to 1.966 billion yuan from 2.698 billion yuan in the same period last year.

The revenue of the "innovation and other" business, including Tmall Elf and Dharma House, was 384 million yuan in the quarter, down 35% from the same period last year, and the adjusted EBITA loss also expanded to 2.452 billion yuan from 1.648 billion yuan in the same period last year, equivalent to nearly seven times the income.

At the beginning of 2022, a series of uncertain factors at home and abroad followed, impacting the performance of domestic Internet giants-the growth rate was generally slowing down and profits were under pressure.

BABA is also one of them. In fact, BABA's performance has been under pressure since last year due to multiple internal and external factors. In order to cope with successive challenges, BABA has been adjusting his internal structure and development strategy. In December last year, BABA announced that the business logic would be redivided according to domestic and foreign logic, and Dai Shan and Jiang Fan took over BABA's domestic and foreign operations respectively.

In the conference call, BABA executives stressed that the company will continue to reduce costs and increase efficiency in the coming year, including shutting down and transferring businesses that have no obvious long-term value, and setting targets for reducing costs and increasing efficiency according to the different nature of the business. for example, direct business to improve gross profits, logistics business to increase efficiency, and control marketing expenses.

In the face of an uncertain future, BABA can only find certainty from himself.