Alibaba reveals $6 billion share buyback as it misses EPS forecast

Posted May 19, 2017

Alibaba Group Holding's revenue beat analysts' estimates, powered by Chinese consumers' growing appetite for quality merchandise.

Alibaba, which runs China's most popular online shopping websites, Taobao and Tmall, also said Thursday that the company's board approved a $6 billion share buyback over the next two years to prevent share dilution.

The Chinese e-commerce giant also reported strong fiscal year revenue growth of 56% with annual non-GAAP free cash flow of approximately United States $10 billion, according to Maggie Wu, Chief Financial Officer of Alibaba Group.

Revenue soared to 38.6 billion yuan, or $5.6 billion, up 60% year-over-year.

The company's income tax expenses in the quarter rose 149% from the year-ago period to RMB 4.6 billion (US $662 million), and Alibaba's effective tax rate was 29% in the quarter, compared to 23% in the same period last year.

The firm acquired the Singapore e-commerce site Lazada previous year.

Alibaba has been making large investments into its digital media and entertainment businesses to compete with Tencent and Baidu Inc for a share of the digital content market. Initially, Alibaba shares fell as much as 5.6% to $114 in NY, the biggest intraday drop in nearly a year.

Alibaba is trying to appeal to a growing middle class demanding premium products from Alaskan salmon to New Zealand milk. Growing Chinese affluence is propelling billionaire founder Jack Ma's worldwide expansion, which include helping a million American businesses tap Chinese consumers and reaching foreign shoppers through AliExpress.

Despite the revenue growth, Alibaba's adjusted earnings-per-share of 4.35 yuan failed to meet estimates of 4.51 yuan.

Alibaba also saw its cloud computing revenue climb 121 percent to US$968 million for the fiscal year, where its paying customer base grew 70 percent to 874,000. Despite stiff competition, Alibaba sees rural investment as manageable due to its franchise model, "where it passes on all commissions to local partners, but incurs limited losses", Leung said. Over the long term, though, the shift to a consumption-based economy provides Alibaba with opportunities, according to Alibaba Group Executive Vice Chairman Joe Tsai.

But that dominance comes with a cost. While revenue from Alibaba's cloud business increases rose 103 percent to 2.2 billion yuan. Up to 507 million customers used Alibaba's China retail platforms on their smartphones in March, an increase of 14 million from December. Revenue from digital media and entertainment in the quarter rose 234% year-over-year to RMB 3.93 billion (US $571 million).

Even so, the digital media unit posted a loss of 1.7 billion yuan ($246.7 million) in the fourth quarter.