On November 1, 2019, the 2019 quarterly report of Ali (NYSE:BABA) released, showing revenue of 119 billion during the period. Growth of 40%, operating profit of 20.36 billion, an increase of 51%. Net profit reached 70.75 billion due to the impact of the investment income of ants. Excluding recurring gains and losses, non-GAAP net profit was 32.75 billion, up 40% year-on-year.
“ceiling” is a floating cloud
In 2019, Q3, Ali Group’s revenue was 119 billion. The quarterly revenue exceeded the whole of 2016 and the growth rate was 7 percentage points higher. It is a miracle of growth.
At the celebration of the 20th anniversary of Ali, CEO Zhang Yong announced the goal of the 2024 fiscal year – serving 1 billion users, with a total transaction amount of 10 trillion. In the past 2019 fiscal year, the total annual active buying and trading volume of Ali was 654 million and 5.73 trillion respectively (Alibaba’s 2019 fiscal year from 2018 4 January 1st – March 31st, 1919 ).
In 2019, Q3, core e-commerce revenue exceeded 100 billion for the second consecutive quarter, up 39.7% year-on-year.
In non-e-commerce business, cloud computing is a rising star. In 2018, Q4 earned 6.6 billion, surpassing the digital entertainment section for the first time. In Q19, in 2019, cloud computing, digital entertainment, and innovation business revenues were 9.3 billion, 7.3 billion, and 1.2 billion, respectively, totaling 17.8 billion, accounting for 15% of total revenue, but only 0.2 percentage points higher than Q2 in 2018. This “old elephant” has always been “dancing.”
In 2017, the largest contribution to revenue growth in non-e-commerce business was the digital entertainment segment, which was 19%, and the total contribution rate for non-e-commerce business was as high as 27%. In 2018, the situation turned sharply. The contribution rate of the digital entertainment sector was only 5%, and the total contribution rate of non-e-commerce business was 13%.
In 2019, Q3, the contribution rate of cloud computing and digital entertainment business to revenue growth was 11% and 4% respectively. Cloud computing became the growth engine after e-commerce business.
The key to researching head companies is the future growth space. If the total market size is 100 billion, the number one ranking has already won 30 billion, and the remaining share is not easy to grab. The total scale is not something that a company can promote. The company’s revenue growth will be limited, often requiring a new stove to find newGrowth engine.
For example, the growth of Tencent in recent years mainly comes from “other businesses”, including financial services, cloud computing, etc., and the investment income is also considerable. Baidu’s big search business is almost stagnant, and its revenue growth is mainly from iQiyi advertising and paid membership business. Fundamental The reason is that the game and online advertising “ceiling” is not high enough. By 2024, the total revenue of these two industries is only 1 trillion (In 2018, the total revenue of the two industries totaled approximately 600 billion), due to fierce competition, the head company’s share is at most 30% to 40%.
Alibaba’s e-commerce business was full of energy, daysThe flower board is as high as the sky’s floating clouds, so Zhang Yong has the confidence that the total amount of transactions in the 2024 fiscal year can reach 10 trillion.
segment revenue
1) core e-commerce
The core e-commerce business EBITA (EBITs) is seasonally significant, with Q4 being the peak year-round. In 2018, Q3 reached a record 46.1 billion, an average of 500 million a day. In Q19, 203, the profit before interest and taxes was 38.6 billion, a year-on-year increase of 30.4%, but the profit rate dropped by 3 percentage points.
The profit margin of the core e-commerce business is declining, there are factors to make profits to the seller, and the other is that the important factor is that the huge new retail eco-building is still in the investment period.
Alibaba’s core e-commerce business covers not only domestic e-commerce business, but also cross-border and overseas business (Lazada), rookie network (< Span class="text-remarks" label="Remarks">2018 double eleven processing 1 billion parcels), local life service ( annual active Users 640 million and new retail business (Box Ma Shengsheng, etc.), the profit margin of these businesses can not be compared with the traditional e-commerce business Than, dragging the profit margin of the entire section.
2) Cloud Computing
In 2016, Q3, the cloud before interest and tax loss rate was 3.8%; after that, except for Q2 in 2018, the loss rate never exceeded 10%; in 2019, Q3, the cloud computing business had a loss before interest and taxes of 520 million, and the loss rate was 5.6%. .
In 2019, Q3, Alibaba Cloud revenue was 9.29 billion, a year-on-year increase of 64%. The growth rate was 26 percentage points lower than that of Q2 in 2018. It is not too low.
Compared with profit and loss, cloud computing revenue growth is more interesting. However, Alibaba Cloud has shown the attitude of “Yingke and then enter, and is in the air”, try to control the loss while maintaining the growth rate. The emerging business of Internet companies has a loss rate of more than 50% or even 100%. With Alibaba Cloud’s strategic position, the loss rate is only a few percentage points.
In the past 12 months, Alibaba Cloud has a total revenue of 31.4 billion yuan, and has the initiative to attack and retreat: the advance rate of more than 50% at a loss rate of several points, consolidating the leading position of domestic cloud computing Retreat is appropriate to reduce the growth rate, in exchange for break-even and even profit, to create conditions for landing in the capital market.
3) digital entertainment
The digital entertainment section mainly includes Youku and UCWeb. The main source of revenue and loss is Youku. Everyone knows that the content cost of video websites is as heavy as Taishan. The good news is that the loss rate of the entertainment sector has narrowed. In Q3 2019, the digital entertainment version had a loss before tax of 2.21 billion and a loss rate of 30%, which was “the lowest in history.”
In 2018, Q3, revenue growth rate was 24%, loss rate was 64%; in 2019, Q3, revenue growth rate was 23%, and the loss rate narrowed to 30%. It seems that the digital entertainment section finds a way to “control” losses and maintain a certain growth rate.
Because there is no separate disclosure, it is roughly estimated that Youku’s revenue, EBIT loss and loss rate are similar to those of iQiyi. Doing a video website is a “long-term battle for burning money.” Youku’s backing is undoubtedly stronger than iQiyi.
4) Overall Benefits
Putting the profit before interest and taxes of the e-commerce business together with the loss before interest and taxes of other businesses, you can see why Ali can handle it with ease. In Q19, in 2019, the core e-commerce profit before tax was 38.8 billion yuan, and the loss before interest and taxes of cloud computing, digital entertainment and innovation business totaled 4.6 billion.