In-depth analysis of Alibaba's latest May 18, 2023 earnings report

Baba's recent performance

Alibaba-SW's revenue, net income, free cash flow, retained earnings, assets, and liabilities have grown significantly over the past few years. In 2022, Alibaba-SW's revenue increased 10% to $247.8 billion. Net revenue increased 2% to $35.9 billion. Free cash flow increased 16% to $7.5 billion. Retained earnings increased 18% to $132.3 billion. Assets grew 14% to $844.5 billion. Debt increased 13% to $371.3 billion. This increase is due to a number of factors, including the continued expansion of Alibaba-SW e-commerce business, growth in cloud computing business, and expansion of international business. Alibaba-SW's growth is expected to continue in the next few years. The company is investing heavily in new businesses, such as artificial intelligence and blockchain, and is expanding its presence in new markets. The table below shows the growth or decline in Alibaba-SW revenue, net revenue, free cash flow, retained earnings, assets, and liabilities from 2021 to 2022:

2021-2022 indicators

My observations on the 2021-2022 metrics are as follows:

Revenue increased 10%.

Net income increased by a corresponding 2.8%, with expenditure exceeding revenue. The $36 billion is still a good profit, and it is hoped that some of it will be reinvested in capital expenditure, technology, and artificial intelligence to create future value.

In terms of free cash flow (FCF), I'm excited to see a 15.38% increase in 2022 to reach $8 billion.

Despite a 2.8% increase in net income, I'm happy to note a 16.2% increase in retained earnings (profit after dividends paid to investors). This is the right trend.

I'm also happy to see an increase in assets (13%) greater than an increase in liabilities (11%).

Note that above is a quick look at some of my favorite financial metrics. For a better understanding, let's take a closer look at the financial status of the latest earnings.

Alibaba-SW FY13 Q4 (ending March 2023):

Cloud Intelligence Group's spin-off was approved.

• Revenue increased 2% year over year to $30.3 billion (over US$410 million).

• Non-GAAP EPADS $1.56 ($0.21).

Operating margin 7% (down 1 percentage point year over year).

• Free cash flow margin of 15%.

Twitter user “App Economy Insights” provided the excellent earnings summary above.

RMB million

Below are my observations on the profit and loss statements for the years ended 2022 and March 31, 2023:

Revenue increased by 1.83% and net income increased by 39.28%. This means they're working to reduce expenses, and hopefully we can see better cost management moving forward.

It's great to see efforts to reduce sales. Marketing expenses fell 13.61%.

However, I would like to express my concern about “general and administrative expenses” and “amortization and impairment of intangible assets”, which recorded significant increases of 32.14% and 15.94% respectively.

I am very happy to see Baba reduce its “weighted shares (per common share)” from 21.558 billion shares to 20.98 billion shares.

RMB million

Observations from the balance sheet (compare the balance of March 31, 2022 and March 31, 2023):

Total assets increased from $1,697 billion to $1,753 billion, an increase of 3.39%

Total liabilities increased from $613 billion to $630 billion, an increase of 2.73%

It's a good thing that assets are growing faster than liabilities. Therefore, it is not surprising that the total volume of shares increased by 3.78%.

I want to emphasize that retained earnings grew at a rate of 6.29% to $599 billion.

Cash flow monitoring (year ended March 31, 2022 to 2023):

Operating cash flow increased by 39.92%

Investment cash flow fell by 31.77% (this is good news)

Financing cash flow increased by 1.82%