Alibaba Q3 Profit Slips 74%

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Chinese e-commerce giant Alibaba Group Holdings Ltd. (BABA) reported Thursday that net income for the third quarter plunged 74 percent from last year, despite 10 percent growth in revenues, hurt by a huge impairment of goodwill. In pre-market activity on the NYSE, Alibaba shares are losing around 5.6 percent to trade at $103.57.

"Alibaba delivered steady progress this quarter as we continued to execute our multi-engine growth strategy in a complex and volatile market environment. We achieved positive momentum in key strategic businesses through a disciplined focus on capacity building and value creation to fuel our future growth," said Daniel Zhang, Chairman and CEO.

For the third quarter, Alibaba reported net income attributable to ordinary shareholders of 20.43 billion Chinese yuan or $3.21 billion, down 74 percent from last year's 79.43 billion yuan. Earnings per ADS were 7.51 yuan or $1.18, compared to 28.85 yuan a year ago.

The results were impacted by an impairment of goodwill of 25.14 billion or $3.95 billion in relation to Digital media and entertainment segment, and the decrease in net gains arising from the changes in fair value of the company's equity investments.

Excluding items, adjusted net income for the quarter was 44.62 billion yuan or $7.0 billion, compared to prior year's 59.21 billion yuan. Adjusted earnings per share were 2.11 yuan or $0.33, compared to 2.75 yuan last year.

The company's revenue for the quarter rose 10 percent to 242.58 billion yuan or $38.07 billion from 221.08 billion yuan last year, primarily driven by the segment revenue growth of China commerce, Cloud, Local consumer services and International commerce.

"Our global annual active consumers grew at a solid pace, reaching 1.28 billion on the strength of a quarterly net increase of 43 million," Zhang added.

China commerce segment revenues grew 7 percent to 172.23 billion yuan or $27.03 billion, International commerce segment revenue improved 18 percent to 16.45 billion yuan or $2.58 billion, Local consumer services segment revenue rose 27 percent to 12.14 billion yuan or $1.91 billion, Cloud segment revenue increased 20 percent to 19.54 billion yuan or $3.07 billion and Cainiao segment revenue grew 15 percent to 13.08 billion yuan or $1.05 billion from last year.

Starting this quarter, the company said it has updated its segment reporting to separately present China commerce, International commerce, Local consumer services, Cainiao, Cloud, Digital media and entertainment, and Innovation initiatives and others.

The company also announced its goal to realize carbon neutrality in its operations by 2030 along with a commitment to an additional 1.5 gigatons of decarbonization in 2035 by working with consumers, customers and partners across our ecosystem.

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