Alibaba jumps as cloud business reports first-ever quarterly profit
- Alibaba reported the first-ever profit in its cloud business of $3 million on Tuesday.
- BABA reported strong earnings including 37% year-over-year revenue growth and net income of $8.96 billion.
- Alibaba's ANT Group has also reportedly reached a restructuring deal with Chinese regulators.
Shares of Alibaba are up over 5% on Wednesday after the company reported the first-ever profit from its cloud business during the December quarter.
The Chinese e-commerce giant reported an adjusted EBITDA of 24 million yuan or $3 million for its cloud business in its earnings report on Tuesday.
While the figure makes the cloud business just barely profitable, it does represent a transformation from a loss of 356 million yuan ($55.1 million) for the same period a year ago. Additionally, cloud computing revenue jumped 50% year-over-year to a record 16.11 billion yuan.
"Our cloud computing business continues to expand market leadership and show strong growth, reflecting the massive potential of China's nascent cloud computing market as well as our years of investment in technology," Alibaba CEO Daniel Zhang said in a press release.
It wasn't just Alibaba's cloud business that performed well during the most recent quarter either. Revenue jumped to $33.5 billion, and net income rose to $8.96 billion in the quarter.
"We delivered another solid quarter, with revenue growth of 37% year-over-year and adjusted EBITDA up 22% year-over-year, while our strong free cash flow enabled us to further invest in strategic areas," said Maggie Wu, Chief Financial Officer of Alibaba Group.
Alibaba has been focused on revenue diversification and profit generation of late as it faces regulatory uncertainty domestically.
The company was hit with an antitrust probe from the Chinese government back in December, and its holdings in the fintech giant ANT Group have been under scrutiny as ANT faces its own regulatory hurdles.
On Wednesday, however, Bloomberg broke the news that Ant Group and Chinese regulators have agreed on a restructuring plan that will turn ANT into a financial holding company, making it subject to capital requirements similar to banks.
The plan calls for putting all of Ant's businesses into the holding company, which is good news for the fintech giant as some market participants had been speculating Ant might be forced to spin off portions of its business, Shujin Chen, Hong Kong-based head of China financial research at Jefferies Financial told Bloomberg.
Additionally, after the company's Tuesday earnings release Alibaba revealed plans to raise up to $5 billion via US dollar-denominated bonds with several tranches at different maturities up to 40 years, CNBC reported.
Despite pressure from Chinese regulators, analysts are mostly bullish on Alibaba due to its impressive e-commerce market share and growing cloud business. The company boasts 22 "buy" ratings, six "neutral" ratings, and zero "sell" ratings from analysts.