How Soon Can Alibaba’s Revenues Breach The $100-Billion Mark?

+40.76%
Upside
72.36
Market
102
Trefis
BABA: Alibaba Group logo
BABA
Alibaba Group

Alibaba’s (NYSE:BABA) stock has taken a hit over recent months due to its Chinese origins despite strong financial performance. The company’s Q1 results in August showed strength in ARPUs and subscriber growth thanks to Alibaba’s growing foothold on lower tier cities. However, the U.S. – China trade war has taken a toll on the stock with rumors of Chinese stocks getting de-listed from U.S. exchanges causing further damage.

Trefis captures trends in Alibaba’s revenues over the years along with our forecast for the next 3 in an interactive dashboard. We believe that Alibaba’s fundamentals remain strong, and the company is poised to report considerable growth over coming years from its focus on several revenue streams – helping its revenues reach nearly $100 billion in fiscal 2021 (ending March) from $56 billion in fiscal 2019.

A Quick Look At Alibaba’s Business Model

Relevant Articles
  1. Down 40% In The Last 12 Months, Is Alibaba Stock Undervalued At $70 Per Share?
  2. Down 65% Since 2021, What’s Next for Alibaba Stock?
  3. With Regulatory Issues In The Rearview Mirror, Alibaba Appears Cheap At $90
  4. Alibaba Stock Looks Undervalued At $80 Per Share
  5. Alibaba Stock’s Low Relative Valuation, Strong Earnings Make It A Buy
  6. Do Recent Regulatory Developments Make Alibaba Stock A Buy?

What Need Does It Serve?

Alibaba makes money through its e-commerce, logistics, cloud, digital media and other subscription software. While the company reports its business in four segments, we have reworked its structure into five segments that better capture Alibaba’s business based on its operations.

What Are The Alternatives?

Alibaba is a conglomerate with business interests spanning across digital and physical goods and services. The company’s most direct competitor is Amazon. However, since Amazon does not operate at scale in China, some other competitors include Baidu, Tencent, Sina etc.

Has 5 Operating Segments

  • China Commerce: Segment revenues are derived from retail e-commerce and associated marketing services in China.
  • Digital Media & Innovation Initiatives: Segment revenues are derived from content subscription, software subscription and merchant advertising offerings.
  • China Wholesale & Other: Segment revenues are derived from wholesale commerce and logistics services, primarily driven by Chinese consumption.
  • International Commerce: Segment revenues are derived from retail and wholesale operations as well as from advertising services outside China.
  • Cloud Computing: Segment revenues are derived based on customers’ duration and usage of Alibaba’s service.

 

Alibaba’s revenue grew 144% over 2017-19 to $56 billion and is expected to increase 78% to nearly $100 billion by 2021

2020E Revenue Breakdown:

  • China Commerce Revenue = 65%
  • Digital Media & Innovation Initiatives Revenues = 7%
  • China Wholesale & Other Revenue = 12%
  • International Commerce Revenues = 8%
  • Cloud Computing Revenues = 8%

 

[A] China Commerce Division Revenue growth of about $5 billion over the next two years will be driven by growing need for digital transformation among brick and mortar stores in the world’s largest country by population.

Additional details about how Alibaba’s largest revenue driver, its China Commerce Division Revenues, have changed over recent years, is available in our interactive dashboard.

[B] Digital Media & Innovation Initiatives Division Revenues to grow by about $2.7 billion over the next two years due to increase in local language content consumption

  • Over the last couple of years, the $1.7 billion increase in revenue has been driven by incremental local language content consumption
  • Over the next couple of years, the incremental $2.3 billion is likely to be driven by continued growth in local language content consumption.

[C] China Wholesale & Other Division Revenues to grow by about $4 billion over the next two years due to increase in logistics and wholesale business.

  • Change in China Wholesale & Other Revenue: 2017 to 19 – $6.2 billion (total percentage change of 666.1%); 2019 to 21E – $3.9 billion (total percentage change of 55%).
  • This includes:
    • Change in China Wholesale Revenues: 2017 to 19 – $663 million; 2019 to 21E – $818 million
    • Change in Cainao Logistics & Other Revenue: 2017 to 19 – $5.6 billion ; 2019 to 21E – $3.1 billion

[D] International Commerce Division Revenues to grow by about $3.7 billion over the next two years due to increase in paying customers and growth in average revenue per customer

  • Change in International Commerce Revenues: 2017 to 19 – $2.2 billion (total percentage change of 113%); 2019 to 21E – $3.7 billion (total percentage change of 89%)
  • This includes:
    • Change in International Commerce Retail Revenues: 2017 to 19 – $1.8 billion ; 2019 to 21E – $3.4 billion
    • Change in International Commerce Wholesale Revenues: 2017 to 19 – $345 mn ; 2019 to 21E – $269 mn

[E] Cloud Computing Division Revenues to grow by about $5 billion over the next two years due to increase in average revenue per customer, wider partnerships and Alibaba’s launch of newer cloud products

  • Alibaba’s recently-launched SAAS accelerator helps deploy cloud native technologies across customer IT environments to speed up adoption of Alibaba’s cloud.
  • Change in Cloud Computing Revenues: 2017 to 19 – $2.7 billion (total percentage change of 280.3%); 2019 to 21E – $5.15 billion (total percentage change of 140%)
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
More Trefis Data
Like our charts? Explore example interactive dashboards and create your own.