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Can Cloud Momentum Propel Alibaba's (BABA) Q1 Earnings?

Alibaba Group Holding Limited’s BABA first-quarter fiscal 2022 results, which are set to release on Aug 3, are expected to reflect the solid momentum across its cloud computing segment.

The segment has turned out to be one of the key contributors to the company’s overall top-line growth. In the last reported quarter, revenues from the cloud computing segment increased 37% from the prior-year period to RMB 16.8 billion ($2.56 billion), accounting for 9% of the total revenues.

The Zacks Consensus Estimate for fiscal first-quarter cloud computing segment revenues is pegged at $2.62 billion, indicating growth of 49.8% from the year-ago reported figure.

Click here to know how the company’s overall fiscal first-quarter results are expected to be.

Factors to Note

Alibaba’s strong cloud services portfolio, powered by advanced technologies like AI, Machine Learningand Internet of Things, is expected to have aided it in addressing the rising demand for cloud architecture in the to-be-reported quarter.

Increasing spending from enterprise customers, driven by the company’s continued efforts to add features to its cloud offerings, is likely to have driven the segment’s top-line growth in the fiscal first quarter.

The impacts of the Hybrid Cloud Partner Program of the company, which has been gaining strong traction, are expected to get reflected in the upcoming results.

Alibaba’s expanding footprint in the booming cloud market is expected to have been encouraging. Its strengthening global data center network is anticipated to have been beneficial in the to-be-reported quarter.

The company has been witnessing solid momentum across the Asia Pacific region for the past few quarters. The trend is expected to have persisted in the quarter under review.

In the fiscal first quarter, the company invested $1 billion to empower start-ups, developers and new talents in the APAC as part of its new project —AsiaForward. The impacts of this are likely to get reflected in the upcoming results.

However, rising competition from big market players is anticipated to have been a major concern in the to-be-reported quarter. Growth of Alibaba Cloud has been hindered by the strengthening efforts of Amazon’s AMZN AWS, Microsoft’s MSFT Azure and Alphabet’s GOOGL Google Cloud.

Currently, Alibaba carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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