Alibaba Q1 FY 2022 Earnings Preview: Growth Insights and Stock Price Impact in 2022

Alibaba's Q1 FY 2022 earnings report is set for release before market open on August 3, 2022. Investors are keenly watching the company's annual active consumer growth in China, a critical indicator of its e-commerce strength.

Key Highlights to Watch

• Analysts forecast adjusted EPS of RMB14.42 ($2.23), slightly below RMB14.82 from Q1 FY 2021.
• Annual active consumers in China are expected to increase year-over-year, signaling robust user engagement.
• Despite regulatory pressures from the Chinese government’s tech crackdown, revenue is projected to grow.

Alibaba Group Holding Ltd. (BABA) has faced significant challenges amid a widespread selloff in Chinese tech stocks, triggered by government efforts to limit the influence of major technology players. Earlier this year, Alibaba was fined $2.8 billion for anti-competitive practices on its e-commerce platforms, impacting investor sentiment.

As Alibaba reports its Q1 FY 2022 financial results, ending March 2022, analysts anticipate a slight decline in adjusted EPS—the first in at least four years—while revenue growth remains strong. Note that the Alibaba shares discussed are Nasdaq-listed American Depositary Shares (ADS) under the ticker BABA.

Investors will focus heavily on the company's annual active consumers in China, a vital metric representing the number of unique buyers on Alibaba’s platforms over the past 12 months. This figure is expected to grow at the fastest rate since Q2 FY 2020, underscoring Alibaba’s ability to attract and retain users despite market headwinds.

Over the past year, Alibaba’s stock has underperformed the broader market, delivering a total return of -22.8%, compared to the S&P 500’s 35.4% gain. The decline began shortly after the Q2 FY 2021 earnings report and has persisted amid regulatory challenges and market volatility.

Alibaba’s Earnings Performance Overview

Alibaba’s Q4 FY 2021 earnings showed mixed results: adjusted EPS missed estimates, but revenue surged 63.9% year-over-year—its fastest growth since Q2 FY 2018. Adjusted EPS grew 12.1%, the slowest pace since FY 2020’s final quarter.

During that quarter, Alibaba paid a significant RMB18.2 billion ($2.8 billion) anti-monopoly fine imposed by China’s State Administration for Market Regulation, resulting in the company’s first net loss as a public entity.

In Q3 FY 2021, both adjusted EPS and revenue exceeded expectations, with EPS rising 21.1% year-over-year and revenue up 36.9%, marking the strongest revenue growth since Q3 FY 2020. Notably, Alibaba's cloud computing business achieved profitability for the first time, continuing its market expansion.

For Q1 FY 2022, analysts predict a 2.7% dip in adjusted EPS—the first decline in over 16 quarters—while revenue is expected to grow by 36.2%, reflecting a slowdown from the previous quarter but maintaining robust momentum.

Looking ahead to full-year FY 2022, adjusted EPS is forecasted to decrease by 5.1%, marking the first drop in five years, while revenue growth is projected at 29.3%, the slowest in the same period.

Source: Visible Alpha

Why Annual Active Consumers Matter

Annual active consumers in China represent the total number of user accounts that placed at least one confirmed order on Alibaba’s retail marketplaces over the past year. This metric excludes whether transactions have been settled but remains critical for assessing platform engagement.

Attracting and retaining active consumers is essential to Alibaba’s business model, which largely depends on selling marketing services to merchants on its platforms. A larger active consumer base translates into greater advertising revenue and increased exposure for Alibaba’s cloud and entertainment divisions, key areas for future growth.

Historically, Alibaba’s annual active consumers in China have grown steadily but with a slowing trend: 23.6% growth in Q1 FY 2019 (576 million users), slowing to 17.0% in Q1 FY 2020, and 10.1% in Q1 FY 2021.

Growth momentum dipped in Q2 FY 2021 but picked up in Q3 and Q4 to 11.7%. For Q1 FY 2022, analysts anticipate an 11.9% year-over-year increase to 830 million users—the fastest growth rate since Q2 FY 2020.

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