Can Cloud Momentum Propel Alibaba’s (BABA) Q3 Earnings?

Alibaba Group Holding Limited‘s BABA third-quarter fiscal 2022 results, which are set to release on Feb 24, 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 33% from the prior-year period to RMB 20.01 billion ($ 3.1 billion), accounting for 10% of total revenues.

The Zacks Consensus Estimate for fiscal third-quarter cloud computing segment revenues is pegged at $ 3.24 billion, indicating growth of 31.2% from the year-ago reported figure.

Click here to know how the company’s overall fiscal third-quarter performance is expected to have been.

Alibaba Group Holding Limited Revenue (TTM)

Alibaba Group Holding Limited revenue-ttm | Alibaba Group Holding Limited Quote

Key Factors to Note

Alibaba’s strong cloud services portfolio, powered by advanced technologies like AI, Machine Learning and the 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 third quarter.

Alibaba’s expanding footprint in the booming global 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’s introduction of server chips, named Yitian 710, for use in its data centers is likely to have positively impacted the upcoming results.

Alibaba 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.

However, rising competition from big market players is anticipated to have continued posing serious risks to Alibaba’s position in the cloud market in the to-be-reported quarter.

Mounting investments costs are likely to have been other concerns.

Zacks Rank & Stocks to Consider

Currently, Alibaba carries a Zacks Rank # 5 (Strong Sell).

Some better-ranked companies in the broader technology sector are Broadcom AVGO, Intuit INTU and Zscaler ZS, each presently carrying a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks # 1 Rank (Strong Buy) stocks here.

Broadcom is scheduled to release first-quarter fiscal 2022 results on Mar 3. It has gained 22.9% over a year. The long-term earnings growth rate for AVGO is currently projected at 14.5%.

Intuit is slated to report second-quarter fiscal 2022 results on Feb 24. It has gained 20.6% over a year. The long-term earnings growth rate for INTU is currently projected at 15.7%.

Zscaler is slated to report second-quarter fiscal 2022 results on Feb 24. It has gained 23.6% over a year. The long-term earnings growth rate for ZS is currently projected at 37.1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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