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Alibaba Group Announces June Quarter 2022 Results

HANGZHOU, China, August 04, 2022--(BUSINESS WIRE)--Alibaba Group Holding Limited (NYSE: BABA and HKEX: 9988, "Alibaba" or "Alibaba Group") today announced its financial results for the quarter ended June 30, 2022.

"During the past quarter, we actively adapted to changes in the macro environment and remained focused on our long-term strategy by continuing to strengthen our capability for customer value creation," said Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group. "Following a relatively slow April and May, we saw signs of recovery across our businesses in June. We are confident in our growth opportunities in the long term given our high-quality consumer base and the resilience of our diversified business model catering to different demands of our customers."

"Despite the challenges posed by the COVID-19 resurgence, we delivered stable revenue performance year-over-year. We have narrowed losses in key strategic businesses given ongoing improvements in operating efficiency and increasing focus on cost optimization," said Toby Xu, Chief Financial Officer of Alibaba Group. "We recently shared our plan to add Hong Kong as another primary listing venue. By becoming primary listed on both Hong Kong and New York stock exchanges, we aim to further expand and diversify our investor base."

BUSINESS HIGHLIGHTS

In the quarter ended June 30, 2022:

  • Revenue was RMB205,555 million (US$30,689 million) and remained stable year-over-year primarily due to a decline in China commerce segment revenue by 1% year-over-year to RMB141,935 million (US$21,190 million) offset by revenue growth of Cloud segment by 10% year-over-year to RMB17,685 million (US$2,640 million).

  • Income from operations was RMB24,943 million (US$3,724 million), a decrease of 19% year-over-year. Adjusted EBITA, a non-GAAP measurement, decreased 18% year-over-year to RMB34,419 million (US$5,139 million).

  • Net income attributable to ordinary shareholders was RMB22,739 million (US$3,395 million) and net income was RMB20,298 million (US$3,030 million). Non-GAAP net income was RMB30,252 million (US$4,517 million), a decrease of 30% year-over-year, mainly due to a decrease in adjusted EBITA and a decrease in share of results of equity method investees.

  • Diluted earnings per ADS was RMB8.51 (US$1.27) and diluted earnings per share was RMB1.06 (US$0.16 or HK$1.24). Non-GAAP diluted earnings per ADS was RMB11.73 (US$1.75), a decrease of 29% year-over-year and non-GAAP diluted earnings per share was RMB1.47 (US$0.22 or HK$1.72), a decrease of 29% year-over-year.

  • Net cash provided by operating activities was RMB33,869 million (US$5,057 million), an increase of 1% compared to RMB33,603 million in the same quarter of 2021. Free cash flow, a non-GAAP measurement of liquidity, was RMB22,173 million (US$3,310 million), an increase of 7% compared to RMB20,683 million in the same quarter of 2021.

BUSINESS AND STRATEGIC UPDATES

China Commerce

China commerce segment mainly includes our China commerce retail businesses such as Taobao, Tmall, Taobao Deals, Taocaicai, Freshippo, Tmall Supermarket, Sun Art, Tmall Global and Alibaba Health, as well as wholesale businesses including 1688.com.

For the quarter ended June 30, 2022, online physical goods GMV generated on Taobao and Tmall, excluding unpaid orders, declined mid-single-digit year-over-year mainly due to impacts from COVID-19 resurgence and restrictions that resulted in supply chain and logistics disruptions in April and most of May. In late May, as logistics capacity normalized, we saw recovering GMV driven by a successful 6.18 Shopping Festival that was strongly supported by our merchants and loyal consumers. The 6.18 Shopping Festival achieved positive paid GMV growth year-over-year and we saw especially strong purchasing demands from our 88VIP members.

Negatively impacted by COVID-19, paid GMV declined for key categories such as fashion & accessories and consumer electronics during the quarter. Nevertheless, we continue to observe increasing consumption in the healthcare category as well as interests-based consumption categories such as pet care, collectibles and outdoor & active gears. Despite near-term challenges, Taobao and Tmall continue to achieve high consumer retention, especially among consumers with higher spending power. 98% of the annual active consumers who each spent over RMB10,000 on Taobao and Tmall in the twelve months ended June 30, 2021 continued to be active in the twelve months ended June 30, 2022. In the twelve months ended June 30, 2022, more than 123 million annual active consumers each spent over RMB10,000 on Taobao and Tmall. As of June 30, 2022, we had 25 million 88VIP members with over RMB57,000 annual average spending per member.

Taobao Deals, our value-for-money platform, continued to enrich product supply and enhance digital consumption experience for consumers in less developed areas. Specifically, Taobao Deals has been helping an expanding base of manufacturers to sell directly to consumers (M2C) on Taobao and Taobao Deals and, in the June quarter, paid GMV of M2C products on Taobao and Taobao Deals grew more than 40% year-over-year. During the quarter, Taobao Deals significantly narrowed losses year-over-year as well as quarter-over-quarter driven by optimizing spending in user acquisition as well as improving average spending of active consumers.

Taocaicai, our business offering consumers next day pick-up service for grocery and fresh goods at neighborhood pick-up points, has rapidly established market presence in regions that have high population density with meaningful consumption power. In the June quarter, Taocaicai GMV grew rapidly at more than 200% year-over-year while its losses increased moderately compared to the same quarter last year. Moreover, driven by optimized pricing strategy, better sourcing capability and lowered operating costs, Taocaicai significantly reduced losses quarter-over-quarter in the June quarter.

During the quarter ended June 30, 2022, our direct sales and others revenue grew 8% year-over-year to RMB64,714 million (US$9,661 million), primarily driven by strong growth of online purchases of food, grocery and FMCG goods that benefitted Freshippo, Tmall Supermarket and Sun Art, partly offset by softening offline sales due to COVID-19 impacts. The percentage of online sales for Freshippo and Sun Art reached 68% and 36%, respectively, during the quarter. By leveraging our multiple direct sales businesses and on-demand delivery infrastructure, we believe we are well positioned to better serve consumers’ increasing demand for on-demand delivery of food, grocery and daily necessities in the future.

International Commerce

International Commerce Retail

Our International commerce retail businesses include Lazada, AliExpress, Trendyol and Daraz. During the June quarter, the combined number of orders of Lazada, AliExpress, Trendyol and Daraz declined by 4% year-over-year, primarily driven by declining orders of AliExpress due to change in the European Union’s VAT rules, depreciation of the Euro against the U.S dollar as well as ongoing supply chain and logistics disruptions due to the Russia-Ukraine conflict.

In Southeast Asia, Lazada exhibited healthy order growth of 10% year-over-year during the quarter ended June 30, 2022. Year-over-year order growth decelerated due to shopping activities normalizing back to offline channels with the lifting of COVID-19 restrictions in the region. Lazada has continued to focus on improving operating efficiency, which has resulted in narrowing of losses quarter-over-quarter and year-over-year during the quarter ended June 30, 2022.

During the June quarter, overall orders of Trendyol grew 46% year-over-year. To better serve its significant consumer base, Trendyol has continued to invest and expand into high-frequency local consumer services business. As of June 30, 2022, Trendyol served more than 225 thousand merchants on its marketplace platform.

International Commerce Wholesale

During the June quarter, international commerce wholesale revenue grew 12% year-over-year. Value of transactions completed on Alibaba.com grew 16% year-over-year, driven by solid growth in industrial goods, partly offset by weakening demand of consumer products from sourcing customers in key developed countries challenged by supply chain disruptions and increasing retail channel inventory build-up.

Local Consumer Services

Local consumer services segment includes "To-Home" and "To-Destination" businesses. For the quarter ended June 30, 2022, Local consumer services order volume declined by 5% year-over-year mainly due to declining Ele.me restaurant delivery orders, impacted by COVID-19 resurgence and restrictive measures, partly offset by solid growth of Ele.me non-restaurant delivery orders and strong growth of Amap orders. During the quarter, overall segment GMV declined year-over-year but has improved each month as COVID-19 impacts eased. Overall segment GMV growth turned positive in the month of June 2022.

To-Home

In the quarter ended June 30, 2022, Ele.me continued to focus on improving user retention and operating efficiency in strategic cities as well as increasing growth in non-restaurant delivery services. During the quarter, restaurant order volumes were negatively impacted by COVID-19 resurgence and restrictive measures throughout China, especially in affluent cities such as Shanghai. Ele.me adapted quickly to meet surging demands for daily necessities such as grocery, medicine and baby care products, which resulted in increased basket size. During the quarter ended June 30, 2022, Ele.me’s unit economics per order was positive due to increased average order value year-over-year as well as its ongoing focus in optimizing user acquisition spending and reducing delivery cost per order.

To-Destination

In the quarter ended June 30, 2022, "To-Destination" businesses, which include Amap and Fliggy, were also negatively impacted by COVID-19, but Amap saw a strong recovery in June as COVID-19 restrictions eased. In June, the number of average daily active users of Amap reached a new high of over 120 million, driven by easing COVID-19 impacts and ongoing enrichments of local contents and services that allow Amap users to discover, connect with and visit local merchants.

Cainiao

In the quarter ended June 30, 2022, revenue from Cainiao, before inter-segment elimination, grew 7% year-over-year to RMB17,292 million (US$2,582 million), primarily driven by the growth of fulfillment solutions and value-added services provided to our China commerce retail businesses, partly offset by declining revenue from merchants of our international commerce retail businesses. During the quarter, 70% of Cainiao’s total revenue was generated from external customers. Revenue from Cainiao, after inter-segment elimination, grew 5% year-over-year to RMB12,142 million (US$1,813 million).

Cainiao continues to expand its international logistics network by strengthening its end-to-end logistics capabilities, including eHubs, line-haul, sorting centers and last-mile network. In July 2022, Cainiao commenced operation of a new international sorting center in Israel, bringing the number of overseas sorting centers in operation to ten. Cainiao is also building and investing in capabilities to improve delivery experience for our global consumers and enrich our value proposition to cross-border merchants. For example, during the quarter, we increased smart lockers capacity and made a bolt-on acquisition that enhanced our last mile delivery capability in Europe. As of June 30, 2022, Cainiao had more than 7,700 smart lockers in operation in Europe.

In China, Cainiao continues to expand its value-added services, including door-step parcel delivery service, through Cainiao Post to improve consumer experience, which complements our China commerce businesses. As of June 30, 2022, excluding those in rural areas and universities, approximately 70% of Cainiao Posts offer door-step parcel delivery service to consumers.

Cloud

Our Cloud segment is comprised of Alibaba Cloud and DingTalk. For the quarter ended June 30, 2022, total revenue from our Cloud segment before inter-segment elimination, which includes revenue from services provided to other Alibaba businesses, was RMB23,938 million (US$3,574 million). Revenue after inter-segment elimination was RMB17,685 million (US$2,640 million) for the quarter ended June 30, 2022, an increase of 10% year-over-year. Year-over-year revenue growth of our Cloud segment reflected recovering growth of overall non-Internet industries, driven by financial services, public services, and telecommunication industries, partly offset by decline in revenue from the top Internet customer that has gradually stopped using our overseas cloud services for its international business due to non-product related requirements, online education customers as well as softening demand from other customers in China’s Internet industry. For the quarter ended June 30, 2022, after inter-segment elimination, non-Internet industries contributed 53% of Cloud revenue, up more than five percentage points compared to the same quarter last year.

Alibaba Cloud

Alibaba Cloud continues to develop, expand and support our partners to better serve our enterprise customers. During our Cloud Partners Summit in July 2022, we emphasized ecosystem enhancing initiatives, including capability building and training programs as well as reward programs for ecosystem partners, and we expect such initiatives will further increase revenue contribution from ecosystem partners.

Alibaba Cloud’s advantages are its proprietary technology and continued commitment to investing in research and development in new product offerings and industry-specific solutions for our customers. Highlights of our proprietary technologies in last quarter include:

Data Centers and Hardware:

  • During Alibaba Cloud Summit 2022 (阿里云峰会) in June, Alibaba Cloud unveiled a proprietary cloud infrastructure system designed to power its cloud-native data centers. The new system, Cloud Infrastructure Processing Unit (CIPU), will help Alibaba Cloud deliver performance improvements in networking, storage, security and computing power by offloading virtualization functions from servers to dedicated hardware. Coupled with the Apsara Cloud operating system, the CIPU system is expected to become the core of our next generation of cloud computing infrastructure.

  • Alibaba Cloud is committed to achieving carbon neutrality for Scope 1~3 GHG emissions by 2030. Over the years, we have invested in more energy-efficient server population, improving server utilization and employing cutting-edge technologies to improve energy efficiency of our self-owned IDCs including liquid cooling technology and renewable electricity storage.

Platform-as-a-Service and other solutions:

  • AI leadership: According to Gartner’s Cloud AI Developer Services Critical Capabilities Report published in May 2022, Alibaba Cloud’s AI language technology ranked second among global cloud AI developer service vendors. Alibaba Cloud offers a comprehensive suite of AI-based capabilities, including Natural Language Processing, intelligent voice recognition, image recognition, video recognition, among others.

DingTalk

DingTalk, our digital collaboration workplace and application development platform, offers new ways of working, sharing and collaboration for modern enterprises and organizations. DingTalk experienced increased usage of its products and services from enterprises, schools and organizations due to greater hybrid-work adoption in China driven by COVID-19 resurgence since March 2022. Specifically, DingTalk saw robust demand for its document sharing and virtual conferencing products, both of which are core DingTalk products that enhance long-term customer value and ensure user stickiness.

Digital Media and Entertainment

In the June quarter, Youku’s daily average paying subscriber base increased 15% year-over-year, primarily driven by quality content and continued contribution from our 88VIP membership program. Youku continues to improve operational efficiency through disciplined investment in content and production capability, which resulted in narrowing of losses year-over-year for five consecutive quarters.

Appointment of Independent Director

We appointed Irene Yun-Lien Lee, chairman of Hysan Development Company Limited and independent non-executive chairman of Hang Seng Bank Limited, and Albert Kong Ping Ng, former chairman of Ernst & Young China who currently serves as an independent non-executive director of a number of companies publicly listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange, as independent directors. Following this appointment, our board consists of twelve directors, including seven independent directors.

Share Repurchases

During the quarter ended June 30, 2022, we repurchased approximately 38.6 million of our ADSs (the equivalent of approximately 308.7 million of our ordinary shares) for approximately US$3.5 billion under our share repurchase program. As of June 30, 2022, we had approximately 21.2 billion ordinary shares (the equivalent of approximately 2.6 billion ADSs) outstanding. Our current US$25 billion share repurchase program is effective through March 2024. As of June 30, 2022, we still have an un-utilized amount of US$12 billion under this program.

JUNE QUARTER SUMMARY FINANCIAL RESULTS

Three months ended June 30,

2021

2022

RMB

RMB

US$

YoY %
Change

(in millions, except percentages and per share amounts)

Revenue

205,740

205,555

30,689

(0)%

Income from operations

30,847

24,943

3,724

(19)%(2)

Operating margin

15%

12%

Adjusted EBITDA(1)

48,628

41,114

6,138

(15)%(2)

Adjusted EBITDA margin(1)

24%

20%

Adjusted EBITA(1)

41,731

34,419

5,139

(18)%(2)

Adjusted EBITA margin(1)

20%

17%

Net income

42,835

20,298

3,030

(53)%(3)

Net income attributable to ordinary shareholders

45,141

22,739

3,395

(50)%(3)

Non-GAAP net income(1)

43,441

30,252

4,517

(30)%(4)

Diluted earnings per share(5)

2.05

1.06

0.16

(48)%(3) (6)

Diluted earnings per ADS(5)

16.38

8.51

1.27

(48)%(3) (6)

Non-GAAP diluted earnings per share(1) (5)

2.08

1.47

0.22

(29)%(4) (6)

Non-GAAP diluted earnings per ADS(1) (5)

16.60

11.73

1.75

(29)%(4) (6)

________________

(1)

See the sections entitled "Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures" for more information about the non-GAAP measures referred to within this results announcement.

(2)

The year-over-year decreases were primarily due to the decrease in China commerce adjusted EBITA, which was primarily due to a decrease in customer management revenue. Customer management revenue decreased year-over-year, primarily as a result of a mid-single-digit decline year-over-year in online physical goods GMV of Taobao and Tmall, excluding unpaid orders, as well as increased order cancellation due to the impacts from COVID-19 resurgence and restrictions that resulted in supply chain and logistics disruptions in April and most of May. The decrease in China commerce adjusted EBITA was partly offset by the narrowed adjusted EBITA loss of Local consumer services driven by Ele.me’s improved unit economics per order. Ele.me’s unit economics per order was positive during the June quarter due to increased average order value year-over-year as well as its ongoing focus on optimizing user acquisition spending and reducing delivery cost per order.

(3)

The year-over-year decreases were primarily attributable to the decrease in income from operations, the decrease in share of results of equity method investee, as well as the decrease in net gains arising from change in market prices of our equity investments in publicly-traded companies.

(4)

The year-over-year decreases were primarily attributable to the decrease in adjusted EBITA, and the decrease in share of results of equity method investees.

(5)

Each ADS represents eight ordinary shares.

(6)

The year-over-year percentages as stated are calculated based on the exact amount and there may be minor differences from the year-over-year percentages calculated based on the RMB amounts after rounding.

JUNE QUARTER INFORMATION BY SEGMENTS

The table below sets forth selected financial information of our operating segments for the periods indicated:

Three months ended June 30, 2022

China

commerce

International

commerce

Local

consumer

services

Cainiao

Cloud

Digital

media and

entertainment

Innovation

initiatives

and others

Unallocated(1)

Consolidated

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

US$

(in millions, except percentages)

Revenue

141,935

15,451

10,632

12,142

17,685

7,231

479

205,555

30,689

YoY% change

(1

)%

2

%

5

%

5

%

10

%

(10

)%

(30

)%

N/A

(0

)%

Income (Loss) from operations

41,035

(2,142

)

(5,311

)

(811

)

(1,304

)

(1,215

)

(2,518

)

(2,791

)

24,943

3,724

Add: Share-based compensation expense

1,951

557

836

372

1,548

399

411

651

6,725

1,004

Add: Amortization of intangible assets

588

18

1,431

254

3

186

211

60

2,751

411

Adjusted EBITA

43,574

(1,567

)

(3,044

)

(185

)

247

(630

)

(1,896

)

(2,080

)

34,419

5,139

Adjusted EBITA YoY% change(2)

(14

)%

(52

)%

36

%

(27

)%

(27

)%

(50

)%

(32

)%

(27

)%

(18

)%

Adjusted EBITA margin

31

%

(10

)%

(29

)%

(2

)%

1

%

(9

)%

(396

)%

N/A

17

%

Three months ended June 30, 2021

China

commerce

International

commerce

Local

consumer

services

Cainiao

Cloud

Digital

media and

entertainment

Innovation

initiatives

and others

Unallocated(1)

Consolidated

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

(in millions, except percentages)

Revenue

144,029

15,202

10,099

11,601

16,051

8,073

685

205,740

Income (Loss) from operations

47,603

(1,732

)

(7,205

)

(633

)

(1,643

)

(1,010

)

(1,950

)

(2,583

)

30,847

Add: Share-based compensation expense

2,383

671

788

212

1,979

383

503

892

7,811

Add: Amortization of intangible assets

836

31

1,647

275

4

208

14

58

3,073

Adjusted EBITA

50,822

(1,030

)

(4,770

)

(146

)

340

(419

)

(1,433

)

(1,633

)

41,731

Adjusted EBITA margin

35

%

(7

)%

(47

)%

(1

)%

2

%

(5

)%

(209

)%

N/A

20

%

Starting from the quarter ended December 31, 2021, our chief operating decision maker ("CODM") started to review information under a new reporting structure, and segment reporting has been updated to conform to this change, which also provides greater transparency in our business progress and financial performance. Our updated segments comprise:

  • China commerce, which mainly includes our China commerce retail businesses such as Taobao, Tmall, Taobao Deals, Taocaicai, Freshippo, Tmall Supermarket, Sun Art, Tmall Global and Alibaba Health, as well as wholesale business including 1688.com;

  • International commerce, which mainly includes our international commerce retail and wholesale businesses such as Lazada, AliExpress, Trendyol, Daraz and Alibaba.com;

  • Local consumer services, which mainly includes location-based services, such as Ele.me, Taoxianda, Amap (previously reported under the Innovation initiatives and others segment) and Fliggy;

  • Cainiao, which mainly includes our domestic and international one-stop-shop logistics services and supply chain management solutions;

  • Cloud, which is comprised of Alibaba Cloud and DingTalk;

  • Digital media and entertainment, which is comprised of Youku, Quark, Alibaba Pictures, and other content and distribution platforms, as well as our online games business; and

  • Innovation initiatives and others, which includes businesses such as DAMO Academy, Tmall Genie and others.

Comparative figures were reclassified to conform to this presentation.

(1) Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

(2) For a more intuitive presentation, widening of loss in YoY% is shown in terms of negative growth rate, and narrowing of loss in YoY% is shown in terms of positive growth rate.

JUNE QUARTER SEGMENT RESULTS

Revenue for the quarter ended June 30, 2022 was RMB205,555 million (US$30,689 million), stable compared to RMB205,740 million in the same quarter of 2021.

The following table sets forth a breakdown of our revenue by segment for the periods indicated:

Three months ended June 30,

2021

2022

RMB

% of
Revenue

RMB

US$

% of
Revenue

YoY %
Change

(in millions, except percentages)

China commerce:

China commerce retail

- Customer management

80,397

39

%

72,263

10,789

35

%

(10

)%

- Direct sales and others(1)

59,708

29

%

64,714

9,661

32

%

8

%

140,105

68

%

136,977

20,450

67

%

(2

)%

China commerce wholesale

3,924

2

%

4,958

740

2

%

26

%

Total China commerce

144,029

70

%

141,935

21,190

69

%

(1

)%

International commerce:

International commerce retail

10,800

5

%

10,524

1,571

5

%

(3

)%

International commerce wholesale

4,402

2

%

4,927

736

2

%

12

%

Total International commerce

15,202

7

%

15,451

2,307

7

%

2

%

Local consumer services

10,099

5

%

10,632

1,587

5

%

5

%

Cainiao

11,601

6

%

12,142

1,813

6

%

5

%

Cloud

16,051

8

%

17,685

2,640

9

%

10

%

Digital media and entertainment

8,073

4

%

7,231

1,080

4

%

(10

)%

Innovation initiatives and others

685

0

%

479

72

0

%

(30

)%

Total

205,740

100

%

205,555

30,689

100

%

(0

)%

________________

(1)

Direct sales and others revenue under China commerce retail primarily represents our direct sales businesses, comprising mainly Sun Art, Tmall Supermarket and Freshippo, where revenue and the cost of inventory are recorded on a gross basis.

China Commerce

(i) Segment revenue

  • China Commerce Retail Business

Revenue from our China commerce retail business in the quarter ended June 30, 2022 was RMB136,977 million (US$20,450 million), a decrease of 2% compared to RMB140,105 million in the same quarter of 2021.

Customer management revenue decreased by 10% year-over-year, primarily because online physical goods GMV generated on Taobao and Tmall, excluding unpaid orders, declined mid-single-digit year-over-year, and increased order cancellation due to the impacts from COVID-19 resurgence and restrictions that resulted in supply chain and logistics disruptions in April and most of May.

Direct sales and others revenue under China commerce retail business in the quarter ended June 30, 2022 was RMB64,714 million (US$9,661 million), an increase of 8% compared to RMB59,708 million in the same quarter of 2021, primarily due to the revenue growth contributed by our Freshippo and Alibaba Health’s direct sales businesses.

  • China Commerce Wholesale Business

Revenue from our China commerce wholesale business in the quarter ended June 30, 2022 was RMB4,958 million (US$740 million), an increase of 26% compared to RMB3,924 million in the same quarter of 2021, primarily due to an increase in revenue from new duty-free wholesale business and value-added services to paying members.

(ii) Segment adjusted EBITA

China commerce adjusted EBITA decreased by 14% to RMB43,574 million (US$6,505 million) in the quarter ended June 30, 2022, compared to RMB50,822 million in the same quarter of 2021. The decrease was primarily due to the decrease in customer management revenue, which also led to a decrease in adjusted EBITA margin from 35% in the quarter ended June 30, 2021 to 31% in the quarter ended June 30, 2022. During the quarter ended June 30, 2022, Taobao Deals significantly narrowed losses year-over-year as well as quarter-over-quarter driven by optimizing spending in user acquisition as well as improving average spending of active consumers. Taocaicai significantly reduced losses quarter-over-quarter, driven by optimized pricing strategy, better sourcing capability and lowered operating costs.

International Commerce

(i) Segment revenue

  • International Commerce Retail Business

Revenue from our International commerce retail business in the quarter ended June 30, 2022 was RMB10,524 million (US$1,571 million), a decrease of 3% compared to RMB10,800 million in the same quarter of 2021. The decrease was primarily due to the declining orders of AliExpress due to change in the European Union’s VAT rules, depreciation of Euro against U.S dollar as well as ongoing supply chain and logistics disruptions due to the Russia-Ukraine conflict, partly offset by the increase in revenue contributed by Lazada as a result of GMV growth and active increase in monetarization initiatives that resulted in higher monetarization rate.

  • International Commerce Wholesale Business

Revenue from our International commerce wholesale business in the quarter ended June 30, 2022 was RMB4,927 million (US$736 million), an increase of 12% compared to RMB4,402 million in the same quarter of 2021. The increase was primarily due to an increase in revenue generated by cross-border related value-added services.

(ii) Segment adjusted EBITA

International commerce adjusted EBITA was a loss of RMB1,567 million (US$234 million) in the quarter ended June 30, 2022, compared to a loss of RMB1,030 million in the same quarter of 2021. The increase in loss year-over-year was primarily due to increase in loss of Trendyol resulting from its investments in new businesses, such as international business and local consumer services in Türkiye, offset by the reduced loss from Lazada as a result of revenue growth and enhanced operation efficiency.

Local Consumer Services

(i) Segment revenue

Revenue from Local consumer services, which includes "To-Home" and "To-Destination" businesses such as Ele.me, Amap and Fliggy, was RMB10,632 million (US$1,587 million) in the quarter ended June 30, 2022, an increase of 5% compared to RMB10,099 million in the same quarter of 2021, primarily due to more efficient use of subsidies that were contra revenue of Ele.me.

(ii) Segment adjusted EBITA

Local consumer services adjusted EBITA was a loss of RMB3,044 million (US$454 million) in the quarter ended June 30, 2022, compared to a loss of RMB4,770 million in the same quarter of 2021, primarily due to the continued narrowing of losses from our "To-Home" businesses, driven by Ele.me’s improved unit economics per order. Ele.me’s unit economics per order was positive during the June quarter due to increased average order value year-over-year as well as its ongoing focus on optimizing user acquisition spending and reducing delivery cost per order.

Cainiao

(i) Segment revenue

Revenue from Cainiao, which represents revenue from its domestic and international one-stop-shop logistics services and supply chain management solutions, after inter-segment elimination, was RMB12,142 million (US$1,813 million) in the quarter ended June 30, 2022, an increase of 5% compared to RMB11,601 million in the same quarter of 2021, primarily contributed by the increase in revenue from consumer logistics services as a result of service upgrade to enhance consumer experience, partly offset by the decrease in international orders from AliExpress.

Total revenue generated by Cainiao, before inter-segment elimination, which includes revenue from services provided to other Alibaba businesses, was RMB17,292 million (US$2,582 million), an increase of 7% compared to RMB16,198 million in the same quarter of 2021. This increase also reflected the growth of fulfillment solutions and value-added services provided to our China commerce retail businesses, such as Tmall, Taobao and Taobao Deals.

(ii) Segment adjusted EBITA

Cainiao adjusted EBITA was a loss of RMB185 million (US$28 million) in the quarter ended June 30, 2022, compared to a loss of RMB146 million in the same quarter of 2021. The year-over-year increase in loss was primarily due to our investment in expanding our global smart logistics infrastructure, as well as reduced profit from AliExpress fulfilments.

Cloud

(i) Segment revenue

Revenue from our Cloud segment, after inter-segment elimination, was RMB17,685 million (US$2,640 million) in the quarter ended June 30, 2022, an increase of 10% compared to RMB16,051 million in the same quarter of 2021. Year-over-year revenue growth of our Cloud segment reflected recovering growth of overall non-Internet industries, driven by financial services, public services, and telecommunication industries; partly offset by decline in revenue from the top Internet customer that has gradually stopped using our overseas cloud services for its international business due to non-product related requirements, online education customers as well as softening demand from other customers in China’s Internet industry.

Total revenue from our Cloud segment, before inter-segment elimination, which includes revenue from services provided to other Alibaba businesses, was RMB23,938 million (US$3,574 million), an increase of 8% compared to RMB22,186 million in the same quarter of 2021.

(ii) Segment adjusted EBITA

Cloud adjusted EBITA, which comprises Alibaba Cloud and DingTalk, was RMB247 million (US$37 million) in the quarter ended June 30, 2022, compared to RMB340 million in the same quarter of 2021. The year-over-year decrease was primarily due to our investments in technology and increase in colocation and bandwidth costs as a result of increased usage of DingTalk’s products and services from enterprises, schools and organizations due to greater hybrid-work adoption in China driven by COVID-19 resurgence since March 2022.

Digital Media and Entertainment

(i) Segment revenue

Revenue from our Digital media and entertainment segment in the quarter ended June 30, 2022 was RMB7,231 million (US$1,080 million), a decrease of 10%, compared to RMB8,073 million in the same quarter of 2021, primarily due to the decrease in revenue from Alibaba Pictures, Youku and other entertainment businesses.

(ii) Segment adjusted EBITA

Digital media and entertainment adjusted EBITA in the quarter ended June 30, 2022 was a loss of RMB630 million (US$94 million), compared to a loss of RMB419 million in the same quarter of 2021. Youku narrowed losses year-over-year, which was offset by the increased loss of other entertainment businesses due to the impacts of COVID-19.

Innovation Initiatives and Others

(i) Segment revenue

Revenue from Innovation initiatives and others was RMB479 million (US$72 million) in the quarter ended June 30, 2022, a decrease of 30% compared to RMB685 million in the same quarter of 2021.

(ii) Segment adjusted EBITA

Innovation initiatives and others adjusted EBITA in the quarter ended June 30, 2022 was a loss of RMB1,896 million (US$283 million), compared to a loss of RMB1,433 million in the same quarter of 2021, primarily due to our investments in technology and innovation.

JUNE QUARTER OTHER FINANCIAL RESULTS

Costs and Expenses

The following tables set forth a breakdown of our costs and expenses, share-based compensation expense and costs and expenses excluding share-based compensation expense by function for the periods indicated.

Three months ended June 30,

% of Revenue
YoY change

2021

2022

RMB

% of
Revenue

RMB

US$

% of
Revenue

(in millions, except percentages)

Costs and expenses:

Cost of revenue

124,097

60

%

129,657

19,357

63

%

3

%

Product development expenses

13,519

7

%

14,193

2,119

7

%

0

%

Sales and marketing expenses

27,036

13

%

25,578

3,819

12

%

(1

)%

General and administrative expenses

7,168

4

%

8,433

1,259

4

%

0

%

Amortization of intangible assets

3,073

1

%

2,751

411

2

%

1

%

Total costs and expenses

174,893

85

%

180,612

26,965

88

%

3

%

Share-based compensation expense:

Cost of revenue

1,691

1

%

1,613

241

1

%

0

%

Product development expenses

3,800

2

%

2,987

446

2

%

0

%

Sales and marketing expenses

813

0

%

900

134

0

%

0

%

General and administrative expenses

1,507

1

%

1,225

183

0

%

(1

)%

Total share-based compensation expense

7,811

4

%

6,725

1,004

3

%

(1

)%

Costs and expenses excluding share-based compensation expense:

Cost of revenue

122,406

59

%

128,044

19,116

62

%

3

%

Product development expenses

9,719

5

%

11,206

1,673

5

%

0

%

Sales and marketing expenses

26,223

13

%

24,678

3,685

12

%

(1

)%

General and administrative expenses

5,661

3

%

7,208

1,076

4

%

1

%

Amortization of intangible assets

3,073

1

%

2,751

411

2

%

1

%

Total costs and expenses excluding share-based compensation expense

167,082

81

%

173,887

25,961

85

%

4

%

Cost of revenue – Cost of revenue in the quarter ended June 30, 2022 was RMB129,657 million (US$19,357 million), or 63% of revenue, compared to RMB124,097 million, or 60% of revenue, in the same quarter of 2021. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue would have increased from 59% in the quarter ended June 30, 2021 to 62% in the quarter ended June 30, 2022. The increase was primarily attributable to (i) the higher proportion of our direct sales businesses, such as Freshippo and Tmall Supermarket, as well as growth in Alibaba Health direct sales businesses, that resulted in increased cost of inventory as a percentage of revenue, and (ii) the growth of Cainiao domestic businesses that led to an increase in logistics costs as a percentage of revenue, which is partly offset by the reduction in delivery cost per order of Ele.me.

Product development expenses – Product development expenses in the quarter ended June 30, 2022 were RMB14,193 million (US$2,119 million), or 7% of revenue, compared to RMB13,519 million, or 7% of revenue, in the same quarter of 2021. Without the effect of share-based compensation expense, product development expenses as a percentage of revenue would have remained stable at 5% in the quarter ended June 30, 2022 compared to the same quarter of 2021.

Sales and marketing expenses – Sales and marketing expenses in the quarter ended June 30, 2022 were RMB25,578 million (US$3,819 million), or 12% of revenue, compared to RMB27,036 million, or 13% of revenue, in the same quarter of 2021. Without the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have decreased from 13% in the quarter ended June 30, 2021 to 12% in the quarter ended June 30, 2022.

General and administrative expenses – General and administrative expenses in the quarter ended June 30, 2022 were RMB8,433 million (US$1,259 million), or 4% of revenue, compared to RMB7,168 million, or 4% of revenue, in the same quarter of 2021. Without the effect of share-based compensation expense, general and administrative expenses as a percentage of revenue would have increased from 3% in the quarter ended June 30, 2021 to 4% in the quarter ended June 30, 2022.

Share-based compensation expense – Total share-based compensation expense included in the cost and expense items above in the quarter ended June 30, 2022 was RMB6,725 million (US$1,004 million), compared to RMB7,811 million in the same quarter of 2021. Share-based compensation expense as a percentage of revenue decreased to 3% in the quarter ended June 30, 2022, as compared to 4% in the same quarter of 2021.

The following table sets forth our analysis of share-based compensation expense for the quarters indicated by type of share-based awards:

Three months ended June 30,

2021

2022

%
Change

RMB

% of
Revenue

RMB

US$

% of
Revenue

YoY

(in millions, except percentages)