Abu Dhabi, UAEWednesday 26 February 2020

Alibaba reports steady results amid global tumult

Company's revenue rose 42 per cent, while net income more than doubled in three months ended June

Alibaba's growth in its cloud computing division slowed to a still-respectable 66 per cent in the last quarter. Reuters
Alibaba's growth in its cloud computing division slowed to a still-respectable 66 per cent in the last quarter. Reuters

Despite a trade war, the slowing domestic economy and brutally aggressive competition, China’s largest technology company Alibaba reported revenue and profit numbers that handily beat analyst estimates.

Alibaba's revenue rose a blazing 42 per cent, while net income more than doubled.

Insulated because of its predominantly domestic business, the company is benefiting from a demographic shift to internet shopping. Chinese online sales accelerated in the June quarter, helped by sales promotions that unfolded across the country’s largest e-commerce platforms.

“It’s surprising how resilient Alibaba is,” said Michael Norris, a Shanghai-based research and strategy analyst at consultancy AgencyChina.

Revenue rose to 114.9 billion yuan (Dh59.8bn) in the three months ended June, while net income also came in ahead of expectations at 24.4bn yuan.

“Despite the macro environment not being as good as last year, Alibaba has launched a lot of new initiatives and the personalised product feed is helping maintain its growth rate,” said Steven Zhu, an analyst with Pacific Epoch. “It’s live-streaming services and collaboration with international brands are helping.”

The economic slowdown is eroding parts of the company’s sprawling empire of e-commerce, retail stores, delivery services and more. Revenue in its digital media and entertainment segment inched up just 6 per cent, despite streaming service Youku enlarging its average daily subscribers by 40 per cent. Growth in its cloud computing division, which commands half the country’s market share, slowed to a still-respectable 66 per cent.

Small and mid-sized enterprises may be leery of spending on ads - Alibaba’s biggest source of income - given the current environment. That prompted chief financial officer Maggie Wu to tell analysts Alibaba is in no rush to monetise its new shopping recommendation feeds.

Investors have raised flags about the impact on margins of Alibaba’s enormous spending on so-called new retail - its effort to use technology to overhaul physical retailers - and deepen its footprint in lower-tier cities and rural areas. Alibaba said it will continue to invest in those initiatives, as well as on-demand services like food delivery unit Ele.me, which is fighting a fierce, money-losing battle with giant Meituan.

A US campaign of tariffs and other curbs is heightening uncertainty around the world’s second-largest economy, while the emergence of rivals at home such as Pinduoduo tests its longstanding dominance of Chinese online retail.

The e-commerce titan may be on the look-out for assets to bolster its lead. Alibaba is in talks to pay $2bn for NetEase’s Kaola, which specialises in selling foreign goods to Chinese consumers, local media outlet Caixin reported.

The company is also hatching plans to raise more capital in the next quarters.

Updated: August 16, 2019 05:30 PM



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