Alibaba growth rate cools before IPO

E-commerce giant records third-quarter income of US$792 million on reduced profit margins

PUBLISHED : Thursday, 30 January, 2014, 5:01am
UPDATED : Thursday, 30 January, 2014, 5:01am

Alibaba's scorching growth may be cooling - but just slightly.

The mainland's privately held online marketplace posted year-on-year revenue growth of 51 per cent in the third quarter of last year, the slowest rate in three quarters, while margins shrank for a second quarter. But it swung from a loss a year earlier to US$792 million in net income ahead of what is being billed as the biggest initial public offering since Facebook's 2012 float.

The figures were disclosed on Tuesday by Yahoo, which holds a 24 per cent stake in Alibaba and reports Alibaba's results one quarter in arrears as part of its own financial disclosures.

Alibaba set a breakneck pace during the first two quarters of last year, logging top-line growth of 71 per cent in the first quarter and 61 per cent in the second. It reported revenue of US$1.78 billion during the third quarter, up from US$1.18 billion.

Aside from decelerating revenue growth, margins also shrank, from 74 per cent to 70 per cent.

But that could suggest the company was priming itself for a public market debut rather than any weakness in its business, said BRiley analyst Sameet Sinha. "It's a function of them making the investments before the IPO," Sinha said. "I'm sure the bankers are telling them not to do the margin acceleration before the IPO, show it after the IPO. That's what gets the stock moving."

Expectations have been building for months around Alibaba, with bankers predicting a listing that could raise up to US$15 billion and value the firm at more than US$100 billion - sums that have drawn comparisons to the frenzied Facebook's offering.

Shares of Yahoo, which has struggled to revive its own core business, closed 4.3 per cent higher in New York on Tuesday, but then fell to US$36.80 in extended trade following the release of Alibaba's revenue figure.