Alibaba posts 37 per cent gain in quarterly profit, bucking slowdown in China

Alibaba Group Holding posted a 37 per cent increase in net income in the quarter ended December, driven by gains in its main online commerce and bucking analyst expectations for a decline amid a slowdown in China’s economy.

The New York-listed e-commerce giant said net income for its fiscal third quarter reached 33 billion yuan (US$4.8 billion) on the back of a 41 per cent rise in revenue to 117.3 billion yuan, up from 83 billion yuan in the same period a year earlier.

Shares of Alibaba were up about 4 per cent in early trading on Wednesday in the US, following the company’s latest earnings report.

“Our resilient operating and financial performance is a direct reflection of our persistent focus on better serving our growing base of nearly 700 million consumers across retail, digital entertainment and local consumer services,” said Daniel Zhang Yong, chief executive of Alibaba, in a statement on Wednesday.

Mobile monthly active users on Alibaba’s China online retail marketplaces reached 699 million in December, which is more than the combined population of the United States, Germany, Russia and Japan.

Consumption remains engine and driving force for China’s growth, Alibaba CEO says

“What we see from Alibaba’s platforms is that Chinese consumption growth is still strong, driven by a growing base of increasingly affluent young consumers,” Zhang said in a conference call with analysts ahead of the opening of the US markets. “In addition, we saw urbanisation continue to be the engine of China’s economic growth, with over 70 per cent of [Alibaba’s] annual active users from tier-3 and below cities.”

While he acknowledged the country’s cooling property market and slower growth in household appliances, Zhang said demand for consumer goods, such as apparel and home furnishing, exhibited growth the past quarter as “Chinese consumers continued to upgrade their lifestyle”.

Alibaba’s latest quarterly results reflected a record haul from Singles’ Day, or Double 11 shopping festival, held on November 11, when the Hangzhou-based company smashed the previous tally with US$30.8 billion in gross merchandise value of goods and services sold. Cloud computing also contributed to the revenue gains in the past quarter.

Alibaba.com wants to move offline trade shows like CES into the online world

The strength of Alibaba’s earnings – the company is the first of China’s internet giants to report quarterly results – may go some way to assuage concerns that the broader economy is slowing.

Chinese government and industry data have shown that spending on property has fallen amid tightened spending by consumers.

“While the Chinese economy suggests a bleaker outlook in 2019, the company continues to grow its user base at a healthy rate,” said eMarketer analyst Oscar Orozco in a report on Wednesday.

Alibaba reported that its core commerce revenue, which includes its main online retail platforms Taobao Marketplace and Tmall, increased 40 per cent to 102.8 billion yuan in the past quarter.

Cloud computing revenue jumped 84 per cent to 6.6 billion yuan, while digital media and entertainment revenue rose 20 per cent to 6.5 billion yuan.

Revenue from innovation initiatives, which include smart speaker system Tmall Genie and mapping arm AutoNavi, grew 73 per cent to 1.3 billion yuan.

Annual active consumers on Alibaba’s China retail marketplaces reached 636 million, an increase of 35 million from the 12 months ended September 30.

Alibaba’s share price had seen a decline of about 25 per cent from its peak of about US$210 in June last year, amid a global tech rout and investment uncertainty around its slowing growth.

Recent investor concerns have revolved around Alibaba’s efforts to acquire stakes in offline retailers, as the company pushes forward its New Retail strategy of integrating online and offline retail platforms. Alibaba is also investing heavily in its merged food delivery arm Ele.me and lifestyle unit Koubei, which is battling Hong Kong-listed Meituan Dianping for supremacy in China’s growing on-demand local services market.

Alibaba launches ‘A100’ initiative to drive its evolution into a global enterprise tech provider

At the conference call with analysts on Wednesday, Alibaba executive vice-chairman Joseph Tsai said the digital transformation of enterprises and the retail sector in China is expected to result in productivity and efficiency gains that will benefit the company.

Earlier this month, Alibaba unveiled its “A100” initiative, which offers enterprises of all sizes a one-stop solution to accelerate their digital transformation, which involves implementation of advanced technologies, processes and practices to fundamentally change and improve how traditional businesses operate.

That initiative looks to reinforce the rapid evolution of China’s major internet players, who built their fortune from consumer-based platforms, into technology powerhouses focused on serving more corporate customers through technologies like cloud computing and artificial intelligence.

Alibaba is the parent company of the South China Morning Post.