Alibaba's stellar results defy slow China growth

Alibaba's core commerce revenue rose 41 per cent to 28.5 billion yuan while sales from the new digital media and entertainment division quadrupled to 3.6 billion yuan.
Alibaba's core commerce revenue rose 41 per cent to 28.5 billion yuan while sales from the new digital media and entertainment division quadrupled to 3.6 billion yuan.PHOTO: REUTERS

Revenue rises 55% to $7b from strong e-commerce and sales from digital media and entertainment division

HONG KONG • Alibaba Group quarterly sales and earnings beat expectations as growth in cloud computing services bolstered an e-commerce business that continues to defy a slowing Chinese economy.

Revenue at China's biggest operator of online shopping malls rose 55 per cent to 34.3 billion yuan (S$7 billion), the company said yesterday. That compares with the 33.9 billion yuan average of estimates compiled by Bloomberg. 

Alibaba is capturing even more of a consumer shift to shopping on mobile devices as it uses its massive computing power and investments in data centres to win cloud customers and add a new leg of growth. The results come about a week before the company's annual Singles' Day sales event, the world's biggest 24-hour shopping promotion.

"At this growth rate, Alibaba's cloud unit could break even as soon as next quarter," said Arete Research Services analyst Li Muzhi. "The company's ability to make money from advertisers on its core e-commerce platforms has also improved."

Shares of Alibaba rose more than 3 per cent in pre-market trading. The stock closed at US$101.15 in New York on Tuesday and has gained 24 per cent this year compared with a near-3 per cent gain for the NYSE Composite Index.

Chairman Jack Ma is complementing the data centres' drive with a push into entertainment as the company gets deeper into the movie and video streaming business.

Core commerce revenue rose 41 per cent to 28.5 billion yuan while sales from the new digital media and entertainment division quadrupled to 3.6 billion yuan. The cloud unit's revenue leapt 130 per cent to 1.5 billion yuan in the quarter, the company said. The division narrowed its loss to 57 million yuan after more than doubling its paying customers to 651,000.

"Our next milestone goal is going to be 1 million," said Alibaba's chief financial officer Maggie Wu. "We've seen that more than 50 per cent of the unicorn companies in China are paying for our Ali Cloud services."

Alibaba has highlighted trillions of dollars in Chinese households savings as a key driver of growth. After free cash flow reached US$8 billion last year, it pledged to keep investing in expansion, despite the potential drag on the bottom line. The company is moving into untapped rural markets, exploring areas abroad and investing in new sources of income from online media to cloud computing. Alibaba bought Youku Tudou to expand into online video and Lazada to gain a foothold in South-east Asia.

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A version of this article appeared in the print edition of The Straits Times on November 03, 2016, with the headline 'Alibaba's stellar results defy slow China growth'. Print Edition | Subscribe