Alibaba revenue beats estimates as shoppers defy China slowdown
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The strength of its e-commerce business is helping Alibaba weather losses in newer businesses of cloud computing and digital entertainment.
PHOTO: REUTERS
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BEIJING (BLOOMBERG) - Alibaba Group Holding's revenue beat analysts' estimates, powered by Chinese consumers' growing appetite for quality merchandise. But, profits lagged after the group swallowed a higher tax bill and splurged on the entertainment and cloud computing businesses that are fueling revenue growth.
Revenue at China's biggest e-commerce company rose 60 per cent to 38.6 billion yuan (S$7.8 billion) in the three months ended March, the company said yesterday. Adjusted earnings-per-share came in at 4.35 yuan, and the net income was 9.85 billion yuan.
The firm also announced a two- year share repurchase program of up to US$6 billion (S$ 8.3 billion).
E-commerce is bucking a slowdown in China's wider economy by appealing to a growing middle class demanding premium products from Alaskan salmon to New Zealand milk.
That's helping fuel billionaire founder Jack Ma's international expansion plan, which include helping a million American businesses tap Chinese consumers, buying control of Southeast Asian startup Lazada Group, and reaching foreign shoppers through AliExpress.
The strength of its e-commerce business is helping Alibaba weather losses in newer businesses of cloud computing and digital entertainment. While revenue in those nascent divisions is surging, they are yet to make money.
"Healthy market performance and engagement growth, more personalized content, and improved targeting should further unleash monetization upside," Ella Ji, an analyst at China Renaissance Securities US, wrote in an April report. "Internationally, we believe Lazada and AliExpress should continue to thrive."
Income tax expenses soared 149 percent to 4.6 billion yuan in the March quarter. Its effective tax rate climbed to 29 percent from 23 percent a year earlier, when the company set aside a portion of its earnings as non-taxable reinvestment capital. Alibaba said it also incurred additional taxes from the sale of certain unspecified investments.
Shares of Alibaba slipped 2.7 per cent in New York Wednesday. The stock has gained 37 per cent this year, compared with a 3.3 per cent gain for the NYSE Composite Index.
