BEIJING • 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 fuelling 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 to March, the firm said yesterday. Adjusted earnings- per-share was 4.35 yuan, and the net income was 9.85 billion yuan.

The firm also announced a two- year share repurchase programme of up to US$6 billion (S$8.4 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 is helping fuel billionaire founder Jack Ma's international expansion plan, which includes helping a million American businesses tap Chinese consumers, buying control of South-east Asian start-up 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. Revenue in those nascent divisions is surging, but they are yet to make money. "Healthy market performance and engagement growth, more personalised content, and improved targeting should further unleash monetisation upside," Ms 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 per cent to 4.6 billion yuan in the March quarter. Its effective tax rate climbed to 29 per cent from 23 per cent 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 on Wednesday. The stock has gained 37 per cent this year, compared with a 3.3 per cent gain for the NYSE Composite Index.

BLOOMBERG, REUTERS