Alibaba beats revenue expectations on cloud boost

Source: by Josh Horwitz and Vibhuti Sharma for Thomson Reuters, Shanghai, May 16

Chinese e-commerce giant Alibaba Group Holding Ltd beat fourth-quarter revenue forecasts on Wednesday, thanks to growth in its core business and its diversification into cloud computing and other services.

Alibaba has invested in new business lines such as cloud computing as a boom in its core e-commerce has peaked and its top line growth is slowing.

It reported a 51% increase in group revenue for January-March from a year earlier to 93.50 billion yuan (10.58 billion pounds), beating estimates of 91.58 billion yuan, according to IBES data from Refinitiv.

Sales excluding revenue from consolidated businesses grew 39 percent year-on-year.

While still solid, Alibaba’s top-line growth rates have slowed sharply from a few years ago, as have those of domestic rivals such as JD.com, which last week reported its slowest quarterly revenue growth since it listed in 2014.

Alibaba said it expects its revenue for the full fiscal year ending in March 2020 will top 500 billion yuan, which would be a 33% increase on the previous year.

Its shares were up 1.7% at $177.55 in New York trade by 1451 GMT, after its fourth-quarter results release.

The group said its net income attributable to ordinary shareholders rose in the quarter to 25.83 billion yuan, from 7.56 billion yuan in the same period a year earlier.

Alibaba has made money primarily by selling advertising and promotional services to third-party merchants that list products on Taobao and Tmall, two of its e-commerce sites, but has in recent years invested heavily in cloud computing as well.

It also opened 135 supermarkets in China under its Hema division, according to its earnings release.

Revenue from the company’s cloud computing business rose 76% in the fourth quarter, it said.

It is still a relatively small part of Alibaba’s overall business, accounting for 8% of group revenue in the fourth quarter. However, the company is now the world’s third-largest cloud service provider, after Microsoft Corp and Amazon.com Inc, and the largest in China with a market share of over 40%, according to data from IDC.

Selling analytics technology to offline retailers and expanding its AliExpress e-commerce sites are other initiatives it is taking further.

Most of Alibaba’s new initiatives are still losing money. Steven Zhu, senior analyst at Pacific Epoch, said that e-commerce growth, while slowing, remains strong enough to support these new investments.

Managing the group’s transition to new areas of business is Daniel Zhang, who was tapped by Chairman Jack Ma to be Ma’s successor in September 2018 and will formally replace him later this year.

An accountant by training, Zhang is soft-spoken and pragmatic, in contrast to Ma’s flamboyance.

© Business Reporter 2021

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