Alibaba doubles quarterly net profit thanks to e-commerce and cloud

By Emma Lee
1 min read
Image credit: Alibaba Group

E-commerce giant Alibaba posted a robust rise in revenue for the first fiscal quarter ended in June as net profit more than doubled, driven by the healthy expansion of its core e-commerce business and growing cloud services.

Why it matters: Strong quarterly results at Alibaba and JD, the country’s top two e-commerce players, show that Chinese consumers are “still spending” despite a slowing domestic economy and the ongoing trade war with the US.

  • Alibaba rival JD.com also posted solid sales growth earlier this week with revenue jumping 22.9% on the year to RMB 150.3 billion ($21.9 billion) in the second calendar quarter.
  • The results bring more confidence to investors who have been increasingly skeptical about growth prospects for Chinese e-commerce companies.

“Geopolitical uncertainties have placed additional pressure on global growth. This is both a challenge and an opportunity for the Chinese economy.”

—Daniel Zhang, Alibaba CEO, on the earnings call.

Details: The company’s revenue grew 42% on the year to hit RMB 114.9 billion in the reporting period while net profit more than doubled to RMB 21.2 billion.

  • Core commerce and cloud computing are two significant drivers of growth, representing 87% and 7% of the company’s total earnings for the quarter.
  • Digital media and entertainment and other innovation initiatives account for 5% and 1%, respectively.
  • Revenue from e-commerce services including Taobao, Tmall as well as food delivery platform Ele.me surged 44% year on year to RMB 99.5 billion.
  • Annual active consumers on these core marketplaces reached 674 million, an increase of 20 million from the 12 months ended March 31, 2019.
  • Cloud computing sales grew two-thirds to RMB7.8 billion during the quarter, primarily driven by an increase in average revenue per customer.
  • This will be Alibaba’s last earnings report before Jack Ma hands over the reins to CEO Daniel Zhang in September.

Context: Alibaba is reportedly seeking a separate listing in Hong Kong for as much as $20 billion in the third quarter of this year.

  • The e-commerce giant is also in talks with NetEase to acquire its cross-border e-commerce arm Kaola and may merge the unit with its Tmall International platform, local media reported.
  • Demand in lower-tier cities is driving the growth momentum in China’s e-commerce market.