Alibaba shoulders past macro, trade war headwinds with robust earnings growth
May 15, 2019
Chinese e-commerce giant Alibaba reported revenue of RMB 93.49 billion ($13.93 billion) for the fiscal quarter ended March 31, 2019, marking 51% growth from the same period a year earlier.
Revenue beat analyst estimates of $13.42 billion for the quarter as growth momentum maintained compared with 58% year-on-year growth during the same period last year. Revenue for the 2019 fiscal year ended March 31 totaled RMB 376.84 billion, an increase of 51% year on year, lower than the company’s forecast of more than 60%.
Alibaba’s net income in the quarter ended March 31 was RMB 23.38 billion, an increase of 252% compared with RMB 6.64 billion in the same quarter of 2018.
Meanwhile, the percentage of revenue cost compared with total revenue in the quarter increased to 60%, or RMB 55.61 billion, from 53% of revenue or RMB 32.50 billion, in the same quarter of 2018.
“The increase in revenue cost was primarily due to our consolidation of Ele.me, as well as an increase of the cost of inventory and logistics from New Retail and direct sale businesses,” the company said in its announcement.
The company forecasted in its 2020 fiscal year outlook revenue of more than RMB 500 billion. Its fiscal year began April 1, 2019 and ends on March 31, 2020.
“More and more, Alibaba is becoming synonymous with everyday consumption in China, growing our base to 654 million annual active consumers and extending our penetration in less-developed cities,” said CEO Daniel Zhang. “Our cloud and data technology and tremendous traction in New Retail have enabled us to continuously transform the way businesses operate in China and other emerging markets, which will contribute to our long-term growth.”
The company’s core e-commerce business drove growth thanks to lower-tier city penetration, better purchase conversion, and expansion to local consumer services and new retail businesses.
Jiang Fan, who oversees the company’s two core marketplaces Tmall and Taobao, announced in April that the company plans to double transaction volume on business-to-consumer marketplace Tmall over the next three years.
However, slowing economy and US-China trade tension remains a long-term uncertainty for the e-commerce giant. The growth rate of China’s online retail sales dropped significantly from 17.8% year on year in the first four months of 2019 from 32.4% in the same period last year.
Revenue from Alibaba’s cloud computing unit rose 76% from last year to RMB 7.72 billion, passing the $1 billion benchmark. Although the growth rate is still impressive, it slowed significantly compared with the 103% year-over-year jump in the same period last year.
Aside from e-commerce and cloud, Alibaba has its hand in a number of other businesses, such as logistics company Cainiao, and digital and entertainment arms including video streaming site Youku and Alibaba Pictures.