Thursday Tech Briefing: Growth Slows at Alibaba

Posted February 01, 2019

Hangzhou-based Alibaba posted 117.28 billion yuan ($17.5 billion) in quarterly revenue on Wednesday, versus 119.08 billion yuan estimated by FactSet.

Alibaba derives more than 90% of its sales from China and any signs of a worsening Chinese economy is very likely to impact the Chinese-dependent company.

Anticipating headwinds from economic uncertainty, Alibaba had lowered its revenue outlook for its financial year ending March even before the top sales season.

The positive result by Alibaba which is the first of China's internet giants to report its earnings may bring a much-needed boost to China's slowing economy.

Net income rose 33 percent to 30.96 billion yuan, however, beating estimates and sending Alibaba's stock up by about 1.6 percent in pre-market trade.

On a call with investors and analysts, Alibaba CEO Daniel Zhang acknowledged the external pressures of the economic climate.

Alibaba's founder, Jack Ma, has previously described the China-US trade spat as the "most stupid thing in the world".

Net profit reached $4.9 billion in the October-December third quarter.

Alibaba Group Vice Chairman and Co-founder Joe Tsai, in remarks made to analysts Wednesday morning and emailed to Retail Dive, pushed back against the idea that any of that would cause much of a ripple for the company's fortunes - echoing comments by Alibaba Group President J. Michael Evans during a panel at the National Retail Federation's Big Show in NY earlier this month.

China's economy posted a 6.6% expansion in 2018, the slowest in 28 years, as factory activity and domestic demand tapered.

The business has also noted that 70 percent of its annual active consumer growth has come from cities rated as third-tier and lower, as mobile connectivity and e-commerce continues to grow in these regions.

"As Chinese consumers upgrade their lifestyles, they will purchase higher-quality products as well as more services and entertainment", CLSA said, adding that Alibaba was well-placed to profit from this.

Revenue from its cloud business rose by 84%, to 6.6 billion yuan (€0.85 billion), while sales from its digital entertainment and media business rose by 20%, to 6.5 billion yuan (€0.84 billion).