Alibaba steadfast amid China turbulence
Alibaba on Wednesday reported that its December quarter revenue rose 41% to RMB 117.3 billion ($17.06 billion), buoyed by its cloud computing business, where revenue rose 84% year-over-year to RMB 6.6 billion. Revenue from core commerce rose 40% to RMB 102.8 billion.
Annual active consumers on its China retail marketplaces grew by 35 million in the 12 months ended Sept. 30 to 636 million. Mobile monthly active users grew by 33 million to 699 million from September to December, according to a company press release.
Income from operations rose 3% to RMB 26.8 billion, as adjusted EBITDA rose 13% year-over-year to RMB 40.7 billion, the company said.
Alibaba's business diversity and ongoing innovations are helping protect it at a time of economic uncertainty in China — signs of slowing growth and governmental lever-pulling to address that. In other words, Alibaba has a lot of irons in a fire that is still burning brightly, despite recent headlines.
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 New York earlier this month.
On the economy, Tsai noted that consumer consumption in China remains robust as the middle class there is set to grow to 850 million people by 2030. "[T]he healthy balance sheet of Chinese households and the increasing availability of credit will fuel consumption," he also said. "The reality is, the absolute dollar amount of new wealth creation in the Chinese economy will be well over US$800 billion each year."
And, that size matters. "The size of the Chinese economy is US$13 trillion," he said. "In the future, obsessing over its rate of growth is not meaningful because of the law of large numbers."
Much anticipated regulation of e-commerce in China isn't likely to be very disruptive, and the economy is poised to improve a bit later this year, according to a note from UBS analysts emailed to Retail Dive.
The e-commerce giant's margins will likely remain under pressure, but its work to innovate has produced a series of business initiatives, like Hema stores, video and payments, that have long ramps to growth, they said. In its report Wednesday, Alibaba said revenue from digital media and entertainment rose 20% RMB 6.5 billion and revenue from innovation initiatives "and others" rose 73% year-over-year to RMB 1.3 billion.
Meanwhile, its record-breaking Singles Day event proved it has muscle, and its Ant Financial and Alibaba Cloud "are the two most likely to move the needle in the foreseeable future," according to the UBS team. "We believe Alibaba has executed well, given macro uncertainty and new regulation on top of slowing secular growth due to high Internet penetration."
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