Alibaba Group on Thursday said that, for the quarter ended Dec. 31, revenue rose 56% year-over-year to RMB 83.03 billion ($12.76 billion, according to the company). Its revenue from "core commerce" rose 57% year-over-year to RMB 73.24 billion ($11.26 billion) and revenue from its cloud services business rose 104% year-over-year to RMB 3.60 billion ($553 million), according to a company press release.
Digital media and entertainment revenue, a key part of the company's aim to penetrate the market through cultural offerings, rose 33% year-over-year to RMB 5.41 billion ($832 million). Mobile monthly active users on Alibaba's China retail marketplaces reached 580 million in December, an increase of 31 million over September. Net income in the quarter was RMB 23.33 billion ($3.59 billion), while operating margin was 31%, adjusted EBITDA margin was 44% and adjusted EBITA margin for core commerce was 53%, the company said.
Also on Thursday, the company said that, "in exchange for certain intellectual property rights owned by Alibaba exclusively related to Ant Financial," it will acquire direct ownership via a 33% equity interest in Ant Financial, its affiliate that runs Alipay and other financial services. The deal ends a profit-share tie-up where Ant gave Alibaba "royalty and technology service fees" equal to 37.5% of pre-tax profits each quarter, according to a company press release.
Alibaba's ongoing investments took a toll on profits, which missed expectations Thursday, but its revenue continues to surge. In a statement, CEO Daniel Zhang deemed it "another great quarter driven by the continued strength of the Chinese consumer and the wide and innovative range of services we provide for merchants and consumers."
In its release Thursday, the company reminded the world of its record $25.3 billion in Singles Day sales in November, which blasted past 2016's record of $17.8 billion (itself a 32% increase over 2015), but noted that the event is just part of its overall growth strategy.
"We are excited by the continued momentum in New Retail, which came to life during another record-breaking 11.11 Global Shopping Festival," Zhang said. "We expanded the scale and footprint of our New Retail initiatives with the vision of delivering true convergence of the online and offline consumer experience through mobile and enterprise technology."
The company also raised its guidance for the year, saying it now expects 2018 fiscal year revenue to rise 55% to 56%, an increase over the top end of the range of 53% that executives communicated last quarter, according to Alibaba Group CFO Maggie Wu, who said the results will help the company fuel its ongoing investments. "Our core business generated significant free cash flow of $7.1 billion during the quarter, enabling us to invest in New Retail, cloud computing, digital entertainment and globalization," she said in a statement.
Last year executives detailed a pivot from a company focused on commerce to one interacting with consumers on several levels. As a result, the company now refers to "annual active consumers" instead of "annual active buyers," the number of which has reached 515 million, an increase of 27 million from the 12-month period ended Sept. 30, the company said Thursday.
Grumbling about Alibaba's counterfeit sales has also been muted in recent months, and several brands have announced that they will participate in its Tmall marketplace. In the quarter detailed Thursday, Givenchy, Giorgio Armani Beauty and Volvo established Tmall flagship stores, and Longines, Hennessy, Dom Perignon and Baccarat joined Tmall's "Luxury Pavilion," the company said. Fast-fashion retailer H&M in December also said it will establish a Tmall outpost.
The stronger tie with Ant Financial via the equity stake will bring "key strategic benefits," including advancing Alibaba's New Retail strategy with mobile payments, increasing user acquisition and retention through collaboration with the Alipay digital wallet, and enhancing execution of its international expansion, the company said. In addition, the move enables Alibaba and its shareholders to "participate in the future growth of the financial technology sector," the company said.