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Alibaba Results Boosted by More Users, Mobile Growth
Cloud-computing segment also reports sharply higher revenue growth, narrower losses
By ALYSSA ABKOWITZ and ANNE STEELE
Updated Aug. 11, 2016 10:32 a.m. ET
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Alibaba Group Holding Ltd. said it would continue to step up its investments after reporting a better-than-expected 59% surge in fiscal first-quarter revenue, its biggest gain since its 25 billion dollars initial public offering two years ago.
Despite fears of an economic slowdown in China, the Chinese e-commerce giant has seen an increase in sales and number of users, as well as rapid growth in its cloud-computing business.
Revenue for the three months ended June 30 surged to 32.15 billion yuan (4.84 billion dollars) from 20.25 billion yuan, with revenue from its China retail marketplaces including Taobao and TMall rising 49% from a year earlier.
This growth “might have surprised many given the economic headwinds,” said Alibaba Executive Vice Chairman Joe Tsai on a conference call following the earnings release Thursday.
Chief Financial Officer Maggie Wu said the company would continue to make further investments in rural areas and in consumers goods, without giving further specifics.
Alibaba’s strong results came as it still faces challenges. The company’s quarterly results also highlighted losses among some newer investments, such as its food-delivery service and logistic affiliate. Alibaba also faces intensifying competition from smaller but more rapidly growing e-commerce companies, in particular JD.com Inc. Alibaba also continues to work on fighting counterfeits and monitoring fraudulent transactions on its online platforms.
Alibaba said its net income fell to 7.55 billion yuan from 30.84 billion yuan a year earlier. The sharp drop in net income was due to a one-time investment gain in the year-ago quarter related to Alibaba Pictures, the company’s movie-making business. Excluding certain items, Alibaba said it earned an adjusted 4.90 yuan (74 cents) a share, above the 4.17 yuan a share projected by analysts in a poll from Thomson Reuters. Revenue beat the 30.17 billion yuan forecast.
Following Alibaba’s disclosure that the U.S. Securities and Exchange Commission had opened an investigation into its accounting practices, the company offered up more financial insight through new key metrics in its earnings report. Alibaba executives didn't give any updates, nor mention the commission’s inquiry on the conference call.
Among the five new categories, the company’s cloud computing business stood out. Alibaba said revenue from that business increased 156% year over year to 187 million dollars, bringing its paying customers total to 577,000. The cloud segment, which sells access to computing logistics, is seen by analysts as a possible strong growth driver for Alibaba. AliCloud is competing in an arena currently dominated by U.S. brands including Amazon Web Services and Microsoft Azure.
Alibaba’s equity investment in food-delivery service Koubei generated a loss of 37 million dollars in the fiscal first quarter, while its investment loss in logistics network Cainiao—which delivered an average of 42 million packages a day—widened to 227 million yuan (34 million dollars) in the latest quarter from 59 million yuan a year earlier.
Alibaba executives said the new detailed information should help analysts and investors better understand its businesses.
Alibaba’s results also reflected the consolidation of the company’s video-streaming site, Youku Tudou and Lazada Group, the 1 billion dollars Southeast Asian e-commerce startup acquisition made this spring. Alibaba said its newly developed and acquired businesses could have a negative impact on margins in the near future.
The results also brought the last quarter Alibaba will report gross merchandise volume, or GMV, a key metric that helps investors determine the growth rate of an e-commerce company. At the company’s investor day in June, Chief Financial Officer Maggie Wu said Alibaba would report GMV on an annual basis, but no longer on a quarterly basis because the company wasn’t seeing the metric as a key performance indicator.
For its fiscal first quarter, GMV hit 837 billion yuan, a 24% increase from a year earlier. Mobile GMV accounted for 75%, Alibaba said.
GMV falls under part of the SEC’s interest in Alibaba’s operating data for Singles’ Day, which is China’s biggest online shopping day. The commission also is looking into accounting details of Alibaba’s Cainiao logistics network and related party transactions.
For the June quarter, Alibaba reported 434 million annual active buyers—defined as customers who place one or more orders on a platform during the year—up 18% from a year earlier. Mobile monthly active users rose 39% to 427 million, helping mobile revenue more than double.
As Alibaba’s user base grew, the company managed to increase its monetization rate. The company said the blended monetization rate of its China retail marketplaces increased to 2.79% from 2.33% in the year-ago quarter. Executives also highlighted the Taobao app, which they say is becoming an entertainment platform, with the average user opening the app seven times a day; 75% of Taobao app users are under age 35, Mr. Tsai said.
“We passed an important milestone this quarter in achieving higher monetization of mobile users than nonmobile users for the first time,” Ms. Wu said in prepared remarks.
On Wednesday, rival JD.com reported that its loss for the second quarter narrowed helped by improved margins. In June, JD struck a deal with Wal-Mart Stores Inc. to expand its e-commerce business in China.
Corrections & Amplifications
A previous version of this article incorrectly said that Alibaba’s investment loss in logistics network Cainiao narrowed.
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