Alibaba growth surges in first earnings report since IPO
Alibaba posted strong second-quarter earnings that showed the Chinese e-commerce giant is continuing a blistering pace of growth.
In its first quarterly earnings report since going public in the largest IPO ever, Alibaba said Tuesday that revenue surged 54% and net income fell 39% when including $490 million in stock options costs. Otherwise, net income rose 16% compared to the same period last year.
Alibaba, which derives 75% of its revenue from online marketplaces that allow retailers to sell to Chinese consumers, has been quickly broadening its business. And on a call with analysts Tuesday, Alibaba executives repeatedly emphasized that the company is taking the long view. The company declined to provide guidance on earnings for the current quarter or shy away from investing in services that remain a tiny fraction of its business.
As one example, Vice Chairman Joseph Tsai said the company sees challenging Google’s Android operating system with one of its own, called YunOS, as a “long-term winning strategy.”
About 80% of mobile phones in China run on Android while less than 1% run YunOS, according to data from consumer research agency Kantar Woldpanel. But many of Google’s services, such as Maps and the flagship search, are sometimes either blocked or don’t work in China.
“The whole idea with an operating system is it makes sense if you have a whole lot of overlying services, for instance maps and for us, e-commerce,” Tsai said. “It’s a very long-term game. The dominant player today might not be the dominant player tomorrow. That’s why we continue to invest in our mobile OS.”
Alibaba also recently relaunched a website for Chinese consumers to buy plane tickets and book hotel rooms and vacation packages. Acquiring digital entertainment content remains another area of focus, with founder Jack Ma having recently made visits to Hollywood studios.
Still, Alibaba’s core is the popular e-commerce platforms Taobao and Tmall in China. Its platforms account for some 80% of Chinese online commerce. Chinese e-commerce is growing fast. Online spending by Chinese shoppers is forecast to triple from its 2011 size by 2015.
Jonathan Lu, Alibaba’s chief executive, told analysts Tuesday that just 9% of rural residents in China shop online compared to 34% of urban dwellers.
“This is a big opportunity for the long term,” he said. “Our vision is to enable farmers to sell their products to city people and globally.”
Beyond that, Alibaba has said it plans to expand into emerging markets and, eventually, into Europe and the U.S.
The company does not compete with its merchants or hold inventory, serving instead as a conduit that links buyers and sellers of all kinds.
For the three months ended Sept. 30, net income after paying preferred dividends fell to $485 million, or 20 cents per share. Excluding one-time items, net income was 45 cents per share. Analysts expected 45 cents per share, according to FactSet.
Revenue, as expected, was a strong spot. Revenue rose 54% to $2.74 billion, beating analyst expectations of $2.61 billion, boosted by more mobile commerce and growth across its platforms.
Gross merchandise volume, the total amount of goods sold, rose 49% during the quarter. Annual active buyers rose 52% to 307 million. Mobile monthly active users more than doubled to 217 million.
Shares of Alibaba Group Holding Ltd. rose $1.68, or 1.7%, to $103.48..
