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Alibaba Reports 61% Revenue Growth; Stock Up 4%

China's e-commerce giant reported its revenue increased 61 percent, while net income declined 29 percent, in the first quarter of 2018. Alibaba stock closed nearly 4 percent up.

Anna Vodopyanova
    May 04, 2018 1:48 PM  PT
Alibaba Reports 61% Revenue Growth; Stock Up 4%

Shares of Alibaba Group Holding Ltd. (NYSE:BABA) continued to climb Friday after the company reported a better-than-expected revenue surge of 61 percent in its quarterly results, driven by strong sales in its commerce and cloud computing units.

China's e-commerce giant said its first quarter revenue grew to nearly $9.9 billion, compared with $6.2 million year-over-year, higher than analysts expected. 

The announcement sent Alibaba's stock nearly 4 percent up to $188.89 per American depositary share Friday.

Net income fell 29 percent to $1.2 billion, or 46 cents per share, down 20 cents per ADS from the first quarter of 2017. Earnings were hurt by higher spending, which resulted from the company's investing in advertising formats, cloud computing, buying and revamping grocers and shopping malls, and expanding overseas.

Earlier this year, Alibaba took ownership of Ele.me, a fast-growing online delivery service with 260 million users. In March, the company invested an additional $2 billion in Lazada Group, a Singapore-based e-commerce site, where Alibaba holds a controlling stake, to further its sales into Southeast Asia.

The company also announced it planned to take a 33 percent stake in its payment affiliate, Ant Financial Services Group, to boost its consumer base and advance its mobile payments strategy with Alipay digital wallet. Ant Financial, China's top online payment platform, has been considering an initial public offering in New York that could value it at close to $150 billion.

The acquisitions, as well as other recent investments, including brick-and-mortar stores, microchips, and logistics, boosted Alibaba's revenue, but declined its operating margin for the quarter to 15 percent, down from 25 percent a year earlier.

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During a conference call with analysts, executive vice chairman of Alibaba, Joseph Tsai, commented on the firm's high revenue growth: "Through technology and consumer insights, we put the right products in front of the right customers at the right time. We also executed tailored strategies in supply chain, product and merchant curation, and logistics for key categories, including apparels, FMCG, home appliances, and consumer electronics. The combination of our superior technology and operating excellence means that we can continue to achieve substantial growth at scale, conquering the law of large numbers."

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Alibaba's quarterly earnings sent the company's shares nearly 4 percent up to $188.89 per share Friday. (Source: Thomson Reuters Eikon)

It has been two years of continuous quarterly revenue growth above 50 percent for Alibaba, even as new investments continue to weigh on margins.

Alibaba's chief financial officer, Maggie Wu, said the company expected strong revenue growth above 60 percent for the year. "We expect our new growth initiatives will drive long-term, sustainable value for our customers and partners, and increase our total addressable market," she added.

(Reuters contributed to this article)

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