Alibaba beats estimates after day of disaster for China earnings

HONG KONG • Alibaba Group Holding Ltd’s quarterly earnings beat expectations on its expansion into areas from cloud computing to entertainment, a rare bright spot as many Chinese companies fell short of financial estimates.

Net income at China’s biggest e-commerce company rose 37% to 33.1 billion yuan (RM20.09 billion) in the December quarter, thanks in part to a one-time accounting gain from taking control of an Internet services affiliate. That outpaced the 22.1 billion yuan analysts had projected. While revenue rose 41% to 117.3 billion yuan, that was the slowest pace in more than two years and lagged the 119.4 billion yuan projected.

Alibaba’s results came after a stunning day in China when at least 20 companies warned investors that full-year earnings would fall short of expectations. The e-commerce giant drove revenue growth during its busiest quarter, a period that includes its annual Singles’ Day promotion, by improving marketing tools and personalised recommendations that spurred purchases.

“The market might view this as the end of the adjustment period and the worst is behind us, and send shares up,” said Eric Wen, founder and CEO of Blue Lotus Capital Advisors. “E-commerce active customer growth is good, mobile monthly active users of e-commerce app is good, but profitability was pretty bad as expected.”

Margins slid about 10 percentage points, but within expectations, he said.

Shares of Alibaba were up about 2% in pre-market trade yesterday, after sliding 1.3% on Tuesday.

Adjusted earnings per share was 12.2 yuan compared to the 11.2 yuan projected. The e-commerce giant booked a one-time non-cash gain of 21.99 billion yuan in the December quarter after re-valuing on-demand services arm Koubei. The share of losses from numerous companies it backed also narrowed sharply.

“Alibaba is the dominant and most profitable leader in China e-commerce,” David Dai, an analyst at Bernstein, wrote in a report before the release. “The general macroeconomic environment should improve in the second half of 2019 as the Chinese government introduces measures to stimulate the economy and US-China trade war stabilises.”

Growth also sprang from billionaire Jack Ma’s decision to take control of its main delivery network, a meals-on-demand service and video platform Youku. Those expansions, however, have shifted the company away from an asset-light model. — Bloomberg