SHANGHAI – Alibaba Group said net profit for the fourth quarter ended March 31 rose 85 percent to 5.37 billion yuan, or $832 million, boosted by gains from disposals of investments and businesses.
Sales revenue surged 39 percent to 24.18 billion yuan, or $3.75 billion at current exchange, of which the company’s China retail marketplace revenue accounted for more than 18.3 billion yuan, or $2.8 billion, an increase of 41 percent on the year.
This revenue growth bettered analyst expectations, 25 analysts surveyed by Thomson ONE prior to the earnings announcement had expected to see quarterly revenue rise 33 percent.
“Today we reported excellent results. There are now 423 million shoppers who have bought something on our platform in the last year,” Alibaba Group vice chairman Joe Tsai said.
“In these challenging times for the global economy Alibaba is bucking the trend,” an upbeat Tsai added.
It’s these 423 million consumers, an increase of 16 million over the prior quarter, which are the backbone of Alibaba’s continued success in the face of China’s broader economic malaise.
As a consumer-focused ecosystem of businesses, Alibaba Group believes itself to be in prime position to take advantage of China’s economic shift away from manufacturing and exports, and towards domestic consumption.
“China has seen double-digit wage growth over the past decade,” Tsai said. “Chinese consumers have a health balance sheet and ability to spend, which will propel the shift to a consumption economy.”
Particularly impressive growth was seen once again in the mobile segment, with revenue increasing 149 percent to 13 billion yuan, or $2 billion.
“At the time of our IPO, mobile represented less than 20 percent of our Chinese commerce revenue, today 73 percent of our GMV [gross merchandise value] revenue comes from mobile,” said Alibaba chief executive officer Daniel Zhang.
“We have completely reinvented the user experience to capitalize on the relationship consumers have with their mobile phone in daily life.”
The triple-pronged focus laid out by Alibaba in the previous quarter – cloud computing, rural China expansion and global expansion – continue to be at the forefront of the company’s plans for the future, with Zhang reiterating these factors will be key in Alibaba reaching its target of 6 trillion yuan in GMV by fiscal year 2020.
Alibaba’s cloud computing and Internet infrastructure business continued their rapid expansion, with revenue increasing 175 percent on the year to slightly more than 1 billion yuan ($165 million), representing an acceleration of the 126 percent growth rate achieved in the previous quarter.
The company’s decision to double down on its global, cross border platforms – in the form of Tmall Global, which has partnered with brands such as Costco, Macy’s and Woolworths – and individual “daigou” sellers on Taobao who sell products sourced from overseas to Chinese consumers, comes at an uncertain time for the burgeoning sector.
Last month, Chinese regulators introduced a new tax system for incoming cross border and “daigou” products that will leave consumers paying more for a number of categories, but Zhang remains optimistic about the future of the sector for Alibaba.
“The recent change in government policy has had some impact on our Tmall Global business, and actually the whole industry, but we are happy to see the government regulate these cross border imports, because we had observed a lot of grey market activities in the bonded warehouses [of China’s free trade zones, through which the cross border imports pass on their way to Chinese consumers],” Zhang said.
“We believe Alibaba will actually benefit from this regulation. People want to buy high quality products from overseas so that business will continue to grow,” he added.
“Increased mobile shopping and rural market demand will remain key growth opportunities,” eMarketing analyst Andria Cheng said prior to the release of Alibaba’s quarterly results. “China’s voracious appetite for foreign goods also spells another big opportunity on the cross-border e-commerce front.”
Similarly voracious is Alibaba’s appetite for acquisition, with the company spending particularly heavily in the realms of media and entertainment – including the $266 million buyout of the Hong Kong-based newspaper South China Morning Post last December.
Just last month, Alibaba announced it would spend $1 billion on the Southeast Asia-focused e-commerce startup Lazada Group.
“Our acquisition of Lazada will allow access to 550 million consumers in one of the world’s most promising markets for e-commerce,” Zhang said, while Tsai detailed a long-term approach to some of the company’s loss-leading media and entertainment acquisitions, comparing their potential with that of e-commerce in China when Alibaba first set out to build that business in the early 2000s.
“We started Taobao in 2003 when online shopping in China was virtually non-existent and for seven years we didn’t produce meaningful profits,” he said. “We have learned it pays to be patient.”