SHANGHAI — Alibaba held its full fiscal year growth forecast at 48 percent during its first-quarter earnings announcement Thursday.
First-quarter net profit slid 75 percent as the company reported one-off gains in the same period a year earlier. Meanwhile, revenue growth for the quarter ending June 30 of 59 percent beat market expectations, coming despite a broader economic slowdown in China and weaker consumer indicators over the first half of 2016, and surpassing the 39 percent revenue growth recorded in the previous quarter.
This growth was attributed partly to an increase in core commerce customers, with annual active users rising to 434 million from 423 million last quarter. Alibaba said these customers drove GMV [gross merchandise value] up 24 percent to $126 billion.
Another major factor driving growth is mobile, with mobile GMV accounting for 75 percent of the total GMV and mobile monetization overtaking the value of PC for the first time.
“I still remember during the IPO roadshow everyone wanted to know if it was possible for mobile take rate to exceed PCs, so today I am happy to report the mobile take rate has exceeded PCs, which is an important milestone. We have completed a successful mobile transition,” said chief financial officer Maggie Wu.
Data driven personalization and in the inclusion of social elements and content such as live-stream video into Alibaba’s Taobao app saw it draw more customers and keep them coming back, with the average active user accessing the app seven times every day.
“If people come more, they discover more and this gives a higher likelihood of final sales. This is one of the main reasons for the continued acceleration of GMV growth,” said Daniel Zhang, Alibaba’s chief executive officer.
“We are capturing the imagination of today’s generation of young consumers. Seventy-five percent of users on the Taobao app are below 35 years of age,” added Alibaba Group executive vice chairman Joe Tsai.
Management revealed that Alibaba would continue its focus on rural and global expansion.
“Even for the core marketplace business we have great potential, if you look at the global, as well as rural expansion and the growth of FMCG and supermarket segments,” Wu said.
As well as its cross-border activity, which Tsai describes as a “very big part” of Alibaba’s global efforts, this quarter Alibaba acquired a controlling interest in Southeast Asia e-commerce company Lazada. “That’s going to be a very important potential market for us, a market with more than 500 million potential consumers. We have started to integrate that business this past quarter and that integration is going very well,” Tsai added.
Other future areas of focus are digital entertainment — spearheaded by Alibaba’s Youku acquisition — as well as the company’s cloud computing arm, which saw revenue growth of 156 percent on the year, driven by the increase in paying customers to 577,000. The division is coming close to breaking even, according to Wu.
“The entire IT sector in China is a $200 billion opportunity, including hardware and software. If we say 20 percent of that sector will eventually be on the cloud, that’s $40 billion but that’s way into the future,” Tsai explained.
“We are at a stage were we have generated $187 million in cloud computing this quarter and that’s still very small in relation to the size of the market. We are in it for the very, very long game. In the last quarter we launched 319 products in cloud and that is a pace no one can match,” he added.
Despite strong growth for the quarter ending June 30, recent news hasn’t all been positive for Alibaba. Late last week Zhang Mao, the head of China’s State Administration for Industry and Commerce [SAIC], said in a television interview with a Hong Kong-based network that Alibaba, and specifically the company’s founder Jack Ma, should be doing more to crackdown on counterfeit products on the company’s platforms.
“I’ve repeatedly told Jack Ma that he is not in the land of outlaws and he should take the primary responsibility,” Zhang said on TV.
In May, it emerged that the U.S. Securities and Exchange Commission is investigating Alibaba’s accounting practices, including how the company accounts for its investment into the logistics provider Cainiao Network and how it reports operating data from Singles Day.