Paul Mozur reports in the New York Times:
Investors have often looked to Alibaba to see how the broader Chinese economy is doing. Alibaba has argued that it should outperform the economy because online buyers have grown more quickly than total consumption. As customer growth has slowed, Alibaba has worked to make more money from users, especially those using mobile phones. Alibaba is looking to build foreign businesses by offering computing services, much like Amazon Web Services.
Jack Ma has been in the global headlines lately for meeting with President Trump and for discussing world affairs at the World Economic Forum in Davos, Switzerland. But for the company he founded, the story is still at home.
Alibaba Group, the Chinese e-commerce giant, posted strong earnings for its third quarter and beat analysts’ estimates. The quarter, which ended in December, is an essential one for the company: Its biggest sales event of the year is in November.Nonetheless, the results showed how Alibaba — despite Mr. Ma’s global profile and its 2014 initial public offering in the United States — is still dependent on China. The results also demonstrate that while Alibaba’s global ambitions have made progress, they haven’t yet become a major driver of its results.
Alibaba’s big dayOf central concern to investors is the durability of Singles Day, a company-created, shopping-oriented “Hallmark holiday” that falls on Nov. 11 each year. While sales growth from that event has steadily slowed, leading the company to pump up entertainment around it, the holiday nonetheless drove earnings growth. In the quarter ending in December, Alibaba said revenue grew 54 percent, compared with the period a year earlier, to $7.7 billion. Net profit rose 38 percent, to nearly $2.5 billion.
Jack Ma: Davos man
At the World Economic Forum in Davos last week, Mr. Ma warned of the dangers of a trade war between the United States and China. With Mr. Trump, he asserted that his company would help create a million jobs in America. (Significantly, details were scant.)His international appearances underscore a tough truth for Chinese internet companies: While they are often held up domestically as beacons of innovation, they have long struggled to build a market abroad. Alibaba has been trying to break that blockage, yet it has mostly focused on recruiting foreign brands to sell on its sites to Chinese consumers. In its third quarter, only 7 percent of its revenue came from commerce outside China.
Digital expansion is easierOne important way that Alibaba is looking to build its foreign businesses is by offering computing services to companies, much like Amazon does with Amazon Web Services. To that end, Alibaba has built new data centers around the world. Analysts are also bullish on the company’s cloud revenue, which in its third quarter more than doubled, to $254 million.
A proxy for ChinaInvestors have often looked to Alibaba to see how the broader Chinese economy is doing. Alibaba has repeatedly argued that it should outperform the economy because online buyers have grown more quickly than total consumption. As that customer growth has slowed, Alibaba has worked to make more money from users, especially those using mobile phones. To that end, the company said the jump in revenue came from an increase in how much its online vendors spent per consumer as well as an increase in clicks because of improved targeting to customers.