Alibaba earnings hint at China’s ability to weather trade war | China News

China‘s e-commerce giant Alibaba Group reported better-than-expected fourth-quarter sales on Wednesday, suggesting still-solid consumer demand in the world’s second-largest economy. But this announcement is overshadowed by a slowing Chinese economy and the growing China-United States trade war.

On Wednesday, Alibaba’s share price closed up 1.58 percent after its latest earnings release.

Its shares had declined since Friday after the US raised tariffs on roughly $200bn of Chinese imports, increasing tariffs to 25 percent from 10 percent.

Joseph Tsai, Alibaba’s executive vice chairman, said the company’s results showed the “resilience” of its business against “complex geopolitical and economic conditions”, and he argued that long-term macroeconomic trends favor Alibaba. For one, he said, China is shifting to a “domestic consumption” and a service-driven economy. China is also set to become a country that imports more than it exports over the next several years, he told analysts. Moreover, China’s middle class – already the world’s largest, at more than 300 million – is set to double in the next 10 years. According to Tsai, less-developed cities are fueling that growth.

“We are swimming and flowing in the direction of the tide,” Tsai said on a conference call with analysts Wednesday. “All the macroeconomic factors are providing the tailwind to push our business forward.”

The revenue Alibaba generates from the various products and services it offers rose 51 percent to 93.5 billion yuan ($13.9bn) in the quarter that ended on March 31. Advertising, other customer-management fees and commissions from its “core commerce” unit (including its Tmall and Taobao online marketplace platforms) helped boost sales.

“Clearly, core business is very healthy,” RBC Capital Markets analyst Zachary Schwartzman said on the conference call, commenting that the health of Alibaba’s core operations allows it to invest in other business lines including cloud computing.

Other key takeaways from Alibaba’s earnings

Analysts predict that Alibaba’s growth will increasingly come from China’s lower-tier cities. “We will continue to invest in lower-tier and rural customers in lower cities,” said Alibaba CEO Daniel Zhang.

The number of annual active consumers on Alibaba’s China retail marketplaces rose by 102 million to 654 million in the 12 months that ended on March 31. Less-developed cities accounted for more than 70 percent of the increase, Alibaba said. So-called third-, fourth- or fifth-tier cities in China have a combined population of 500 million. Consumption from these smaller cities will triple in the next 10 years, Alibaba’s Tsai said on the earnings call.

Cloud computing is a revenue bright spot: Like Amazon in the US, Alibaba is strengthening its commitment to growing its cloud computing service and going head to head with Amazon and Microsoft to increase its share of the growing global cloud service market. Alibaba’s “Cloud Computing” fourth-quarter revenue rose 76 percent to the equivalent of $1.15bn. It is one of the company’s fastest-growing businesses.

However, unlike Amazon’s AWS cloud computing service, Alibaba’s cloud service is still losing money. By comparison, Amazon’s offering is a profit crown jewel, and represented half of Amazon’s operating income in the most recently reported quarter.

Alibaba’s domestic success makes it a target for competitors. Alibaba has been building a growing empire to hook consumers to spend within its ecosystem of products and services, and the competition is catching on.

According to Euromonitor International data, while Alibaba is still ranked as number one in China’s growing e-commerce market, its share of the country’s “internet retailing” market declined to 41 percent in 2018, down from 45 percent in 2013. By contrast, JD.com’s share more than doubled to 34 percent during the same period. Suning and Vipshop also increased their share of the e-commerce market slightly to 4.1 percent and 2.7 percent respectively, reported Euromonitor.

Source

more recommended stories

  • Could Iraq be pulled into a conflict between the US and Iran? | Iran

    The United States is raising the.

  • Kurdish leader Ocalan calls end to jail hunger strikes in Turkey | News

    Imprisoned Kurdish rebel leader Abdullah Ocalan.

  • Iranian FM visits Baghdad to discuss rising tensions with the US | Iran News

    Iranian Foreign Minister Mohammad Javad Zarif has.

  • Should we fear for India’s democracy? | India elections 2019

    Weeks before the general elections in.

  • Citing Iran, Trump bypasses Congress to sell arms to Saudis | Saudi Arabia News

    US President Donald Trump, declaring a.

  • Indonesia’s Prabowo challenges election result in court | News

    Defeated Indonesian presidential candidate Prabowo Subianto.

  • India elections 2019: All the latest updates | India News

    Counting of votes is under way.

  • US charges WikiLeaks founder Julian Assange with espionage | USA News

    The US Justice Department unveiled 17.

  • What you need to know about India’s BJP | India News

    Indian Prime Minister Narendra Modi is.

  • Pentagon ‘mulls sending thousands more troops’ to Middle East | News

    The United States‘ Department of Defense.

  • US House Speaker Pelosi says Trump is engaged in a ‘cover up’ | USA News

    Democrats in the United States House.

  • Washington says attacks ‘deterred’ as US-Iran tensions rise | News

    The acting US defence secretary says.

  • New Ukrainian President Zelensky calls early parliamentary polls | Ukraine News

    Ukraine‘s new President Volodymyr Zelensky called.

  • Water supplies restored to besieged Libyan capital Tripoli | Libya News

    Water supplies to the 2.5 million.

  • Trump loses lawsuit challenging subpoena for financial records | Trump News

    A US judge on Monday ruled.

  • North African filmmakers pushing boundaries at Cannes 2019 | France News

    This year’s Cannes Film Festival is.

  • US says warship sails in South China Sea amid trade tensions | News

    The United States military has said.

  • Saudi Arabia ‘seeks to avert war, ready to respond with force’ | News

    Saudi Arabia wants to avert war.

  • Eurovision vs Globalvision: An artistic response | Palestine News

    Bethlehem and London – Palestinian, Israeli.

  • Presidential hopeful Joe Biden calls for unity in inaugural rally | Elections 2018 News

    Former Vice President Joe Biden has.

  • US warns airliners flying over Gulf of ‘misidentification’ | Iran News

    US diplomats warned commercial airliners flying.

  • Australian election: Voting under way in key contest | Australia News

    Melbourne, Australia – Australians are heading.

  • An Iranian building bridges in wall-obsessed America | US & Canada

    A towering artist of his generation,.

  • Taiwan parliament to vote on same-sex marriage legislation | Taiwan News

    Amid deep divisions, Taiwan‘s parliament has.

  • The Philippines’ Duterte: In pursuit of an imperial presidency | Asia

    Although President Rodrigo Duterte‘s name was.

  • Venezuela government, opposition in Norway for crucial talks | News

    Envoys from the Venezuelan government and.

  • Iran halts some commitments under 2015 nuclear deal | News

    Iran has officially stopped some commitments.

  • PNG assesses damage from magnitude 7.5 earthquake | Papua New Guinea News

    Authorities in Papua New Guinea have dispatched.

  • Palestinian campaigners call for mass boycott of Airbnb on May 15 | News

    A Palestinian campaign has called on.

  • Spyware discovered targeting phones through WhatsApp calls | News

    Spyware crafted by an “advanced cyber.

  • Senior Palestinian official says she was refused US visa | USA News

    A senior Palestinian official has said she.

  • Sweden to reopen rape probe against WikiLeaks founder Assange | News

    Julian Assange is to be investigated.