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Alibaba Sales Slow Amid Profit Growth

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Chinese e-commerce giant Alibaba has reported its slowest revenue growth since 2016, despite exceeding expectations and posting net income growth of more than 30% for the quarter ending Dec. 31.

The company’s quarterly revenue grew by 41% year-on-year, down from 56% in December 2017. Nevertheless, revenue increased to RMB 117.3 billion ($17 billion) during the reporting period, up from RMB 53.2 billion in 2016 and RMB 83 billion in 2017.

Quarterly sales from its core commerce business increased 40% year-on-year to RMB 102.8 billion, thanks in no small part to the Double11 shopping festival, which netted RMB 213.5 billion in gross merchandise value on Nov. 11.

Cloud computing revenue jumped 84% year-on-year to RMB6.6 billion, while that from digital media and entertainment increased by 20% to RMB 6.5 billion.

Compared to the same period in 2017, the company saw slowing growth across the board. In December 2017, revenue growth for its e-commerce business was 57%, 17 percentage points higher than its latest results. At the same time, cloud computing reached 104% growth, 20 percentage points higher than December 2018.

The slowdown comes amid an overall retail market cool in China. Year-over-year retail growth in May and October 2018, reached 8.5% and 8.6%, respectively, the slowest since June 2003, according to China’s National Bureau of Statistics. The case is worsened due to the complication of national deleveraging to ease debts and threats from the US-China trade tensions.

Slowing consumer growth has led Alibaba to increase its focus on enterprise clients, launching a platform, dubbed A100, to help companies embrace digital transformation by using its various technology services.

The company saw its highest revenue growth from innovation initiatives, which increased 73% year-on-year to RMB 1.3 billion, compared to a 9% decrease in 2017. The increase is mainly due to sales of the company’s Tmall Genie, a smart voice assistant, and mapping service Amap.

“Our growth is … driven by the power of Alibaba’s cloud and data technology that helps expedite the digital transformation of millions of enterprises,” Daniel Zhang, chief executive officer of Alibaba, said in a statement.
Alibaba’s shares jumped around 6% to just under $167 on Wednesday.

Original news is from Technode.