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Alibaba reported better-than-expected profit growth for its latest quarter Thursday as the Chinese e-commerce giant continued to benefit from a recovery in consumer spending.
Alibaba BABA, -2.04% saw 30% revenue growth for its fiscal second quarter, driven by a continued rebound in Chinese consumer spending after the country got its COVID-19 outbreak under control. Alibaba posted revenue of RMB155.06 billion ($22.84 billion), up from RMB119.02 billion a year earlier. Analysts surveyed by FactSet had been projecting RMB154.87 billion.
“Our domestic core commerce business continued to grow steadily during the post-COVID-19 environment in China through higher purchase frequency and consumer spending,” Chief Financial Officer Maggie Wu said in Alibaba’s release. Total core commerce revenue rose to RMB130.92 billion from RMB101.22 billion a year earlier.
Shares are off 2.5% in midday trading Thursday. Global X tech analyst Pedro Palandrani said that the selloff could represent profit-taking similar to what he saw with some large U.S. tech companies last week that also reported better-than-expected results.
Alibaba’s cloud-computing arm saw revenue from 60% to RMB14.9 billion, and while this portion of the business is still running at a loss, Alibaba expects it to turn profitable by the end of the fiscal year. Palandrani is upbeat about this trend given that Amazon.com Inc. and Microsoft Corp. generate a high portion of their profits from the cloud.
Palandrani was also enthusiastic about Alibaba’s commentary on grocery delivery as a trend that could persist beyond the pandemic. “We’re seeing non-traditional e-commerce areas like food delivery, e-commerce, healthcare and autos really happening online these days whereas before the pandemic, there was minimal penetration for those respective segments,” Palandrani told MarketWatch.
Alibaba generated September-quarter net income of RMB28.77 billion, or RMB10.48 per American depositary share, compared with RMB72.54 billion, or RMB27.51 per ADS, a year prior. On an adjusted basis, Alibaba earned RMB17.97 per ADS, while the FactSet consensus was for RMB13.82 per ADS.
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The company had 757 million annual active customers as of the September quarter, up from 742 million in the June quarter and 693 million in the prior September period.
Thursday was also supposed to mark the first day of trading for shares of Ant Group, the Alibaba-affiliated fintech giant that had been preparing to list in both Hong Kong and Shanghai. Instead, Alibaba’s earnings are taking center stage as the Ant listing was suspended earlier this week due to last-minute concerns raised by Chinese regulators.
Alibaba has a 33% stake in Ant through subsidiaries, and its shares sold off Tuesday upon news of the suspended IPO. Susquehanna analyst Youssef Squali wrote in a Tuesday note to clients that while the prospect of an Ant IPO “has been anticipated for years” and helped drive Alibaba shares higher recently, the suspension “has no direct bearing on BABA’s operations.”
On the earnings call, Alibaba Chief Executive Daniel Zhang said that “as Ant Group’s major shareholder, Alibaba is actively evaluating the impact on our business in response to the recent proposed change in the fintech regulatory environment and will take appropriate measures accordingly.”
Alibaba is gearing up for its main Singles Day event on Nov. 11, after also holding part of the shopping festival earlier in the month. Palandrani said that third-party estimates seem to be looking for about RMB350 billion in gross merchandise volume over the course of the event, equating to roughly $52 billion. That compares with an estimated $10 billion for Amazon’s Prime Day, he said.
U.S.-listed shares of Alibaba have gained 39% so far this year, as the KraneShares CSI China Internet ETF KWEB, +0.23% has risen 58% and as the S&P 500 SPX, +2.24% has increased 6.6%.
