Chinese e-commerce colossus Alibaba has revealed that it has almost doubled its net profit due to phenomenal growth in online shopping following the disclosure of its quarterly figures.
Alibaba is a hugely successful entity which has subsequently made its founder Jack Ma one of the richest men in China. It is the dominant player in online commerce and its robust earnings only serve to highlight the strength of the sector whilst the rest of the country’s economy appears to have stagnated.
Shareholders are the big winners following the results of the first quarter, as net profit attributable to ordinary shareholders has soared by 98% in just twelve months. Analysts have claimed that this seismic rise was generated on the back of a faster-than-expected 60% surge in revenue.
Alibaba also confirmed that it has authorized a $6 billion buyback to take place over a period of two years. Alibaba’s Chief Financial Offer, Maggie Wu, said the results were indicative of the strength of Alibaba’s core and emerging businesses. She said, “Our robust results demonstrate the strength of our core businesses, as well as the positive momentum of our emerging businesses, including cloud computing, where we continue to see strong growth.”
It has been suggested that Alibaba’s Taobao platform holds more than 90% of the consumer-to-consumer market. In addition to this, it has been claimed that its Tmall platform handles over 50% of its business to consumer transactions. However, China’s largest online shopping portal has been on the defensive since the US Trade Representative put Taobao on its ‘blacklist’ – suggesting it hadn’t done enough to curb the sales of fake and pirated products on its platform.
Comparisons have been made between Alibaba and US e-commerce giants Amazon and eBay – and the Chinese organization has continued to expand outside its core businesses – dipping it toes into sector which range from sports to entertainment. Vice Chairman of Alibaba, Joseph Tsai said its strategy is to capitalize on changes currently occurring in the Chinese economy.
He said, "Chinese consumers are driving the shift of the Chinese economy from an export and investment-led to a consumption-led economy. When looking at investing in China, this secular trend is absolutely important to pay attention to, and that is what we focus on when we plan our strategy rather than on quarter-to-quarter cyclical trends."
One example of Alibaba’s desire to expand into different sectors was evidenced further by its decision to invest in Steven Spielberg’s Amblin Partners, which is a film creation company which incorporates DreamWorks studios. Revenue from its investment in digital media and entertainment has also soared.
Experts have claimed that many investors will be keeping a close eye on Alibaba’s top-line growth guidance for next year. Ray Zhao, an analyst, told Bloomberg News that the number of acquisitions made by Alibaba may impact its revenue growth. He said: "Investors will be paying attention to Alibaba's top-line growth guidance for next year. Alibaba has done a lot of acquisitions this past year, so revenue growth might not be as fast as people expect."
