Alibaba sees revenue surge of 61%, beats the Street – but investors remain cautious
Alibaba reported fiscal first quarter earnings this week, beating expectations and logging an incredible uptick in revenue. Despite this, the share price barely moved, as investors – perhaps cautious in a world where trade wars and tech backlashes have been the talking points of the year – remained unconvinced. Alibaba’s share price dropped by a couple of points on the back of the results, but given that it rose by a similar amount in the run up to results, it’s essentially remained flat throughout the week.
Alibaba’s share price is up by 0.07% in the last 5 days
Source: Yahoo Finance
Alibaba said that revenue for the three-month period came in at 80.92 billion yuan ($12.23 billion). That’s higher than analysts expected (they were looking for 80.75 billion yuan), and a massive 61% rise against the first quarter of the previous fiscal year. Alibaba likewise beat the Street in regards to earnings per share, reporting 3.30 yuan instead of the predicted 2.79 yuan. However, net income to a big hit, coming in at 8.69 billion yuan – that’s a 40.8% drop, year on year.
The driving forces behind a largely successful three months were the company’s core commerce business, which is focused on its ecommerce properties Tmall and Taobao, and its cloud computing arm. The latter is still small fry in the grand scheme of things, but growth in the unit has been huge – this year, revenues from the segment rose by 93% year on year.
Maggie Wu, Alibaba’s chief financial officer, said in a statement: "The exceptional growth across our major segments of core commerce, cloud computing and digital media and entertainment validates our strategy of investing in customer experience, product, technology and infrastructure for the future."
Regarding the dip in margin, Alibaba said in its earnings release: "As many of our newly developed and acquired businesses have different cost structures, we expect that our margin will continue to be negatively impacted by these businesses and the accounting treatment of revenue recorded on a gross basis."
Dominion holds Alibaba in its Global Trends Ecommerce Fund.
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