Chinese e-commerce giant Alibaba reported stronger-than-expected results for the September quarter, but its share price in New York declined 2.7% on slower sales growth and the suspension of the dual public listing for its fintech affiliate Ant Group.
Why it matters: Alibaba’s sales were buoyed in the September quarter from an economic rebound in China, much like the preceding quarter. But the Ant Group public offering mishap weighed on the parent company, which holds a third of the fintech company.
- The Thursday dip in share price followed a 8% drop on Tuesday in New York after the Shanghai exchange halted Ant Group’s mega listing due to “significant changes” in the regulatory environment.
Details: Alibaba reported revenue of RMB 155 billion ($23 billion) in the quarter ended Sept. 30, representing a 30% year-on-year increase from the same period in 2019, the company said in a statement on Thursday. The earnings beat the average analyst estimate compiled by Yahoo Finance.
- Revenue growth decelerated significantly from the 40% year on year growth figure seen in the same period of last year, but was still a strong quarter for Alibaba given lingering coronavirus impact, according to Marina Koytcheva of CCS Insight. Its results are “strongly suggesting that the transition to online shopping and digitalization of services is a sustainable trend even as life in China has now mostly returned to its pre-pandemic normal,” she said in an emailed comment.
- Net income attributable to ordinary shareholders fell 60% year on year to RMB 28.8 billion, mainly attributable to a one-time gain from equity interest in Ant Group last year as well as share-based compensation expenses during the quarter, according to the filing.
- Representing 84% of total revenue, the company’s core e-commerce revenue increased to RMB 130.9 billion. The figure grew 29% year on year compared with 40% year on year growth in the same period last year.
- Taobao Deals, Alibaba’s Pinduoduo-like business targeting value-conscious consumers, became a key driver for user acquisition as the company competes head-on with rivals like Pinduoduo and JD.com in expanding to lower-tier markets. Taobao Deals launched a major new update in March, and monthly active users jumped 75% quarter on quarter to 70 million as of September.
- Cloud computing revenue grew 60% year over year to RMB 14.9 billion, driven by growth in revenues from customers in the internet, finance, and retail industries.
- Cost of revenue in the quarter was RMB 89.9 billion, or 58% of revenue, up 3% year on year mainly driven by increased cost of inventory from direct sales businesses such as Tmall Supermarket.
- Domestic consumption, cloud computing and data intelligence, and globalization will remain the company’s three long-term growth engines, Daniel Zhang, chairman and chief executive officer of Alibaba Group, said in a statement.
- Zhang said in a conference call with analysts that the company is “actively evaluating the impact” of the regulation change on Ant Group’s listing and “will take appropriate measures accordingly.”
Context: Ant Group this week will begin refunding Shanghai investors who had placed orders for the postponed public listing.
- Alibaba sold its stakes in Meinian Onehealth Healthcare Holdings, Shanghai-listed medical examination services provider, according to a Meinian filing on Wednesday.