HONG KONG —
Jack Ma has been in the global headlines lately for meeting with President
Trump and for discussing world affairs at the World Economic Forum in Davos,
Switzerland. But for the company he founded, the story is still at home.
On Tuesday, Alibaba Group, the Chinese
e-commerce giant, posted strong earnings for its third quarter and
beat analysts’ estimates. The quarter, which ended in December, is an essential
one for the company: Its biggest sales event of the year is in
November.
Nonetheless,
the results showed how Alibaba despite Mr. Ma’s global profile and its 2014
initial public offering in the United States is still dependent on China. The results also
demonstrate that while Alibaba’s global ambitions have made progress, they
haven’t yet become a major driver of its results.
Alibaba’s big day
Of central
concern to investors is the durability of Singles Day, a company-created,
shopping-oriented “Hallmark holiday” that falls on Nov. 11 each year. While
sales growth from that event has steadily slowed, leading the company to pump
up entertainment around it, the holiday nonetheless drove earnings growth.
In the quarter
ending in December, Alibaba said revenue grew 54 percent, compared with the
period a year earlier, to $7.7 billion. Net profit rose 38 percent, to nearly
$2.5 billion. At the World Economic Forum in
Davos last week, Mr. Ma warned of the dangers of a trade war between the United
States and China. With Mr. Trump, he asserted that his company would help
create a million jobs in America.
His
international appearances underscore a tough truth for Chinese internet
companies: While they are often held up domestically as beacons of innovation,
they have long struggled to build a market abroad. Alibaba has been trying
to break that blockage, yet it has mostly focused on recruiting foreign brands
to sell on its sites to Chinese consumers. In its third quarter, only 7 percent
of its revenue came from commerce outside China.
Digital expansion is easier
One important
way that Alibaba is looking to build its foreign businesses is by offering
computing services to companies, much like Amazon does with Amazon Web
Services. To that end, Alibaba has built new data centers around the world.
Analysts are also bullish on the company’s cloud revenue, which in its third
quarter more than doubled, to $254 million.
A proxy for China
Investors have
often looked to Alibaba to see how the broader Chinese economy is doing.
Alibaba has repeatedly argued that it should outperform the economy because
online buyers have grown more quickly than total consumption. As that customer
growth has slowed, Alibaba has worked to make more money from users, especially
those using mobile phones. To that end, the company said the jump in revenue
came from an increase in how much its online vendors spent per consumer as well
as an increase in clicks because of improved targeting to customers.
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