Alibaba reported stellar quarterly earnings growth, doubling its profits and beating market expectations.
On Thursday, the Chinese eCommerce giant posted fiscal first-quarter revenue of $7.51 billion, an increase of 56 percent year-on-year. The strong results are mainly attributed to the company’s strong core ecommerce business as well as robust cloud and digital entertainment. The company reported 466 million active buyers over the past 12 months.
Alibaba has outperformed the market in 2017, lifted by positive growth in June sales events as well as expansion developments overseas.
Alibaba’s net profit was $2.1 billion for the quarter ended in June 30, an increase of 96 percent year-over-year.
Ecommerce business segment’s revenue is at $6.4 billion, representing the biggest chunk of the company’s total revenue. The company showed robust growth in this division despite the huge base factor. Mobile active users also grew 24 percent and revenue-per-customer also increased year-over-year.
The company’s cloud computing revenue also doubled 96 percent year-over-year to $359 million, and paying customers increased from 577,000 to over 1 million in June of last year. The number is expected to grow in the coming years owing to the increasing demand for internet in China and in other Asian markets. Global data centers also increased to a total of 17, with additional data centers in Indonesia and India.
The company’s entertainment and digital media business combined also grew 30 percent to $602 million, with Youku Tudou, its online video streaming platform being the biggest revenue driver for the segment.
The company is continuously expanding its business beyond China, and its quarterly earnings are strong proof that these investments are starting to bear fruit. Alibaba’s international eCommerce saw a boost in revenues as the company adds Singaporean eCommerce platform Lazada to its Southeast Asian operations. With Lazada’s strong performance during recent quarters, Alibaba plans to invest another $1 billion in the Singaporean eCommerce company to increase its stake to 83 percent from 51 percent. Likewise, AliExpress revenue increased 136 percent from last year’s result.
According to Neil Campling, Northern Trust Capital Markets head of technology, media and telecoms research, performance of cloud business could drive a re-rating for Alibaba and that the company’s valuation will go higher. “AliCloud is replicating the Amazon blueprint,” he wrote in a note to clients.
However, the company is yet to substantiate the value of some of its most significant investments, which includes a $2.6 billion investment in Intime Retail Group, which is a chain of department stores.
“Alibaba had a strong start to fiscal 2018, reflecting the strength and diversity of our businesses and the value we bring to customers on our platforms,” Alibaba chief executive officer Daniel Zhang, said in a report by TechCrunch. “Our technology is driving significant growth across our business and strengthening our position beyond core commerce.”
Analysts raised their price targets for Alibaba. Deutsche Bank expects between $201 and $208, Daiwa Capital Markets raised targets to $205, and Nomura lifted its expectations from $170 to $201.
“We expect Alibaba’s vast data insight into Chinese shoppers to sustain its current online marketing revenue growth in the coming one to three years, while investment in digital entertainment, cloud, and new initiatives should be under control,” Daiwa Capital Markets wrote in a note to clients.
Alibaba has given strong guidance for 2018, expecting a revenue increase of between 45 percent and 49 percent. Non-GAAP diluted earnings per share for the fiscal year ending March to climb 40 percent up on a year-over-year basis.
The company’s shares are up 2.18 percent to close at $167.50 on Friday. Alibaba is one of Wall Street’s most-loved stocks, CNBC reports, with shares up over 86 percent year-to-date.