China’s Alibaba Group Holding Ltd (BABA.N) reported a better-than-expected 40% rise in second-quarter revenue, powered by strong growth in its e-commerce and cloud computing businesses. The results come as the company gears up for its annual Single’s Day shopping bonanza this November, and competes increasingly with e-commerce site Pinduoduo Inc (PDD.O) for sales in China’s smaller cities.
The company’s U.S.-listed shares rose more than 2% to $180.25 in trading before the bell. Alibaba primarily earns income from selling advertising and promotional services to third-party merchants that list products on Taobao and Tmall, two of its e-commerce sites.
Total revenue rose to 119.02 billion yuan ($16.91 billion) in the second quarter ended Sept. 30 from 85.15 billion yuan a year earlier. Analysts were expecting revenue of 116.8 billion yuan, according to IBES data from Refinitiv. Sales from the company’s e-commerce business rose about 40% to 101.22 billion yuan, while its cloud computing business posted a 64% jump in revenue to 9.29 billion yuan.
The company’s net income attributable to ordinary shareholders rose to 72.54 billion yuan from 20.03 billion yuan a year earlier, due to a one-time gain related to its stake in Ant Financial.
Alibaba, the biggest Chinese e-commerce company and rival JD.com Inc (JD.O) have been looking to diversify as online sales slow amid saturated markets in China’s biggest cities and consumer confidence takes a hit from the ongoing U.S.-China trade war. For Alibaba, this has meant doubling down on reaching consumers in China’s second- and third-tier cities.
Over the past several years, upstart e-commerce service Pinduoduo attracted many first-time online shoppers with a social, group-buying based app. To compete, Alibaba has launched a bargain-centric app called Taobao Tejia, and also pushed its existing group-buyins service Juhuasuan to customers.
In an earnings call with analysts, Alibaba CFO Maggie Wu highlighted how the company’s broad range of apps allows it to appeal to a wide range of consumers. —Reuters