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Alibaba posts record growth as mobile revenue tops desktop for first time

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Alibaba saw record growth in Q2 2016 as the company’s Chinese retail marketplaces surged and users on mobile out spent those on desktop devices for the first time.

The e-commerce giant reported revenue of RMB 32.2 billion (US$4.8 billion), which is a 59 percent increase year-on-year — the highest growth since Alibaba went public in September 2014 in the largest U.S. IPO in history.

There’s been talk of an economic slowdown in China, but that didn’t seem to impact Alibaba’s business on home soil. The company’s China marketplaces pulled in total sales of RMB 23.4 billion (US$3.5 billion), 49 percent higher than the same time last year. Of that figure, 75 percent of revenue came from mobile devices — RMB 17.5 billion (US$2.6 billion) — which is up 119 percent year-over-year.

Mobile revenue outstripped desktop for Alibaba’s Chinese marketplaces last year, but now the scale has finally tipped to mobile across its entire business with average spend higher from users on mobile than those accessing Alibaba via a PC. Handling the switch to mobile was a critical concern for investors prior to the IPO, and Alibaba executives admitted that the speed of this shift has surprised even them.

While revenue growth was undoubtedly the highlight for Alibaba executives, the company’s net income dropped 76 percent year-on-year to RMB 7,142 million, $1.1 billion, thanks to a one-off gain from its Alibaba Pictures affiliate last year. Other metrics were impressive with non-GAAP net income up 28 percent over the same period, and operating profit rising by 71 percent.

Outside of its core business, cloud computing is an area where Alibaba has been piling resources. Its Alicloud business more than doubled its revenue year-on-year to reach RMB 1.2 billion, or around $181 million, for the quarter with 577,000 paying customers.

That business is still a work in progress, though. Alicloud carded an improved RMB 439 million ($66 million) operating loss for the quarter and, speaking on an analyst call, Alibaba Vice President Joe Tsai said it is “moving towards breakeven.”

Alibaba has come under fire for not making its financial data clear enough, with the SEC investigating its accounting of affiliates like logistics firm Cainao, online-to-offline platform Koubei, video platform Youku Tudou, and Ant Financial.

In response, Alibaba broke out increased financial data — including revenue and profit/loss — for business units like such as digital media, cloud computing, food delivery and more for the first time.

For now, those affiliates are burning cash — per the chart below — but Alibaba is betting that they will supplement its core business in the future.

Screenshot 2016-08-11 19.19.32

Alibaba is making another major bet on emerging markets.

It took a majority stake in Lazada, a Rocket Internet-backed e-commerce site in Southeast Asia, for $1 billion earlier this year, and in India it has backed mobile wallet-commerce company Paytm, as well as e-commerce unicorn Snapdeal.

“We’re starting to serve local consumers in Southeast Asia, a market with over 500 million potential consumers,” Tsai said. “That’s going to be a very important potential market for us.”

“We’ve decided to place some very strategic assets” in India, he added. “We think mobile and payments are going to be an important strategy for us there.”

Article updated to include further information about net income and Alibaba’s desktop/mobile revenue rates.

Featured Image: aaron tam/Getty Images