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Alibaba beats Q1 expectations as digital economy grows

While Alibaba withstood China’s macroeconomic slowdown in early 2020, a wave of digitization spurred growth in e-commerce livestreaming, cloud services, and enterprise software.

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Alibaba (NYSE: BABA) reported its March quarter financial results on Friday, marked by a 22% year-on-year (YoY) increase in total revenue to RMB 114.3 billion (USD 16.1 billion), exceeding market expectations of RMB 107.5 billion. Alibaba’s entire digital economy reached a milestone of USD 1 trillion in gross merchandise value (GMV) in the fiscal year.

However, the Hangzhou-based internet and e-commerce giant was not spared from the impact of COVID-19 and generated just RMB 3.1 billion (USD 447 million) in net income attributable to shareholders during the quarter, a decrease of 88% YoY. The annual decline reflects decreases in the value of Alibaba’s equity investments in publicly-traded companies.

Alibaba’s share price slid by 5.87% to USD 199.70 as of market close on Friday.

The company’s food delivery subsidiary Ele.me experienced an 8% YoY decline in revenue due to the mass closure of restaurants and merchants during the COVID-19 lockdown. However, Ele.me returned to positive GMV growth in April as normal life began to resume after the outbreak.

The pandemic also provided opportunities for Alibaba, as more offline merchants sought to digitize their businesses. Alibaba’s core commerce saw continued user growth, as the number of mobile MAUs on its retail platforms in China increased by 125 million users annually, reaching 846 million.

Daily active merchants on Taobao Live, the company’s industry-leading e-commerce livestreaming platform, grew 88% YoY during the March quarter.

Alibaba Cloud’s revenue increased by 58% YoY to RMB 12.2 billion (US$1.7 billion), as demand for cloud services soared amidst a transition to remote work and distance learning.

Freshippo, an Alibaba-backed supermarket that offers fresh grocery delivery, saw revenue growth during the lockdown period, and 60% of Freshippo’s GMV in the quarter was from online orders, an increase of 10% YoY.

DingTalk, Alibaba’s enterprise solutions software, saw a sharp uptick in popularity during the outbreak period as daily active users (DAU) during weekdays reached a peak of 155 million in March. While active users will fall as schools and businesses reopen in China, Alibaba maintains that DingTalk boasts over 100 million DAUs.

Amidst the US Senate’s recent passage of the Holding Foreign Companies Accountable Act, Alibaba’s CFO Maggie Wu assured investors on the earnings call that the firm is committed to upholding the highest standards of integrity regarding financial statements, and will comply with any regulation that increases transparency and protects investors.

Alibaba explained that the Chinese economy has been steadily recovering from the COVID-19 lockdown since March, and forecasted USD 650 billion in revenue for the next fiscal year.