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Alibaba posts better-than-expected earnings but disappoints with tepid user growth

Written by Julianna Wu Published on     2 mins read

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As for user accounts, Pinduoduo could overtake Alibaba as soon as next quarter.

E-commerce giant Alibaba (NYSE: BABAHKEX: 9988) on Thursday posted strong revenues of USD 22 billion for Q3, a 30% increase from the same quarter in 2019, and net income attributable to ordinary shareholders of USD 4.2 billion, representing a 60% decrease from last year.

Though the group managed to surpass market expectations on the key numbers, a mix of disappointing user growth and the dramatic IPO halt of its affiliate Ant Group led to a further sell-off of its shares in New York trading, losing another 2.69% at the close.

The total number of monthly active users on Alibaba’s retail marketplaces in China, mainly Taobao and Tmall, grew by 7 million month-on-month to 881 million, which is still the largest online e-commerce user base in the country, but nearly 10 million less than the market’s estimates of 899 million, said 36Kr.

China digest

Annual active consumers added up to 757 million by the end of September, an increase of 15 million from the twelve-months period ended June 30, 2020.

In the meantime, domestic rival Pinduoduo, which in recent years rose swiftly among China’s price-sensitive lower-tier consumers as an online group-buying choice, is catching with an average 45 million quarterly jump in user accounts, KrASIA reported.

Earlier this week, Ant Group’s estimated USD 34.5 billion Shanghai-Hong Kong dual listing was thwarted by Chinese regulators, KrASIA reported. Alibaba’s stock price tumbled on the news costing its co-founder Jack Ma some USD 3 billion in net wealth.

“As a major shareholder of Ant Group, Alibaba will actively evaluate its impact on its business and take appropriate measures in response to the recent changes in the fintech regulatory environment,” said Alibaba chairman and CEO Daniel Zhang during the earnings call.

Alibaba explained the drop in net income with the fact that it “booked a one-time gain of RMB 69.2 billion (USD 10.44 billion) upon the receipt of the 33% equity interest in Ant Group in the same quarter in 2019,” according to the earnings report.

Despite of leading China’s cloud computing industry with a 40% share, according to analyst firm Canalys, Alibaba’s revenue still largely depends on its core e-commerce business.

One week ahead of China’s annual online shopping festival “Double 11,” the company formed a partnership with London-based retailer Farfetch and luxury group Richemont to set up a cross-border online luxury shopping portal on Tmall.

China is increasingly becoming a significant market for luxury brands. As COVID-19 restricts international travel, online channels are now a major choice for customers on the search for high-end foreign brands.

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