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Alibaba’s digital economy soaks up consumer demand in Q2

Since the COVID-19 outbreak, changes in consumption patterns have massively benefitted Alibaba as both consumers and merchants go digital.

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Alibaba (NYSE:BABA) reported its June quarter financial results on Thursday marked by accelerating growth as total revenues reached RMB 153.75 billion (USD 21.76 billion), an increase of 34% year-on-year (YoY), surpassing market expectations of RMB 148 billion (USD 21.4 billion).

The company’s chief executive officer (CEO) Daniel Zhang said in a statement, “We were well-positioned to capture growth from the ongoing digital transformation, which has been accelerated by the pandemic, in both consumption and enterprise operations.”

He added on the earnings call, “The dynamics have fundamentally altered our macroeconomic environment and everyday life, but it has also introduced new opportunities.”

Alibaba’s vibrant e-commerce ecosystem, which the company said has returned to pre-COVID-19 levels, has benefitted from robust growth as online spending surges in the post-COVID-19 economy. Alibaba’s online marketplaces with platforms including Taobao, Taobao Live, and Tmall, added 28 million mobile monthly active users (MAU) during the quarter, bringing the total to 874 million.

Tmall’s gross merchandise value (GMV) for physical goods grew by 27% YoY during the quarter.

The company’s deep integration into various segments of the digital economy continues to reap rewards, as Alibaba’s food delivery business Ele.me saw the number of merchants on the platform grow by 30% YoY during the June quarter.

The firm also mentioned that 45% of Ele.me’s new customers were acquired through Alipay, a positive indicator for Alipay’s strategic shift to a super-app for services.

Alibaba Cloud, the firm’s cloud computing arm, saw its revenues increase by 59% YoY as demand for digital infrastructure continued to rise resulting in a higher average revenue per customer.

The company could potentially become the target of further US government sanctions as President Trump hinted at last week. In Alibaba’s latest earnings call, Zhang addressed the concerns explaining, “As the world’s largest e-commerce platform, Alibaba’s primary commercial focus in the U.S. is to support American brands, retailers, small businesses and farmers to sell to consumers and trade partners in China as well as the other key markets around the world.

He added, “We believe global trade will continue, and Alibaba’s active pursuit of our mission to make it easy to do business anywhere are fully aligned with the interest of both China and the United States.” The company said it is monitoring any US changes in policy towards Chinese companies and will comply with any new regulation.

Alibaba’s share price fell by 1.08% to USD 257.97 in Thursday trading after the earnings release.