Alibaba’s 2018 first-quarter revenue grew 61 percent to 61.9 billion yuan ($9.73 billion) from a year earlier, beating analyst estimates of a 53 percent increase.
The results mark two years of continuous quarterly revenue growth above 50 percent for Alibaba, even as new business investments in offline retail, cloud computing, and overseas expansion continue to weigh on margins.
Looking ahead, they expect revenue growth for fiscal year 2019 to be over 60% year-over-year. Excluding the consolidation of Ele.me and Cainiao Network, because Cainiao we only had half-year revenue last year, we expect revenue growth for fiscal 2019 to be over 60%.
Alibaba’s operating margin for the quarter was 15 percent, down from 25 percent a year earlier.
Alibaba will invest an additional $2 billion in Southeast Asian e-commerce firm Lazada Group, adding to a run of recent investments in China including brick-and-mortar stores, microchips, and logistics.
The spending comes as Alibaba faces increased competition from Chinese rival JD.com Inc, which has partnered with social media and gaming giant Tencent Holdings Ltd on offline retail, marketing, and payments.
Alibaba’s Chief Executive Daniel Zhang said they will continue to invest aggressively” with a goal of surpassing $1 trillion in gross merchandise volume (GMV) by 2020.
Last quarter Alibaba announced it will acquire a one-third stake in payment affiliate Ant Financial, replacing an earlier profit share agreement, under which Ant paid royalty fees to Alibaba equivalent to 37.5 percent of its pre-tax profits.
Overall, revenues grew 58% year-over-year, and Taobao and Tmall GMV accelerated its growth from the 22% growth last year to 28% growth this year.
Highlights that demonstrate the success of Alibaba’s strategy and execution. There are three things worth noting.
1. Alibaba gained incremental market share and a larger share of the consumer e-commerce wallet despite the law of large numbers. How is that possible? Because, through technology and consumer insights, they put the right products in front of the right customers at the right time. They executed tailored strategies in supply chain, product and merchant curation, and logistics for key categories, including apparels, FMCG, home appliances, and consumer electronics. The combination of their superior technology and operating excellence means that we can continue to achieve substantial growth at scale, conquering the law of large numbers.
2. Their New Retail initiatives are substantially growing Alibaba’s total addressable market in commerce. In retail, they are anticipating changing consumer behavior and increasing expectations of quality and convenience, whether these consumers shop online or in offline stores.
Through their proprietary technology and operational implementation, they are enabling their retail partners to meet and even exceed these consumer expectations and capture incremental sales and operating efficiency. And this process of digitizing the entire retail operation, they are driving a massive transformation of the traditional retail industry. It is fair to say that their e-commerce platform is fast becoming the leading retail infrastructure of China. With this transformation, China’s US$5 trillion in retail sales will be available to Alibaba as their total addressable market.
3. Alibaba is well-positioned to capture more discretionary spend of Chinese consumers through entertainment and local service offerings beyond e-commerce. Over the past year, they made substantial investments in their digital media and entertainment business, which strengthened their offerings in streaming content and subscription video services for an expanding viewership.
NOTE- Disclosure Nextbigfuture’s Brian Wang owns shares of Alibaba.