Alibaba revenue rose 51% in the three months ended March
The e-commerce operator says recommendations to users based on their preferences now drive more sales than traditional searches
Hong Kong — Alibaba Group Holding has posted quarterly revenue and earnings that top analyst estimates as personalised recommendations drive consumer spending across its shopping sites.
Revenue at China’s biggest e-commerce company rose 51% to 93.5-billion yuan ($13.6bn) in the three months ended March, the company said. That compares with the 91.7-billion yuan average of analysts’ estimates compiled by Bloomberg. Adjusted earnings per share was 8.57 yuan, topping projections for 6.5 yuan. The Hangzhou-based company predicted revenue in the current financial year of more than 500-billion yuan.
Recommendations to users based on their preferences are now driving more sales than traditional searches, boosting Alibaba’s ability to provide targeted advertising for merchants on its main Taobao platform. That is helping the e-commerce operator generate more revenue at a time escalating US-Chinese tensions threaten to dampen the world’s number two economy.
The “testing of new recommendation-based advertising indicates monetisation will kick in soon, supporting faster earnings recovery”, Binnie Wong, a Hong Kong-based analyst with HSBC said in a report ahead of the results. The new features could help improve the conversion rate for merchants, Wong wrote.
Shares of Alibaba rose 2.8% to $174.84 in New York on Tuesday, before the earnings were announced. The stock has gained 28% compared with an 11% gain for the NYSE Composite Index.
Earlier on Wednesday, rival Tencent Holdings posted earnings that topped estimates, even as revenue growth slowed to the lowest since its 2004 initial public offering (IPO).
Alibaba’s full-year revenue rose 51% to 376.8-billion yuan, towards the bottom of its forecast range of 375-billion to 383-billion yuan. The core commerce business posted revenue of 78.9-billion yuan, a jump of 54%.
Revenue from the cloud unit surged 76% to 7.7-billion yuan, the company said. The business is becoming a key pillar of growth, with more than half the market in China.
The cloud business could post growth of 46% a year up to and through 2022, according to Bernstein estimates. In Asia, Gartner forecast that Alibaba, last year, accounted for 19.6% of the Asian market for infrastructure as a service and infrastructure utility services, two of the most popular forms of cloud business. That means its regional market share rose by nearly a third from 2017, while Amazon’s fell slightly to 11%.
Sales from the digital media entertainment unit rose 8% to 5.7-billion yuan.