Alibaba’s earnings beat expectations boosted by mobile users’ growth

Chinese e-commerce giant Alibaba, reported a better-than-expected 59 percent jump in quarterly revenue on Thursday boosted by strong performance among mobile users. Despite fears of an economic slowdown in China, the etailer has seen an increase in sales and number of users, as well as rapid growth in its cloud-computing business.

Mobile revenue from the company's China commerce retail business more than doubled to 17.51 billion yuan, while monthly mobile active users increased 39 percent.Total revenue for the three months ended June 30 surged to 32.15 billion yuan ($4.84 billion) from 20.25 billion yuan, with revenue from its China retail marketplaces including Taobao and TMall rising 49 percent from a year earlier.

As Alibaba’s user base grew, the company managed to increase its monetization rate. The company said the blended monetization rate of its China retail marketplaces increased to 2.79 percent from 2.33 percent in the year-ago quarter. Executives also highlighted the Taobao app, which they say is becoming an entertainment platform, with the average user opening the app seven times a day.

“We passed an important milestone this quarter in achieving higher monetization of mobile users than non-mobile users for the first time, reflecting the success of our strategy to stay ahead of the curve by embracing mobile. As we demonstrate from our segmental disclosure, our results reflect the unrivaled strength of our core commerce business, as well as the accelerating traction we are seeing from our cloud computing and digital media and entertainment businesses,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

In cloud computing, where AliCloud is competing against the likes of U.S. brands including Amazon Web Services and Microsoft Azure, revenue was up 156 percent year on year to $187 million.

Revenue from digital media and entertainment businesses skyrocketed 286 percent over a year ago to $472 million. The company attributed the jump to the consolidation of newly acquired video streaming company YoukuTudou and an increase in mobile value-added services such as mobile searches and news feeds provided by UCWeb.

"Our results show the scale and leverage of our ecosystem, as we strengthen our competitive positions in core commerce, cloud computing and digital media and entertainment," said Alibaba CEO Daniel Zhang in a statement. "We are poised for strong profitable growth in the future."

Alibaba’s strong results came as it still faces challenges. The company’s quarterly results also highlighted losses among some newer investments, such as its food-delivery service and logistics affiliate. Alibaba faces intensifying competition from smaller but more rapidly growing e-commerce companies, in particular JD.com Inc. Alibaba also continues to work on fighting counterfeits and monitoring fraudulent transactions on its online platforms.

Alibaba said its net income fell to 7.55 billion yuan from 30.84 billion yuan a year earlier. The sharp drop in net income was due to a one-time investment gain in the year-ago quarter related to Alibaba Pictures, the company’s movie making business. Excluding certain items, Alibaba said it earned an adjusted 4.90 yuan (74 cents) a share, above the 4.17 yuan a share projected by analysts in a poll from Thomson Reuters. Revenue beat the 30.17 billion yuan forecast.

The results also brought the last quarter Alibaba will report gross merchandise volume, or GMV, a key metric that helps investors determine the growth rate of an e-commerce company. At the company’s investor day in June, Chief Financial Officer Maggie Wu said Alibaba would report GMV on an annual basis, but no longer on a quarterly basis because the company wasn’t seeing the metric as a key performance indicator.

For its fiscal first quarter, GMV hit 837 billion yuan, a 24 percent increase from a year earlier. Mobile GMV accounted for 75 percent, Alibaba said.