Alibaba beats analyst estimates as recommendations boost sales
The Alibaba Group posted quarterly revenue and earnings that topped analyst estimates as personalised recommendations drive consumer spending across its shopping sites.
Revenue at China’s biggest e-commerce company rose 51% to 93.5bn yuan ($13.6bn) in the three months ended in March, the company said. That compares with the 91.7bn-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 500bn yuan. Recommendations to users based on their preferences are now driving more sales than traditional search, boosting Alibaba’s ability to provide targeted advertising for merchants on its main Taobao platform.
That’s helping the e-commerce operator generate more revenue at a time escalating U.S.-Chinese tensions threaten to dampen the world’s number two economy.
The "testing of new recommendation-based advertising indicates monetization 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 Ltd. posted earnings that topped estimates even as revenue growth slowed to the lowest since its 2004 initial public offering.
Alibaba’s full-year revenue rose 51% to 376.8bn yuan, toward the bottom of its forecast range of 375-383bn yuan.
The core commerce business posted revenue of 78.9bn yuan, a jump of 54%.
Revenue from the cloud unit surged 76% to 7.7bn 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% per year 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 5.7bn yuan.