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Alibaba Shares Fall Despite Better Than Expected Revenue in Q1

Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate Alibaba, saw its shares slip after reporting first quarter results.

Though the company had better than expected revenue, profit still fell short and had traders concerned.

Alibaba reported mixed fiscal first-quarter earnings that showed revenue jumping 61% YOY, boosted by the company’s core e-commerce business as well as cloud division. Earnings however, adjusted, were $8.04 yuan. Analysts had expected 8.15 yuan. This is also compared to the 7.95 yuan per share in the year ago quarter. Revenue then was 50.18 billion yuan.

Net income of 8.69 billion yuan, was a 40.8 percent decline from the 14.68 billion yuan reported in the fiscal first quarter of 2017.

Alibaba shares had hit a record high close on June 14th but have struggled since, falling over 15% as concerns over the impact of the U.S.-China trade war have effected Wall Street.

For the first quarter, the company’s core commerce business, accounted for around 86 percent of revenues. Core commerce revenues came in at 69.19 billion yuan, below the 70.49 billion yuan that analysts had expected. This did however represent a 61 percent year-on-year rise. Cloud computing revenues totaled 4.7 billion yuan, a 93 percent year-on-year rise.

“The exceptional growth across our major segments of core commerce, cloud computing and digital media and entertainment validates our strategy of investing in customer experience, product, technology and infrastructure for the future,” said Maggie Wu, chief financial officer at Alibaba.

Alibaba’s executive vice chairman, Joe Tsai, said during the earnings call, “Chinese middle class continues to grow. I want to particularly emphasize that Alibaba’s three-pronged consumer offerings in retail, entertainment and local services will be the long-term drivers of value creation, as the Chinese middleclass expands, and more of these consumers demand a higher quality lifestyle. The good thing is our historical strength in e-commerce is giving us a distinct advantage, because we have already acquired our customers. To be exact, this quarter we gained another 24 million transacting users to a total of 576 million annual active consumers.”

“These consumers have made purchases on our platform, not just once or twice a year, but on a regular frequent basis. The average annual active consumer places 90 orders across 16 different product categories per year on our China retail marketplace platforms. And they trust Alibaba as the Company that will offer goods and services, where they can spend and get quality and value for their money.”

Not too long ago Alibaba raised its stake in Lazada, a Singapore-based online retailer. The company also acquired Ele.me in April, a food delivery platform. Alibaba warned that it’s margins could continue to be squeezed. The company said, “As many of our newly developed and acquired businesses have different cost structures, we expect that our margin will continue to be negatively impacted by these businesses and the accounting treatment of revenue recorded on a gross basis.”

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