Alibaba cloud revenue climbs 93 percent to $710M

Chinese internet giant says growth in paying customers and revenue from higher value-added services boosted cloud revenue for its June quarter, and points to Southeast Asia and South Asia as expansion targets amidst China-US tariff war.
Written by Eileen Yu, Senior Contributing Editor

Alibaba Group's cloud revenue has climbed 93 percent in its first quarter ended June 30, to hit US$710 million. The Chinese internet giant also points to Southeast Asia and South Asia as key targets of its international expansion, especially amidst the China-US tariff war.

Commenting on its cloud revenue for the quarter, Alibaba said growth was fuelled by adoption of its higher value-added service as well as growth in paying customers.

However, the business unit saw a US$74 million loss in adjusted EBITA margins, as the Chinese internet giant continued to make investments in its cloud footprint. Alibaba Cloud currently operates eight datacentre regions in China as well as 10 international datacentre regions, of which eight are located in Asia-Pacific including Singapore, Australia, Indonesia, and Malaysia. Worldwide, it has more than 1 million paying customers.

For the June 2018 quarter, Alibaba said it added customers such as InterContinental Hotels Group, Minsheng Bank and China Communications Construction Group. Last week, it launched nine cloud products for the global market including Anti-Bot Service, Apsara Stack, and Machine Learning Platform for AI.

Company-wide, Alibaba reported a 61 percent year-on-year increase in revenue to US$12.22 billion. It core commerce revenue also climbed 61 percent to reach US$10.45 billion, while revenue from digital media and entertainment increased 46 percent to US$903 million.

Net income, though, dropped 45 percent to US$1.15 billion (7.65 billion yuan) for the quarter, compared to 14.03 billion yuan last year.

Its China retail marketplaces added 24 million annual active customers to peak at 576 million for the year ended March 31. Mobile monthly active users hit 634 million, up 17 million over March 2018.

Core commerce still accounted for the bulk of Alibaba's business, contributing 67 percent of its revenue for the quarter--but this was lower than the 73 percent it added to the revenue mix. And while its cloud computing business accounted for just 6 percent of Alibaba's overall revenue for the quarter, its contribution grew slightly compared to 5 percent last year.

Alibaba first launched its cloud business in China in 2009, before expanding its offerings internationally in 2015. It set up its international headquarters in Singapore, pledging US$1 billion in investment to expand its datacentre footprint as well as build up its partner ecosystem and cloud offerings.

Alibaba puts focus on local and regional markets, amidst US trade tensions

During his analyst call to discuss the results, Alibaba's executive vice chairman Joe Tsai touched on the trade tensions between China and the US. Noting that the company's business was focused on consumption opportunities in its domestic Chinese market, he said Alibaba was less reliant on Chinese exports.

"It is clear nobody wins in a trade war," Tsai said. "Over the years, China has become less reliant on exports so that the Chinese economy can withstand the imposition of tariffs on Chinese products. The most important point, however, is that the strength of China domestic demand is critical to the stability of the Chinese economy and market confidence."

Should US goods become too expensive due to tariffs imposed by the Trump administration, he noted that Chinese consumers could opt for domestic producers or imports from other international markets.

He added that Alibaba also had options in growing its international presence.

Tsai said: "In terms of our international expansion, the world is a big place. We have made substantial progress in emerging markets, such as Southeast Asia and South Asia, as these markets are ripe for us to add more consumers into our ecosystem."

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