Alibaba Group first quarter profit up 23 percent to $1.7b

China's Alibaba Group has reported its fiscal first quarter results, but despite boasting $1.7 billion in earnings and $3.3 billion in revenue, the online retailer said its revenue should have been up a further 8 percent.
Written by Asha Barbaschow, Contributor

With $109 billion in product sales transacted via its online marketplace, China's Alibaba has recorded a first quarter non-GAAP earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $1.7 billion, up 23 percent from the same quarter last year.

Its non-GAAP EBITDA margin decreased by one percent year-on-year to 52 percent for the quarter, with the decrease attributed to the consolidation of acquired businesses and investments in new business initiatives.

Alibaba recorded a 28 percent year-on-year increase in revenue, tipping $3.3 billion, an increase which was credited to the rapid growth of its China commerce retail business, however, the company said that this increase should have been 36 percent.

According to Alibaba, the lower year-over-year revenue growth was a result of three factors, the first being the suspension of its online lottery business. In February, Alibaba's Taobao platform was ordered to cease its lottery sales, with the General Administration of Sport of China banning the activity online.

At the time, the authority said it would come down firmly on those selling online lotteries and that in cooperation with the police and other administrative departments, it would crash the illegal business.

In addition to the online lottery reform, Juhuasuan, the company's car division saw a decrease in its pricing in an attempt to acquire more high-quality merchants.

The third factor in its reduced revenue identified by the company was a reduction of revenue from its SME loan business, with that arm of the business being transferred to Zhejiang Ant Small and Micro Financial Services Company Limited in February.

The company said that it has seen a record number of annual active buyers with 367 million global users, and 307 million monthly mobile active users, up 18 million from March this year.

"We had a strong quarter and we continued to build the foundations for future growth," Daniel Zhang Alibaba Group CEO said.

Alibaba said 55 percent of its users are shopping via mobile, with mobile gross merchandise volume (GMV) reaching $60 billion, an increase of 125 percent year-over-year, additionally, mobile revenue was $1.3 billion.

"We focused our efforts on building healthy GMV growth, delivering the best consumer experience, and improving the quality and sustainability of merchants doing business on our marketplaces," Zhang said.

"We are excited about our top strategic priorities, including internationalization, winning in mobile, expanding our ecosystem from cities to villages, and investing in core technologies that will propel our cloud computing business."

Within the business, cloud has experienced 106 percent growth, to come in at $78 million.

Last month, Alibaba announced that it has set aside $1 billion to drive growth in its cloud business, Aliyun. The e-commerce company currently operates five data centres in China and Hong Kong, and in March this year opened its first facility outside its domestic market in Silicon Valley.

Part of its $1 billion investment will be channelled toward building new data centres in Singapore, Japan, the Middle East, and Europe.

"We continue to execute our growth strategy and focus on long-term value creation," chief financial officer Maggie Wu said. "The fundamental strength of our business gives us the confidence to invest in new initiatives, add new users, improve customer experience and expand our products and services."

On Tuesday, Alibaba announced its intentions to sink $4.63 billion into Chinese retail chain, Suning for a 19.99 percent stake in an effort to extend its retail presence. Suning, in return, will invest $2.2 billion into Alibaba, and as a result claim a 1.1 percent stake in the conglomerate.

In 2014, Alibaba invested $248.88 million for a 10.35 percent stake in Singapore's telecommunications and postal service, SingPost. Just last month, the e-commerce giant increased its stake to 66 percent following a $206.45 million investment.

Alibaba then pumped $600 million into Travice Inc, the Chinese operator of taxi app Kuaidi Dache in January this year, and only days later, the e-commerce giant snapped up an undisclosed stake in AdChina, an online marketing firm, in order to boost its advertising portfolio.

Bolstering its mobile hardware presence, Alibaba then took a $590 million minority stake in home-grown smartphone manufacturer, Meizu.

In June, Alibaba invested $194 million for an undisclosed stake in China Business News, a local financial media firm that produces both TV programs and newspapers; and also sank $118 million into Softbank Robotics Holdings, preparing for what Alibaba's executive chairman Jack Ma has labelled the 'Fourth Industrial Revolution'.

In December, Alibaba reported a 28 percent year-on-year fall in net income to $964 million in its December quarter financial results, with the company citing costs associated with its record-shattering initial public offering in the United States last September.

At the time, Alibaba Group said the year-on-year decrease in net income for the three-month period was due to an increase in share-based compensation expense, along with a $134 million one-time charge for financing-related fees as a result of its early repayment of $8 billion bank borrowings, and an increase in tax expenses.

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