Alibaba sees opportunities amidst trade tensions as cloud revenue climbs 90 percent

Chinese internet giant's cloud revenue continues to grow, climbing 90 percent in its latest fiscal quarter, as departing chairman Jack Ma identifies opportunities amidst trade tensions with the US.
Written by Eileen Yu, Senior Contributing Editor

Alibaba Group's cloud computing business continues on its growth momentum, clocking a 90 percent spike in revenue for the company's second fiscal quarter, fuelled by higher value-added services and customer growth.

The Chinese internet giant said cloud revenue reached US$825 million for the quarter, during which it introduced more than 600 products and features across various areas such as big data analytics, security, Internet of Things (IoT), and artificial intelligence (AI).

The business unit still reported a loss of US$33.64 million, though, for the quarter, which was higher than the year before when its adjusted EDIBTA was a loss of about US$23.49 million.

Despite the loss, Alibaba said its cloud revenue helped drive the organisation's total revenue to US$12.4 billion for the quarter, up 54 percent year-on-year. It also pointed to robust growth from its domestic commerce retail business, which climbed 37 percent to hit US$7.89 billion in revenue, as well as its logistics business Cainiao Network.

The company's net income for the quarter hit US$2.66 billion, up 5 percent from the year before.

Alibaba's retail marketplaces--Taobao and Tmall--registered an annual active consumer base of 601 million for the year, ended September 30, compared to 488 million in September 30, 2017. The company said higher new customer acquisition in less developed areas helped widen its consumer base.

Mobile monthly active users also grew to 666 million in September 2018, up from 634 million in June and a 21 percent increase from 549 million the year before.

For its core commerce business, Alibaba reported a 13 percent growth in adjusted EBITA to US$4.34 billion for the quarter. This segment accounted for 85 percent of the group's overall revenue.

Cloud computing contributed 7 percent of Alibaba's total revenue for the quarter, up from 5 percent last year.

Opportunities amidst US trade tensions

In his letter to shareholders, departing executive chairman Jack Ma revealed the company's goal to serve 2 billion consumers worldwide and support 10 million businesses by 2036.

He said the global economy currently was in "a state of turmoil", with uncertainties in trade relations, stock markets, and the manufacturing industry. China-US trade tensions also posed risks to stability, Ma added.

Noting that Alibaba had twice experienced similar setbacks in the global economy, he said: "Our past experience tells us there are huge opportunities behind the anxiety and friction. The only question is how we should pivot. Monumental challenges give rise to monumental opportunities and Alibaba is well-positioned because we are adept at weathering adversity.

"When it gets difficult to do business, it is precisely the time to fulfil our mission to make it easy to do business anywhere," he said. "Today's conventional business model and regulatory framework for global trade is facing enormous challenges. This has presented the perfect opportunity for us to make globalisation a priority."

Ma pointed to Alibaba's efforts over the past three years in developing a trading system for small and midsize businesses (SMBs), supporting key aspects of global transactions--specifically, buying and selling, payments, delivery, and travel.

He also stressed the need for inclusivity, ensuring all SMBs, youth, and women had fair access to global trade.

He added Alibaba's investment in developing its own online and data technology, including data science, cloud, AI, and IoT, helped transform the company as well as supported 200,000 brick-and-mortar retail stores to adopt an integrated online-and-offline strategy.

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