Alibaba posts slowest revenue growth in four years

Running headalong into the withering storm of the Covid-19 epidemic, Alibaba Group's revenues were up 38% year-on year at RMB161.4 billion ($23.1 billion), even as income increased to RMB 39.5 billion ($5.6 billion), up 48%. 

Despite being worried about the virus' impact, Covid-19 may have only worsened a looming slowdown in business for the company. While nearly 40% sales growth sounds impressive, the revenue growth actually marks Alibaba's slowest pace in four years. Growth in its core commerce business, which accounts for nine-tenths of its revenue, was aided by business in physical retail Excluding that, advertising revenue grew just 21%, which is 4 percentage points slower than the previous quarter and down 5.5 percentage points year-on-year.  

In the December 2019 quarter, when the firm listed in Hong Kong, Alibaba's China retail marketplaces, Taobao and Tmall, had 824 million mobile MAUs, representing a net increase of 39 million from September 2019. Annual active consumers on its China retail marketplaces reached 711 million for the 12 months ended December 31, 2019, an increase of 18 million compared to 693 million for the 12 months ended September 30, 2019. As the tech giant searched for new growth and users, over 60% of new annual active consumers were from less developed areas. 

In December 2019, GMV generated from Taobao Live and the number of monthly active users who watched Taobao Live both grew over 100% year-over year. Meanwhile, Alibaba's annual 11.11 Global Shopping Festival in the December quarter generated nearly RMB 267 billion in sales ($38.4 billion). This represented "2.3 times the combined online sales of Black Friday and Cyber Monday in the U.S. It reflects the strength of Alibaba's digital economy and our Chinese consumers' robust consumption power," CEO Daniel Zhang told analysts on a post-results call. 

Away from its domestic business, Alibaba also saw strong growth overseas, with the international business growing 27% to RMB 7.4 billion, driven by growth in its Lazada unit. Lazada recorded 97% year-over-year quarterly order growth reflecting strong consumer demand in the apparel and accessories and general merchandise categories. Meanwhile, its Aliexpress Logistics unit saw 46% growth in gross merchandise value (GMV) for the December quarter, driven by the company's 11.11 sale. 

Other businesses too showed strong traction. During this third quarter, Alibaba's Cloud unit generated RMB10 billion of revenue in a single quarter for the first time, with revenues growing 62% year-over-year to RMB10.7 billion (US$1.5 billion), driven by increased revenue contributions from both our public cloud and hybrid cloud businesses.

For the quarter, average daily subscribers for its media platform Youku increased 59% year-over-year. This spike was driven by the addition of new subscribers during key promotional
campaigns, an increase of auto-renewal subscribers and a greater contribution from the 88VIP
membership program on Alibaba's China retail marketplaces. 

The overhang of Covid-19 inevitably will be the biggest business headache for CEO Zhang in the coming quarter. While he said the "black swan" event would have a telling impact on business performance, Alibaba is investing heavily (around $67 million) in helping the community recover. However, business is expected to take a body blow, with the company possibly posting its first revenue decline on record in the upcoming quarter. 

Alibaba CFO Maggie Wu told analysts that the China retail and local consumer businesses, which account for over half of revenue, would be worst hit, due to reduced demand and the challenge of delivering products. "While demand for goods and services is there the means of production in the economy has been hampered by delayed opening of offices, factories and stores after Lunar New Year holiday," she told analysts. "Since the starting of February our overall revenue growth rate we believe will be negatively impacted for (the) March quarter."