Alibaba, the Chinese e-commerce behemoth, reported on Tuesday a jump in profit in its first earnings announcement since its initial public offering in September.
Shrugging off a slowdown in the Chinese economy, Alibaba’s profit grew 16% from the same period a year earlier as the company’s sites benefited from the growing number of Chinese turning to the internet to shop.
Shares in the company, China’s largest e-commerce retailer by transactions, have risen about 50% since it raised nearly $21.8 billion in the highly anticipated initial stock sale.
In a sign of the growing power of Chinese internet companies, the listing surpassed the offering of Facebook, the American social media giant. Now with a market value of almost $250 billion, Alibaba is worth more than Facebook.
Alibaba’s growth is likely to continue at a strong clip, according to the Jefferies analyst Cynthia Meng, who believes that it will count half of China’s 1.3 billion people as customers over the next decade, up from less than a quarter now. A huge increase in the number of Chinese shopping online will help Alibaba overcome a slowdown in the growth of Chinese internet users and moderating economic expansion, Ms. Meng said.
“Among China’s Internet subsectors, we see e-commerce as the most favourable sector (followed by mobile games, and online travel) benefiting from the shift in internet user demographics” toward users older than 30 with more spending power, Ms. Meng wrote.
Alibaba said that in the quarter ended September 30, its net profit jumped to $1.1 billion, roughly in line with the $1.16 billion estimated by 22 analysts polled by Reuters. Alibaba’s revenue rose 54% to $2.7 billion, better than the $2.6 billion estimate of 27 analysts polled by Reuters. The company’s shares rose 2.3% in premarket trading on the results.
The twin drivers of Alibaba’s growth are its Taobao Marketplace and Tmall sites. Taobao, which facilitates the sale of goods from small merchants to consumers, is currently larger than Tmall, but analysts expect Tmall to eventually eclipse it as
Chinese consumers become wealthier and buy products from larger brands. On Tmall, larger companies and multinationals set up their own stores to sell to the huge number of consumers who visit the site.