Online marketplace Alibaba Group (BABA) Friday reported higher second-quarter earnings that topped estimates. The company slashed its full-year 2019 revenue outlook to reflect the economic slump in China, while posting lower-than-expected revenues for the September quarter. The stock gained sharply in the premarket following the announcement.
Earnings, on an adjusted basis, were 9.60 yuan per share (US$1.40 per share) in the second quarter, up from 8.57 yuan per share a year earlier. Unadjusted profit rose 13% year-over-year to 20.03 billion yuan (US$2.92 billion) or 7.62 yuan per share (US$1.11 per share). The bottom line beat the Wall Street projection.
The company slashed its full-year 2019 revenue outlook to reflect the ongoing economic slump in China
Revenues of the China-based e-commerce firm surged 54% annually to 85.15 billion yuan (US$12.40 billion) during the three-month period but fell short of expectations. Contributing to the overall gain, revenues from Cloud computing grew 90% annually to 5.67 billion yuan. During the quarter, Alibaba Cloud launched over 600 products and features.
“While the growth of our overall profitability this quarter has been tempered by significant investments in local services, logistics, entertainment, and international expansion, our core marketplace business continued to show strong profit and cash flow growth, which enables us to re-invest into strategic areas and our technology,” said CFO Maggie Wu.
At the end of September 30, 2018, the company had 601 million annual active consumers in its China retail marketplaces, up 25% compared to last year. The number of mobile monthly active users advanced 21% to 666 million.
The economic slowdown in China has been a cause for concern among local entrepreneurs. To reflect the potential impact of the weak macroeconomic conditions, Alibaba’s management revised down the revenue guidance for fiscal 2019 to a range of 375 billion yuan to 383 billion yuan from 400 billion yuan predicted earlier.
The steady growth of Alibaba’s stock, which started at the beginning of 2016, was halted this year after President Trump announced a series of trade sanctions on Chinese goods and companies. The company, like most of its Chinese peers, is currently struggling to recover from the downturn.
The shares ended the previous trading session sharply higher and continued to gain in the premarket Friday following the earnings report. The stock has declined about 17% since the beginning of the year.
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