Slowing China Economy Hits Alibaba's Third-quarter Revenue

Chinese online retail giant Alibaba Group Holding Ltd. experienced its weakest revenue growth in three years in the third quarter, as the slowdown at home and damaging US-China trade war dampened its top-sale season.

Asia‘s second most valuable public company reported on Wednesday that third-quarter revenue of CN¥117.28 ($17.47 billion), ending higher than the CN¥83 billion generated in the previous year, but lower than analysts’ estimated increase of CN¥118.9 billion.

The result is likely to further raise investor concerns as it stresses the piling pressures facing Alibaba, whose sales are often deemed as a gauge of consumer spending in China.

Net income, on the other hand, climbed 33 percent to CN¥30.96 billion, surpassing expectations and pushing the firm’s shares higher by 2 percent in pre-market trade. Adjusted earnings per share (EPS) was at CN¥12.2.

Shares of Alibaba last stood 3.9 percent higher to $163.01 in pre-market trade on Wednesday, having closed 1.2 percent lower to $156.88 in the previous session. The stock has been up by 14.5 percent this year.

Alibaba usually releases its highest revenue in the December quarter due to its mega Singles’ Day in November, which is the world’s largest online sales event that beats US sales of Black Friday and Cyber Monday combined.

However, despite the online retailer’s record $30 billion from the Singles’ Day event in 2018, annual growth fell to the weakest rate in the event’s decade-long history as a slowing China economy and trade tensions kept shoppers at bay.

Seeing headwinds from economic deceleration, Alibaba cut its revenue guidance for its financial year ending March ahead of the top-sales season.

Trade War Impact Not a Big Concern

Analyst David Dai said Alibaba is the dominant and most profitable leader in China e-commerce, and the general macroeconomic environment should improve in the second half of 2019 as the Chinese government introduces measures to stimulate the economy and trade war stabilizes.

Alibaba Executive Vice Chairman Joe Tsai stated that sales grew in December, but demand for big-ticket items continued to weaken.

Tsai also dismissed concerns over trade war, saying people were overly worried about its impact on the world’s second-biggest economy, adding that Chinese consumers are still overall eager and consumption is on track to expand in the next five to ten years.

China’s economic growth declined 6.6 percent last year to mark as its slowest pace since 1990 amid plummeting domestic demand and tough US tariffs. The slowdown is expected to continue this year.

China’s Ministry of Industry and Information Technology (MIIT) stated on Tuesday that domestic technology firms saw no growth in revenue in 2018, while consumer spending slowed amid heavy economic pressures.

As the country’s urban market faces saturation, the Chinese tech giant has been attempting to broaden its reach beyond its core e-commerce business to draw new customers, which includes cloud computing, artificial intelligence (AI), and online entertainment.

Revenue from its cloud business added 84 percent to CN¥6.6 billion, while its online entertainment and media business climbed 20 percent to CN¥6.5 billion.

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