The 5 Most Important Figures From Alibaba's Q3 Report
Alibaba (NYSE: BABA) is heading for another banner year. The Chinese e-commerce giant reported revenue of $12.8 billion, which beat out estimates for $12.4 billion, on top of net income of $3.7 billion. When the 2018 financial year concludes at the end of March, Alibaba expects its annual revenue to be up year over year in the range of 55% to 56%.
A large focus of the earnings call was on the company's continuing New Retail strategy, or combining the best of offline and online shopping. Alibaba has been experimenting with the use of data and technology to improve the physical retail experience and said its brick-and-mortar projects are starting to add to its top line.
Alibaba is a huge company with arms that extend into physical retail, online retail, apps, digital media and entertainment, as well as the cloud. To break down its financials into simpler terms, here are Alibaba's eight most important financial figures from the last quarter.
1. Overall revenue growth: 56%
Year-over-year revenue growth has been Alibaba's pride and joy these past few years. The third quarter marked the company's seventh straight quarter of its revenue growing by more than 50%. For this past quarter, revenue grew 56% year over year to $12.8 billion.
On the earnings call, Alibaba CEO Daniel Zhang said the impressive revenue growth is a result of the company focusing on new users, new technology, and new retail experiences. Something Alibaba has always been proud of is its ability to use its large trove of customer data to improve its platforms in a way that makes customers happier and also leads to more spending.
Specifically, Alibaba said its revenue got a boost from its China commerce retail business, international commerce retail business, Alibaba Cloud, and the consolidation of Cainiao Network, a logistics affiliated founded in 2013. In late September, Alibaba announced that it was raising its stake in Cainiao to above 50%, which ended up adding $600 million to the company's quarterly revenue.
It's also worth noting that Alibaba's international retail business grew 93% in revenue year over year to $727 million. Alibaba's international businesses include AliExpress, which lets Chinese branded companies sell their items to consumers outside the China market, as well as Lazada, an e-commerce firm that was launched in 2012 to serve Southeast Asia.
2. China retail annual active consumers: 515 million
Compared to the 12-month period ending in the previous quarter, Alibaba added 27 million annual active consumers, its largest net increase in the past three years. This brings the total number of annual active consumers on its China-based retail marketplaces to 515 million.
Along the same lines, Alibaba's mobile monthly active users (MAUs) increased 31 million over the December quarter bringing the total to 580 million. That's significantly more than the 20 million it added for the September quarter. This is important because Alibaba has told its investors that the more time users spend on its personalized Taobao app interacting with content, the more money they spend on its platforms.
3. New equity stake in Ant Financial: 33%
Perhaps the most interesting and unexpected piece of news in Alibaba's earnings was its decision to buy a 33% stake in its payment affiliate, Ant Financial, which runs the Alipay mobile payment platform.
While Alibaba lauded the deal for giving it equity ownership in a company that will continue to play a major role in its business, some investors were wary over Ant Financial's drop in profitability this past quarter. Alibaba said the decline in profit was due to Ant Financial's "aggressive user growth plan."
Ant Financial is important to Alibaba's future because it's a key component of its much-talked-about New Retail strategy. Allowing customers to pay through their phones whether they're shopping in-store or at home is an important part of the New Retail experience.
The Wall Street Journal speculated that the equity stake could be in preparation for Ant Financial going public. However, Alibaba Chief Financial Officer Maggie Wu declined to comment on a possible IPO for Ant Financial.
4. Alibaba Cloud revenue growth: 104%
In the continuing global cloud competition, Alibaba Cloud reported revenue growth of 104% year over year to $553 million. Last quarter, it reported 99% year over year revenue growth.
Alibaba Cloud, launched in 2009, is already the market leader in China. The dramatic leaps in revenue growth are mainly due to an increase in the number of paying customers as well as adding higher value services to increase current customer spending, the company said in the report.
5. Media & entertainment subscriber growth: over 100%
Alibaba's lesser-known media and entertainment business is growing quite well under the radar. The segment managed to increase subscriber growth by 100% year over year.
In a collision of worlds, U.S. streaming giant Netflix actually acquired Alibaba's Chinese hit drama "Day and Night" for global distribution this past quarter. Zhang said the purchase was "a validation of the creative capability of our digital video business."
The media and entertainment business' revenue increased 33% year over year to $832 million. The company is seeing particular growth with video platform Youku thanks to the original content it's been releasing on the platform, similar to Netflix's subscriber growth strategy.
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Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.