Alibaba Stages Big Upside Reversal As Investors Dismiss Earnings Miss

Alibaba Group Holding, operator of the world's largest e-commerce platform, posted a record year of revenue in 2016, driven by China's growing preference for online retailing, where consumers shop on the internet for everything from clothing to food and electronics.

The firm also announced a two- year share repurchase programme of up to US$6 billion (S$8.4 billion).

The Chinese e-commerce giant also reported strong fiscal year revenue growth of 56% with annual non-GAAP free cash flow of approximately USA $10 billion, according to Maggie Wu, Chief Financial Officer of Alibaba Group.

Alibaba reported revenue of $5.61 billion, up 60% year over year and beating the consensus estimate of $5.2 billion (35.87 billion yuan).

Income tax expenses soared 149 percent to 4.6 billion yuan in the March quarter. Alibaba has expanded into new areas in response to the deceleration, buying control of Lazada Group SA to gain a Southeast Asian foothold and waging a price-based war with Tencent Holdings cloud computing services.

High App Engagement: The Taobao app's highly relevant and engaging content continues to drive robust growth in active users and engagement. Shares of Alibaba fell in pre-market trade before recovering. Adjusted earnings per share were 4.35 yuan, below estimates of 4.48 yuan.

"Investors will be paying attention to Alibaba's top-line growth guidance for next year", Ray Zhao, an analyst at Guotai Junan Securities, told Bloomberg News.

E-commerce is bucking a slowdown in China's wider economy by appealing to a growing middle class demanding premium products from Alaskan salmon to New Zealand milk. The company reported that it also incurred additional taxes from the sale of certain unspecified investments. Alibaba's cloud computing business reached triple-digit growth, producing $314 million. Alibaba is "working with talent and directors on proprietary content, so over time the cost should come down".

Still, the company made an operating loss of 505 million yuan in cloud computing during the three months.

Like its United States rival Amazon - which claims more than 300 million customer accounts - Alibaba has expanded into a wide range of services, including cloud computing and media, via its Youku Tudou video hosting service. Over the long term, though, the shift to a consumption-based economy provides Alibaba with opportunities, according to Alibaba Group Executive Vice Chairman Joe Tsai.

Revenue from the firm's core e-commerce business unit increased 47 percent to 31.57 billion yuan, above the previous quarter's 45 percent rise.

The vendor said it was the largest public cloud services provider in China a year ago, citing figures from IDC.

Digital media and entertainment revenue grew even faster, rising 234% year-on-year to $571m.

  • Zachary Reyes