Alibaba projects $72b in annual revenue despite US-China trade war

Chinese ecommerce giant Alibaba Group Holding projected that its annual revenue will surpass 500 billion yuan (US$72.7 billion) this financial year despite a trade war between the US and China.

The New York-listed company said its revenue rose 39% to 376.8 billion yuan (US$54.7 billion) for the 12-month period ended March, excluding newly consolidated revenue, according to a company statement. Non-GAAP net income, which excludes valuation gains, was 93.4 billion yuan (US$13.5 billion).

Photo credit: moovstock / 123RF

Alibaba’s financial results were announced as the US and China continued to pursue a resolution to their ongoing trade dispute.

China announced tariffs ranging from 5% to 25% on US$60 billion of US goods to be implemented on June 1, in response to US President Donald Trump’s 25% tariffs on US$200 billion of Chinese imports effective last Friday. The US has also pledged to impose tariffs of up to 25% on all remaining Chinese imports, with an approximate total annual trade value of US$300 billion.

“The US trade war has become both a challenge and an opportunity for China’s economy,” Daniel Zhang Yong, chief executive of Alibaba, said in a conference call with analysts on Wednesday. “Looking into the future, China will transform from an export-driven economy to a consumption-driven economy.”

Alibaba, the parent company of the South China Morning Post, said it had 654 million annual active consumers on its China retail marketplaces, while mobile monthly active users reached 721 million in March this year.

The trade war has an inevitable impact on ecommerce companies like Alibaba, which operate a global business across dozens of countries, Ben Kwong Man-bun, a Hong Kong-based director at brokerage KGI Asia, said before the results were announced.

“The trade war is not the only factor that could affect Alibaba’s business as the entire ecommerce sector has slowed over the years, as the momentum of global economic growth is also weakening,” Kwong said. “In the face of a new cycle of global economic slowdown, a big enterprise like Alibaba has a better opportunity to counter the impact given its strong financial record and diversified business portfolio.”

Alibaba reported 51% revenue growth in its core commerce segment for the financial year 2019, driven by effective user acquisition, penetration into less developed cities, higher user engagement, and new-retail initiatives that helped improve user loyalty.

The company has been expanding its new-retail format – designed to combine the online and offline shopping experiences – by opening more Hema supermarkets and enhancing coverage of its online food delivery arm Ele.me.

An Ele.me deliveryman on his electric scooter / Photo credit: Alibaba

Revenue from Alibaba’s cloud computing business rose 76% to 7.7 billion yuan (US$1.1 billion) during the March quarter, helped by increased average spending. It said subsidiary Alibaba Cloud served more than half of the A-share listed companies in China in the financial year 2019.