Alibaba beats estimates, lowers guidance for 2019
Alibaba (BABA) is still growing fast, and now it’s taking measures against China’s macro headwinds.
The Chinese e-commerce giant reported second-quarter revenue of RMB 85,148 million (U.S. $12,398 million) on Friday, an increase of 54% year-over-year, and earnings per share of RMB7.62 (U.S. $1.11), higher than analyst’s estimate of $1.08 a share.
Core commerce grew 56%, lower than last quarter’s 61%. This is in-line with analysts expectations, due to the moderate growth of China’s domestic consumption, a major engine of the second largest economy in the world.
In response to the macroeconomic situation, Alibaba announced it will lower its revenue guidance for fiscal 2019 (April 2018 to March 2019) by 4% to 6%, expecting RMB 375 billion to RMB 383 billion due to delayed monetization. Earlier this year, Alibaba’s revenue guidance for FY2019 was above 60% growth year over year.
“In light of current fluid macroeconomic conditions, we have recently decided not to monetize, in the near term, incremental inventory generated from growing generated from growing users and engagement on our China retail marketplaces,” Alibaba said in a statement on Friday. “We expect this decision to benefit SMEs [small- to medium-sized enterprises] on our marketplace platforms.”
Maggie Wu, Alibaba’s CFO called the economic condition “challenging times” for merchants on Alibaba. “So that does not make sense for us to maintain very high revenue growth,” Wu said on Friday.
Alibaba’s core retail business has already felt some pains from contracting consumer spending. It said consumer durables are the most impacted, especially large ticket items consumer electronics. This is in-line with Apple’s results on Thursday, which reported sales growth of 16% year over year in greater China, slower than the 19% pace in the previous quarter.
Jack Ma, Alibaba founder and chairman, warned the global economy is “in a state of turmoil” in his letter to shareholders on Tuesday. “When it gets difficult to do business, it is precisely the time to fulfill our mission to make it easy to do business anywhere,” he wrote in his final letter as the chairman of Alibaba.
Alibaba shares jumped 4% in pre-market trading Friday.
Krystal Hu covers tech and economy at Yahoo Finance. Write to Krystal at krystalh@yahoofinance.com or follow her on Twitter.
Read more:
Why the $375 billion US-China trade deficit can be totally misleading
Foxconn executive: Make products in the U.S. and sell them to China
Why you won’t feel much pain from Trump’s tariffs this holiday season
