What's going on?
Alibaba, the Chinese ecommerce giant, saw its New York-listed stock jump 10% on Thursday after it predicted that it would make far more revenue this year than investors were expecting!
What does this mean?
At a briefing for investors, Alibaba said it expected revenue this year to grow 45-49%, implying that revenue will be about 10% higher this year than analysts were thinking. There didn’t appear to be any single reason for the heightened expectations, except that it is executing well on its current initiatives (which include moving into businesses other than ecommerce, like cloud computing and entertainment).
Why should I care?
For markets: The plan is to be THE platform for Chinese retailers – and it’s working!
Alibaba has built a massive digital platform where retailers and consumers meet to do business. As it collects more and more data on both sets of its customers, it is able to improve the effectiveness of its ecosystem – so, in theory at least, the platform gets better as it gets bigger – which is a major reason that Alibaba expects its revenue growth to increase versus last year, despite its already enormous size.
The bigger picture: The tech revolution is global – and China may be leading the charge.
American tech giants like Amazon and Alphabet are doing some pretty incredible things. Amazon is dominating US ecommerce and Alphabet is, essentially, the fountain of all knowledge (a.k.a. Google search). But their Chinese rivals may be outpacing them (e.g. Alibaba and Tencent, whose WeChat app is fast resembling what Facebook wants to become). The battle should intensify as the tech behemoths push to expand outside their home markets (which, of course, has already begun).