What's going on?
Alibaba – the Chinese ecommerce titan – reported its quarterly results on Thursday. The company continues to dominate the Asian internet market but let its profit margin slip with some major investments, sending its shares sliding.
What does this mean?
Alibaba is basically China’s answer to Amazon – and like its American counterpart, it’s flying. Different parts of the business all helped the company deliver its tip-top 61% revenue growth over the same period last year. Most importantly, its core online retail offering is still going strong and – like Amazon – its cloud business is, too, doubling its revenue from a year ago.
To keep its position as top dog in the world’s fastest-growing consumer market, Alibaba has been investing like mad. It’s trying to dominate both online and offline retail in China by moving into areas like entertainment, online payments and food delivery (Alibaba joined forces with Softbank to invest $3 billion alone in food delivery this quarter). Suffice to say, profit didn’t grow.
Why should I care?
For markets: Chinese ecommerce is having a wobble.
China’s ecommerce market is growing quickly, and so are the companies within it. But to keep the engine running, many are having to invest more money than they’re getting back in revenue. Tencent’s stock sunk 3% last week as it reported its first profit drop in over a decade.
The bigger picture: Chinese tech can still be a good place to be.
Xiaomi – one of the biggest initial public offerings (IPOs) of the year – posted strong growth in its first set of post-IPO results, sending its shares soaring 7% on Thursday. As part of its plan to become an internet services powerhouse, it’s selling hella phones and moving into new markets like Europe. Chinese companies are all chasing world domination.