Bottom line: One of China’s most prominent companies is doing well financially, but its short term prospects have worsened due to the coronavirus outbreak. Investors seem to think the company will weather the storm just fine, but its CEO is worried about the recent plunge in sales.
Alibaba’s latest quarterly report shows the company has managed to hit record revenues for its cloud business, fuelled by increased demand that has also benefitted other companies such as Intel.
The Chinese company raked in 10.7 billion yuan ($1.54 billion) from serving its public and hybrid cloud customers in the three months ending in December 2019, which is a healthy 62 percent increase year-over-year. But cloud services accounted for a mere 7 percent of Alibaba’s total revenue for the quarter, which was 161.5 billion yuan ($23.2 billion).
That means overall performance exceeded analysts’ expectations, as Alibaba’s net income grew 58 percent when compared to 2018, reaching a little over 52 billion yuan ($7.5 billion).
The company’s bread and butter is e-commerce, on a scale so large that it sells two-thirds of everything bought online in China. According to CEO Daniel Zhang, a lot of its revenue growth came from rural areas in the region, as well as an improved targeting strategy that involved social commerce content.
Alibaba’s annual Singles’ Day shopping event generated more than $1.43 billion in the first 90 seconds after it went live, and eventually settled at $38.5 billion, which is a new record. During peak volume, the platform had to process over 544,000 orders per second, piling up 970 petabytes of data by the end of that day.
Zhang also touched upon the topic of the coronavirus outbreak, noting that it could be detrimental to the Chinese, and, by extent, the global economy. The crisis has generated fears over the possibility that delivered packages may carry the coronavirus, and this could lead to delays in shipping game consoles, a drop in smartphone shipments, and, to a lesser extent, NAND and RAM supplies.
Overall, investors remain optimistic – especially since Alibaba is exploring other avenues for growth by working on its RISC-V processor and waiving some fees for merchants on its platforms to help them get through the coronavirus crisis.