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Written by: Derren Nathan | Hargreaves Lansdow
Alibaba – Second quarter lands broadly in line, threat of Trump tariffs hangs heavy
- Revenue up 5% to $33.7bn. Operating profit up 5% to $5.0bn
- Domestic ecommerce struggling against high competition
- Intelligent cloud grows 7%
The timing of Alibaba’s second-quarter results mean they won’t have had the benefit of any boost to spending in China following recently proposed stimulus measures. Revenue came in a little below forecasts, but there were wide gulfs in performance between the divisions. The domestic online retail arm grew revenues by just 1% reflecting intense competition in the space.
Cloud Intelligence grew at a more respectable clip, up 7%, but it’s hardly the electrifying pace being set by the big cloud services players, Amazon, Microsoft and Alphabet. International Digital Commerce is showing real momentum, growing 29%, but it’s a relatively small part of the overall pie.
Despite some rays of hope, today’s results have not been enough to inject some much-needed enthusiasm into sentiment towards the shares. That may be in part due to mixed economic data coming out of China, but also with a looming Trump presidency and with that a trade war is weighing heavy. While Alibaba doesn’t do much business within the US, it’s a significant channel for American exporters to China. What’s more, any direct impact on the Chinese economy will impact demand on the ground. So, until more clarity emerges on Washington’s future trade policies, expect the shares to remain under pressure.