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Alibaba sales outlook beats estimates as new forays pay off
[HONG KONG] Alibaba Group Holding Ltd's forecast for 45 to 49 per cent revenue growth this year topped analysts' estimates, underscoring how heavy investments into businesses beyond its bread-and-butter of online shopping are paying off.
China's largest e-commerce company has been venturing deeper into new areas from cloud computing services to streaming media as the country's economy slows. Its revenue forecast compares with the 35 per cent that analysts projected on average.
To reflect its increasingly diverse customer base, Alibaba will start reporting active consumers as opposed to just buyers, chief financial officer Maggie Wu said during the company's annual investor-day conference Thursday. It will begin to disclose "customer management revenue" instead of just online marketing, to reflect sales from serving a broader base of advertising platforms.
Alibaba is spending billions of dollars on new businesses in part to counter Tencent Holdings Ltd's increasing dominance of online social media and entertainment. The company, considered a barometer of Chinese consumer sentiment, has also expanded abroad since buying control of Lazada Group SA to establish a foothold in South-east Asia, potentially setting up a clash with Amazon.com Inc.
While Alibaba has outperformed expectations, investors remain concerned about a deceleration in China's economy and efforts by Tencent to capture digital ad spending and muscle in on its turf.
In response, Alibaba moved into untapped rural markets and invested in new sources of income. Most of those new businesses are years away from contributing to the bottom line.
On Thursday, Ms Wu said Alibaba will continue to sacrifice a small slice of profitability to help bankroll its investments. The priority for cloud computing, one of the company's fastest-growing businesses, remains expansion for now, she added.
"Profitability is still not the priority for our cloud business," Ms Wu told investors. Alibaba wants to "quickly expand cloud leadership in coming quarters". BLOOMBERG