Last week (23 August) Alibaba reported financial results for their fiscal first quarter. Revenue soared 61% year-on-year, boosted by its core e-commerce business and fast-growing cloud division, but earnings fell short of expectations.

Revenue was ¥80.9bn (£9.3bn), compared to expected revenue of ¥80.7bn (£9.2bn). Meanwhile, adjusted earnings per share were ¥8.04 (92p), compared to an expected result of ¥8.15 (93p).

In the year-ago quarter, Alibaba reported adjusted earnings of ¥7.95 (91p) per share on revenue of ¥50.2bn (£5.7bn). Net income of ¥8.7bn (£1bn), a 40.8% decline from the ¥14.7bn (£1.7bn) reported in the fiscal first quarter of 2017.

U.S.-listed shares of Alibaba fell more than 2% in Thursday trading. The stock has been under pressure in recent months amid a broader sell-off in Chinese stocks over concerns about the impact of the U.S.-China trade war.

Shares hit a record high close of USD$210.90 (£163.90) on 14 June, but have declined about 15.6% since. That equates to a USD$81.3bn (£63.7bn) fall in market capitalisation or value. The stock is up just 1% so far in 2018.

Alibaba's core commerce business, which focuses on its online shopping sites Tmall and Taobao, is still the company's biggest unit, accounting for around 86% of revenues. Core commerce revenues came in at ¥69.19bn (£7.9bn), just below analyst expectations of ¥70.5bn (£8bn). This represented a 61% year-on-year rise.

RetailTechNews spoke to industry experts about the results:

Ruth Manielevitch, director of business development EMEA, Taptica, says: “Whilst Alibaba announced a sharp dip in profit by 40.8%, it is still performing well, having announced its 61% surge in revenue. This is unsurprising, as Alibaba has scaled rapidly this year through a variety of notable partnerships, from major U.S. consumer brands like Tiffany & Co., to international luxury brands such as Valentino. Alibaba is also miles ahead when it comes to its use of consumer data; and this has become a powerful tool for its advertising technology through enhancing personalisation, so that ads and offerings are always relevant to consumers. With Alibaba now accounting for 58% of the Chinese e-commerce market, it is clear that this retail titan has a winning strategy, and the likes of Amazon should be conscious about its potential to dominate the e-commerce market in the future.”

Richard Brosgill, head of APAC, Forward3D, adds: "Alibaba continues to grow at a rate faster than Amazon, driven by its diverse investments across e-commerce, cloud computing, entertainment, and more. While e-commerce remains the core revenue stream, Alibaba is investing in broader areas to increase touchpoints with the Chinese consumer. This will impact margins; however, the power of the retailer will continue to scale as their addressable market grows. Investments into food delivery, their wider New Retail initiatives in China, in addition to their integration with regional e-commerce retailer Lazada based in Singapore, demonstrate their aggressive push for growth both domestically and abroad.

“Recently, brands including Tiffany & Co. have aligned on this view and are starting to sell their products across Alibaba’s e-commerce sites in order to tap into their extensive reach and traffic. The only challenge for retailers is whether they are willing to give away their first-party data, consumer insights, and brand positioning for exposure on Alibaba's marketplaces. The Alibaba opportunity can't be ignored, but retailers should also consider building their own presence to better engage with the consumer.”

Meanwhile, Graeme Howe, managing director, eCommerce Expo, sees a trend in these results, and the results of Alibaba’s international competitors: “Alibaba’s latest earnings follow a similar trend to rivals Amazon and eBay, which each delivered mixed results this past quarter. Ventures into the cloud business and investments in on-demand local services have helped the company diversify, but retail still remains at its core, thanks to a strategy of sales days, exclusive partnerships with luxury and global brands, and continued expansion into physical commerce. It’s wise for European brands and retailers to continue to align themselves with Chinese digital leaders, like Alibaba, to harness the technological tools available and be part of building the future of e-commerce in the region. Alibaba has been able to assert itself as a leader in e-commerce with its enhanced user experience and ability to control the buying process from beginning to end – something the team at IMRG are seeing a real appetite for and will be a strong discussion point amongst key players in the market at eCommerce Expo this September.”

Cindy Liu, forecasting analyst, eMarketer, comments: “It’s all about data – and Alibaba has a wealth of consumer data. We are seeing increased engagement across all of their platforms, which not only enriches the customer experience, but also empowers its ad technologies in personalisation.”