Alibaba Posts Strong Earnings in First Report Since I.P.O.

HONG KONG — Alibaba, the Chinese e-commerce behemoth, reported on Tuesday a jump in profit in its first earnings announcement since its initial public offering in September.

Shrugging off a slowdown in the Chinese economy, Alibaba’s profit grew 16 percent from the same period a year earlier as the company’s sites benefited from the growing number of Chinese turning to the Internet to shop.

Shares in the company, China’s largest e-commerce retailer by transactions, have risen about 50 percent since it raised nearly $21.8 billion in the highly anticipated initial stock sale.

In a sign of the growing power of Chinese Internet companies, the listing surpassed the offering of Facebook, the American social media giant. Now with a market value of almost $250 billion, Alibaba is worth more than Facebook.

Alibaba’s growth is likely to continue at a strong clip, according to the Jefferies analyst Cynthia Meng, who believes that it will count half of China’s 1.3 billion people as customers over the next decade, up from less than a quarter now. A huge increase in the number of Chinese shopping online will help Alibaba overcome a slowdown in the growth of Chinese Internet users and moderating economic expansion, Ms. Meng said.

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Alibaba’s stock activity since it recently went public.

“Among China’s Internet subsectors, we see e-commerce as the most favorable sector (followed by mobile games, and online travel) benefiting from the shift in Internet user demographics” toward users older than 30 with more spending power, Ms. Meng wrote in a recent report.

Alibaba said that in the quarter ended Sept. 30, its net profit jumped to $1.1 billion, roughly in line with the $1.16 billion estimated by 22 analysts polled by Reuters. Alibaba’s revenue rose 54 percent to $2.7 billion, better than the $2.6 billion estimate of 27 analysts polled by Reuters. The company’s shares rose 2.3 percent in premarket trading on the results.

The twin drivers of Alibaba’s growth are its Taobao Marketplace and Tmall sites. Taobao, which facilitates the sale of goods from small merchants to consumers, is currently larger than Tmall, but analysts expect Tmall to eventually eclipse it as Chinese consumers become wealthier and buy products from larger brands. On Tmall, larger companies and multinationals set up their own stores to sell to the huge number of consumers who visit the site.

Jack Ma, Alibaba’s founder. Now with a market value of almost $250 billion, Alibaba is worth more than Facebook. CreditLucy Nicholson/Reuters

Chinese are also increasingly using smartphones to access the Internet in place of computers, and some analysts have worried about Alibaba’s ability to continue to attract users. Though Alibaba has a number of standout smartphone applications, in mobile, it remains in the shadow of its rival Tencent, which runs a hugely popular messaging and social networking application called WeChat. Tencent has been striving to make use of the app to sell goods to consumers and has a partnership with Alibaba’s closest e-commerce competitor in China, JD.com.

Analysts have been cheered by the quick growth in the percentage of Alibaba’s transactions carried out on smartphones, though the company’s smartphone presence will continue to be watched closely.

The Forrester analyst Bryan Wang said that just as critical as growth for Alibaba will be controlling costs, which could balloon as Alibaba works to integrate the more than a dozen partnerships it has forged in 2014 alone.

“I’m not so worried about growth. Growth will slow down, probably in the next couple of quarters,” said Mr. Wang. “That will be fine. The key is to make sure costs don’t go up, because when you make so many investments, integration costs rise, and they need to make sure these investments benefit them.”

http://www.nytimes.com/2014/11/05/technology/alibaba-earnings-first-report-since-ipo.html?ref=technology&_r=0

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