China’s most valuable corporation Alibaba Group Holding Ltd.’s quarterly revenue grew a better than expected 34%, signaling that Chinese consumer sentiment is recovering at a rapid clip from its Covid-19 trough.
Alibaba reported sales of 153.8 billion yuan ($22.2 billion) and net income of 47.6 billion yuan in the June quarter, both surpassing projections. Ant Group, Alibaba’s 33%-owned financial affiliate, grew profit roughly six-fold to $1.3 billion in the March quarter, offering a glimpse into its books in the run-up to a mega initial public offering in Hong Kong and mainland China.
Alibaba’s online marketplaces and logistics network is bouncing back from China’s coronavirus-induced lockdowns. The e-commerce giant is benefiting from a gradual pick-up in consumer spending in China, whose economy is among the first globally to recover from the pandemic.
Alibaba and close rival JD.com Inc. racked up record sales during a June shopping event this year, as heavy discounting lured shoppers who had delayed purchases during the national lockdown. At the same time, it needs to fend off growing competition from the likes of JD, Tencent Holdings Ltd., and ByteDance Ltd. across businesses spanning online retail to food delivery and cloud computing.
The result validates the thesis that Alibaba will emerge from the pandemic stronger than before. Once the operational disruptions in the March quarter are overcome, the company will benefit from the accelerated shift of users and merchants to digital channels for consumption.
Alibaba handled a record 698 billion yuan in sales during the “6.18” summer extravaganza, more than twice that of JD. The sales were fueled in part by 14 billion yuan subsidies issued by Alibaba together with local brands and governments.
“The large scale coupon-ing signals the company’s aggressiveness to defend its market leading positioning,” Goldman Sachs analysts led by Piyush Mubayi wrote last month. On Thursday, it said its annual active consumers in China had grown 16 million to 742 million, powering a 34% rise in its core commerce business.
That market position is being chipped away by multiple competitors. Upstart Pinduoduo has lured small-town buyers away with cheaper bargains. JD has ventured beyond its traditional strength in consumer electronics into groceries, with supermarket goods the biggest contributor to its first-half revenue among all product segments.