Alibaba saw annual growth in revenue and profits decelerate sharply in the latest quarter, denting confidence as the Chinese e-commerce group prepares to launch an initial public offering expected to value it at more than $60bn.
Figures published Tuesday by Yahoo, which owns a 24 per cent stake in Alibaba, showed that Alibaba – host to about 80 per cent of China’s ecommerce – lifted revenues 51 per cent year-on-year in the three months to September 30 to $1.78bn. That was down from growth of 61 per cent the previous quarter and 71 per cent the quarter before that.
Growth in gross profits also fell back, to 58 per cent year-on-year to $1.26bn, compared with 74 per cent the previous quarter.
Brian Wieser, an analyst at Pivotal Research, said “Most investors will react negatively to this”, adding that because Alibaba publishes so little information about itself investors have become focused on the top line revenue numbers. “The company is a bit of a black box,” he said.
The figures published quarterly by Yahoo, with a three-month delay, are the only source of financial data on Alibaba.
Mr Wieser said that Alibaba’s overall growth in 2013 was dependent on growth in its core business areas – ecommerce grew at 42 per cent in China last year, while advertising grew 57 per cent. “Overall growth is dependent on advertising primarily and ecommerce secondarily,” he said.
Alibaba’s sales now exceed those of eBay and Amazon combined and comprise about 2 per cent of China’s gross domestic product. Alibaba’s expected IPO will be one of the most watched financial events of the year.
Some analysts have warned, however, that factors such as a the switch to mobile internet in China could bolster competition. Another threat is the increased popularity of Weixin, a social media service known as Wechat in English belonging to rival Tencent.
In addition, China’s own economic growth figures have slowed, which could have knock-on effects for Chinese companies, and on Alibaba’s sales. Economists expect China’s full-year gross domestic product growth in 2014 to come in at about 7.4 per cent, the slowest pace since 1990.
US analysts blamed Alibaba’s slowing growth for the slight drop in Yahoo’s share price in after-hours trading.
Yahoo’s share price has jumped more than 80 per cent over in the past 12 months on expectations that Alibaba’s IPO would price Yahoo’s stake at roughly the same value as the rest of the US group’s businesses combined.
Alibaba, which is privately held, declined to comment on the figures. However, people close to the company defended the results. “It is still growing faster than any company of its size on the face of the earth,” said one person close to Alibaba.
Another person familiar with Alibaba’s earnings said that the company had “nothing to worry about” and pointed out that it had broken all its records for sales on the annual shopping day of November 11, selling $5.7bn in merchandise and beating “Singles Day” sales in 2012 by 83 per cent.