Chinese e-commerce giant Alibaba, beat analysts’ estimates for quarterly revenue on Tuesday as investments in one-hour delivery helped drive more users to its shopping apps, while its cloud division reported strong growth.
U.S.-listed shares of the company rose 4% in premarket trading. The company reported revenue of 247.80 billion yuan ($34.97 billion) in the second quarter, compared with estimates of 242.65 billion yuan, according to data compiled by LSEG.
Alibaba’s results come against the backdrop of a costly battle in China’s “instant retail” sector – which Alibaba calls “quick commerce” – where major players are pouring billions into one-hour delivery services to capture market share. At the same time Alibaba has been investing heavily in artificial intelligence, emerging as one of China’s leaders in the field.
“We have entered into an investment phase to build long-term strategic value in AI technologies and infrastructure, and a consumption platform integrating daily life services and e-commerce,” said Alibaba Group CEO Eddie Wu. Net profit fell 53% to 20.61 billion yuan, though that was still higher than analysts had expected.
The instant retail price war, triggered by aggressive discounting and subsidies from Alibaba, JD.com and Meituan, has led to heavy cash burn. Analysts at Nomura estimate over $4 billion industry-wide in the second quarter alone and raised investor concerns about margins.
Alibaba is less exposed than rivals, yet it sees long-term upside, projecting instant retail could add 1 trillion yuan in annualized gross merchandise value – or GMV, a commonly used metric for e-commerce sales – over the next three years.
