Alibaba Shreds Analysts’ Q2 Estimates With Massive $2.66 Billion In Profits

 

Rob Cain , CONTRIBUTOR

Opinions expressed by Forbes Contributors are their own.

A monitor displays Alibaba Group Holding Ltd. signage on the floor of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg

Alibaba’s (NASDAQ:BABA) multi-pronged revenue strategy powered yet another stunning financial result in its recently concluded fiscal second quarter, with torrid revenue growth of 61% to $8.29 billion. That was a half-billion dollars better than consensus estimates of $7.78 billion.

Profits also blew past Zacks Investment Research consensus estimates of $0.84 per share, coming in at $1.02 per share, a 21% upside surprise. That follows a 29% positive surprise in the company’s first quarter.

In trading on Thursday the stock dipped by as much as 1.5% as investors locked in gains, but it had climbed back by late in the session to nearly unchanged for the day. The stock has been on a spectacular run this year, up 110% year-to-date, compared to 15% for the S&P.

Consistent stock market gains have propelled the company into the ranks of the world’s most valuable companies, with a nearly half-trillion dollar market capitalization. If it continues its current trajectory it will overtake Apple—currently valued at an $892 billion market cap—to become the world’s most valued company as soon as 2018.

Like its American counterpart—and increasingly its international rival—Amazon (NASDAQ:AMZN), Alibaba has expanded from its core online retail business into movies and digital entertainment, cloud services, and even physical retail. Unlike Amazon, however, the Chinese giant has been a reliable profit machine. Its $2.66 billion in quarterly profits dwarfed the $256 million in profits and $0.54 per-share earnings it announced last week for its last fiscal quarter.

After its core e-commerce business and its rapidly growing cloud services offerings, movies and mobile entertainment account for a large and high-growth share of Alibaba’s overall revenue pie. The company owns the prominent Youku-Tudou OTT movie and TV service, and it has also established robust domestic Chinese and U.S. movie production divisions.

On Thursday I spoke at the American Film Market in Santa Monica, California, with Alibaba’s senior movie executives, who told me that while their China-based colleagues are focused on local-language content for domestic consumption, the U.S. office, which is based in Pasadena, pursues more internationally-focused English-language co-productions.

Alibaba doesn’t currently offer a bundled shipping and movies loyalty program like Amazon Prime, which offers subscribers unlimited 2-day or faster shipping on goods purchased on its sites, together with digital streaming and movies, for $99 per year.

“We don’t want to simply copy the Prime model from Amazon to China,” Alibaba Chief Executive Daniel Zhang said. “I think in China, we can generate our own model. And the purpose of this loyalty customer program is to enhance the stickiness of the loyalty customers and also give people a very clear roadmap on how to be loyalty customers and so that we have more and more people to be with us.”

In late 2016 Alibaba announced that it would invest $7.2 billion in film and TV production from 2017 through 2019. It has backed such Hollywood productions as Mission Impossible: Rogue Nation, and is a co-financing partner in Steven Spielberg’s Amblin’ Partners.