Alibaba's Better-Than-Expected Q2 Results Indicate Strong Consumer Confidence
COVID-19 and China
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E-commerce giant Alibaba Group Holding Limited (BABA:NYSE) announced its financial results for the quarter ended June 30, 2019.

The revenue stood at CNY 114.92 billion (USD 16.74 billion), an increase of 42% year on year, beating naysayers’ expectations of dwindling sales due to China’s slowing economy and the US-China trade war.  Net income amounted to CNY 19.12 billion (USD 2.79 billion), up 150% compared to the same quarter of 2018.

With a revenue growth of 42%, Hangzhou-based Alibaba topped other e-commerce platforms that have released their quarterly results. Ranking second to fourth were, NetEase and Vipshop, which posted an increase of 22.9%, 20.2% and 9.7% in revenue respectively.

Alibaba's retail marketplace in China added 20 million annual active consumers to reach 674 million in this quarter, with over 70% of the new users from less developed areas. Taobao, especially its sub-sector Juhuasuan (聚划算) that offers "flash sales" targeting Pinduoduo, has further penetrated the rural market. Its mobile MAU reached 755 million, gaining 34 million more users over March 2019.

Ant Financial, the fintech arm of Alibaba, has made an outstanding contribution. Royalty fees and software technology service fees amounted to CNY 1,627 million (USD 237 million) in the second quarter of this year, compared to CNY 910 million in the same quarter last year.

The profit-sharing arrangement agreed between Ant Financial and Alibaba Group demands that the fintech firm hand over 37.5% of its revenue to the parent company. This translated into yet another CNY 4.44 billion in profit that boosted Alibaba’s coffers.

Ant Financial posted losses in 2016 and 2018 when the company implemented many costly customer acquisition promotions amid its competition with Tencent.

Observers believe that as Alipay and WeChat Pay cease to offer subsidies to attract new users, the cost savings have contributed to a surge in Ant Financial's profits in the second quarter.

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