Alibaba earnings show its more than just an online bargain hunter's paradise

Alibaba has released its quarterly earnings for the period ending December 31, showing the company is more than just an eCommerce giant.

Revenues for the quarter were reported at roughly $7.76 billion, a 54% year-on-year increase, with the core eCommerce business accounting for around 87%, though there were also strong gains in the cloud computing unit and digital entertainment.

Like Amazon, Alibaba has risen to dominance in the eCommerce arena before using its substantial digital capacity and reputation to move into new areas. The cloud computing business saw a 115% year-on-year boost to $254 million taking the total number of customers to 765,000, while digital entertainment grew 273% to $585 million. Alibaba may still be considerably reliant on the core business unit, though the cloud and digital entertainment units are contributing more than chump change.

“We reported another excellent quarter, with robust revenue growth of 54%. With three quarters of the year coming in ahead of expectations, we are adjusting up our 2017 fiscal year revenue guidance from 48% to 53% year-over-year growth,” said Maggie Wu, Chief Financial Officer of Alibaba Group.

“This quarter we generated US$4.9 billion in free cash flow on a non-GAAP basis, enabling us to continue investing in growth areas globally, including cloud computing, digital media and entertainment and innovation initiatives, as well as core commerce.”

The success of the cloud business may attract the attention from other tech businesses around the world just as cloud computing begins to penetrate the mass market. The introduction of another technology powerhouse into a cloud race which is already seeing AWS, Google Cloud, Microsoft Azure and IBM Softlayer pull away from the chasing pack should be worrying the also-rans. They are finding life tough enough as it is.

In truth, the transition through to cloud computing on mass scale should see plenty of business to share around, even if the also-rans are only getting the scraps; there is enough money in circulation to make a respectable profit margin even if they aren’t changing the world. However, China still remains one of the most lucrative markets worldwide. Sustained success and dominance from Alibaba will make it tough for international players to reap the rewards hidden behind the Great Wall.

The quarter also saw the team open up a number of new assets internationally, with new data centres in Germany, the Middle East, Japan and Australia. If a Chinese powerhouse is no longer satisfied with the potential of its domestic market, this should also be a worrying sign for the rest of the world. The German data centre in particular is an interesting one, as it is widely recognised as the technology leader in Europe. Should Alibaba Cloud be able to gain a foothold in this important market, it would act as a fantastic springboard for the rest of Europe.

While the cloud and digital entertainment businesses do seem to be progressing well, it’ll be a while before Alibaba can count them in the big leagues. That said, the rest of the industry will do well to keep a wary eye on developments here.