Analysts to watch Alibaba's cloud computing, mobile results

Updated: 2016-11-02 13:40


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Chinese e-commerce giant Alibaba Group Holding LTD reports fiscal second-quarter earnings on Wednesday, and analysts will be looking for further signs of growth in the company's cloud computing division and its ability increase profit from mobile users.

The Hangzhou, China, company will release results for the period ended Sept 30 and analysts surveyed by S&P Capital IQ are looking for earnings of about $1.04 billion. That would be down from the $3.57 billion in the year-ago period in which results were aided by a one-time gain of $2.93 billion from the revaluation of a stake in Alibaba Health Information Technology.

Analysts are forecasting revenue of about $5.1 billion, up sharply from $3.49 billion a year ago according to S&P Capital.

"We expect continued strength in the core commerce and cloud businesses to drive top-line growth and narrowing losses in the digital media business to partially offset some margincontraction from ongoing investments," analysts at Stifel, Nicolaus & Company, Inc wrote in a research note.

Investors will be closely examining results from the company's cloud computing unit (AliCloud), which has grown to more than 500,000 users, according to The Wall Street Journal. The company has been pursuing international cloud expansion by opening new data centers in Asia, the US and elsewhere.

"We expectcontinued momentum in cloud revenue growth of 120 percent y/y (year-over-year) against difficultcompares,' said the Stifel analysts. They are forecasting cloud revenue of $215 million in the quarter, up from $98 million in the 2015 period and $187 million in the first quarter.

In the August quarter, Alibaba's monetization rate, a measure of how much it makes from sales on its platforms, was 2.79 percent, up from 2.33 percent a year earlier.

Alibaba's results have been buoyed by progress in making money off transactions on cellphones and other mobile devices. Mobile monthly active users rose from 410 million in March to 427 million in June – or about 100 million more mobile users than the population of the US.

Alibaba and its rivals like are gearing up for Singles Day on Nov 11, a major annual shopping spree in China. Last year Alibaba topped its own record for sales on Singles Day with 91.2 billion yuan ($14.3 billion), a 60 percent rise from 2014.

The company is also in the process of expanding its online payment capabilities globally. Recently Alipay, the mobile payment service of Ant Financial Services, an Alibaba spin-off, struck agreements with VeriFone Holdings and credit-card processor First Data Corp in the US.

Alipay has also been expanding into Australia, Germany and Thailand as well to build up a global network of retailers that accept its payment services. Although Alipay is targeting the rising number of Chinese tourists that are traveling overseas, the Wall Street Journal reports that the company could be establishing a strategy to eventually challenge US-based credit-card giants MasterCard Inc and Visa Inc.