Alibaba Holding Group (BABA) didn't disappoint.
The Chinese internet giant's fiscal second quarter, which ends in September, is typically more muted as it preps for the massive Singles' Day shopping event on Nov. 11, making the fiscal third quarter the one to watch.
Instead, Alibaba on Thursday blew past analysts' expectations for the second quarter and hiked its full-year revenue growth forecast to be between 49% and 53%, up from 45% to 49%. The outperforming quarter was driven by a continued surge in its largest business, core e-commerce; its ability to monetize its mainstay Taobao and Tmall marketplaces; and efforts to expand into new commerce areas, such as offline retail, groceries and luxury items. Revenue from Alibaba's cloud business grew 99% annually to $447 million, up from $224 million one year ago.
Shares of Alibaba opened at a record high on Thursday, but were down 1.1% to $183.94 by late morning. The stock has skyrocketed more than 115% so far this year vs. the S&P 500's gain of 15.1%.
Alibaba held a call with investors after reporting earnings, where it gave some color on the quarterly results. Here are the biggest takeaways:
1. Investments in mobile are paying off.
Alibaba has been plowing money into the mobile apps for Tmall and Taobao to improve the user experience, product personalization and ad targeting. Specifically, the company called out content-driven and community-driven improvements, such as real-time personalized product recommendations, subscription-based content and short-form videos, according to CEO Daniel Zhang.
As a result, mobile e-commerce is serving as a major catalyst in the company's juggernaut core commerce business, which continues to grow at a double digit rate each year. The company noted that mobile revenue per mobile user grew at a healthy clip during the quarter, alongside further growth in annual revenue per active consumer.
More users were added to the platforms during the second quarter. Mobile monthly active users increased by 20 million quarter-over-quarter to 549 million in the most recent period. Annual active consumers also grew 20 million sequentially to 488 million.
These investments have generated a growing and more engaged user base, a platform that can handle scale, customer loyalty and active customers that have made the Alibaba economy "more vibrant," said Joe Tsai, Alibaba's executive vice chairman.
"It is this franchise value that underpins the sustainability as well as the capacity for future value creation of our business," Tsai told investors on the call.
2. The 'New Retail' strategy is starting to pay dividends.
Alibaba clocked its first revenue gains from its "New Retail" initiatives, the strategy laid out by co-founder Jack Ma that aims to connect offline and online businesses (otherwise known as O2O). Other revenues, which includes New Retail initiatives, grew 180% year-on-year to 3.2 billion yuan ($484 million), up from 600 million yuan ($91 million) one year ago.
"You actually can see that starting from this quarter, the new retail started to have some contribution to our total revenue," said CFO Maggie Wu.
It's showing up in other ways, too. Alibaba's China retail segment, which falls under the core commerce business, grew 438% annually, helped by the consolidation of newly-acquired retail chains Intime and Hema. The acquisitions are just one part of Alibaba's aggressive expansion into brick-and-mortar retail -- investments where Wu said Alibaba is less concerned about profitability and more focused on rapid growth.
Much of these efforts have centered on modernizing and improving the in-store retail experience via investments in data technology. The company said it expects more than 1,000 brands to convert nearly 100,000 physical locations into "smart stores" blending an offline and online retail experience.
3. Alibaba is building a logistics network unlike Amazon's.
One big way Alibaba is supporting its new retail strategy is by building out its network of logistics and delivery services. The company doubled down on this effort in September when it paid roughly $808 million for a controlling stake in smart logistics company Cainaio.
Alibaba also pledged to invest $15 billion in Cainaio over the next five years, as it continues to expand into offline and online retail. Part of that investment will go toward developing smart warehouses and smart delivery solutions, some of which will show up in its hybrid retail locations that serve as part store, part delivery hub.
The company was quick to erase comparisons with Amazon's (AMZN) Prime shipping network, however.
"We don't want to think to copy the Prime model from Amazon to China," Tsai told investors on the call. "I think in China, we can generate our own model."
Zhang added that Alibaba "isn't interested" in building another logistics company; instead, it plans to work with many logistics companies in China and around the world.
This latest round of earnings may give CEO Jack Ma another reason to dance:
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