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Alibaba and Tencent announce revenue growth in Q1 despite China's slowing economy

Consumers are also spending more time on Alibaba and Tencent platforms.

Chinese e-commerce and tech giants Alibaba and Tencent both announced their financial results yesterday (May 16) for the quarter and fiscal year ended March 31, 2019, with both companies posting positive growth and an increase in users.

This is despite ongoing China and US trade war and the country's technology sector slowing down as uncertainty around the country’s economy deepens.

Alibaba, China's most valuable brand, saw its revenue for the quarter increased 51% year-on-year to reach RMB 93.5 billion (US$13.9bn) due to annual active consumers on its platforms like Taobao, reaching 654 million, which is an increase of 18m.

Consumers are also spending more on Alibaba’s platform as its mobile monthly users, which the company uses to measure shoppers, reached 721 million in March, which is an increase of 22 million in three months and 104 million over 2018. Its annual active users were also up by 18% to 654 million.

This is in line with figures from the National Bureau of Statistics of China's findings on online sales, which represented nearly 23% of overall retail sales and totaled RMB $333bn in the first quarter of 2019, a sign the country’s economic downturn is not yet impacting consumer spending.

Daniel Zhang, the chief executive officer of Alibaba, pointed the positive results to improved conversion rates because of the company’s new app interface featuring more recommendations and video content, an increase in retailer product launches and general shopper growth, according to TechCrunch.

“More and more, Alibaba is becoming synonymous with everyday consumption in China, growing our base to 654 million annual active consumers and extending our penetration in less-developed cities,” said Zhang.

“Our cloud and data technology and tremendous traction in New Retail have enabled us to continuously transform the way businesses operate in China and other emerging markets, which will contribute to our long-term growth.”

Outside of China, its businesses like Singapore-based Lazada and AliExpress gained a combined 120 million annual active consumers.

Alibaba said it strengthened Lazada’s third-party marketplace business, management team and technology infrastructure and at the same time, reduced Lazada’s exposure to direct product sales of low-margin categories, such as electronics.

This saw Lazada’s revenue decreased by 4% in the quarter ended March 31. Overall, revenue from Alibaba’s international commerce retail business in the quarter was RMB 4,944 million (US$737 million), an increase of 25% compared to the same quarter of 2018.

Meanwhile, Tencent posted a net profit of RMB 27.2bn (US$3.9bn) in the quarter ended March 31, up from RMB 23.3bn in the same period last year. Its revenue increased by 16% to 85.5bn, compared with RMB 73.5bn in the same period in 2018.

It had previously announced that it feared a decline in profits for the final quarter of 2018, mostly due to the Chinese government cracking down on new game approvals which hit the tech giant’s gaming business.

The growth was largely driven by payment and other financial technology services as well as advertising and digital content services like music and streaming video, according to the company.

Online advertising contributed 16% to the growth, with RMB 13.4bn in revenue because of WeChat Moments, Mini Programs and QQ’s entertainment news feed Kan Dian.

“We sustained healthy user engagement across our key platforms, with notable growth in the number of short videos uploaded and shared by users on QQ and Weixin (WeChat),” said Tencent chairman and chief executive Pony Ma Huateng in a statement.

“Our payment, other fintech services and cloud business, while still at an early stage of expansion, are now generating substantial revenues. We believe that we are building solid foundations for future growth in both the consumer and industrial internet domains.”

The Chinese government crackdown on games has had an impact on Tencent’s overall video games business, which accounts for a third of its total revenue. The revenue for its gaming business slipped 1% year on year to RMB 28.5bn in the first quarter.

It also reported a 3% decline in mobile games revenue to RMB 21.2bn because of fewer new titles released, while personal computer games recorded RMB 13.8bn in revenue, down 2%.

Alibaba and Tencent's rival reported a 21% increase in net revenues, marking its slowest Q1 growth on record, two days earlier.

Its revenues hit RMB 121.1bn (US$18bn), narrowly beating analyst expectations, and net income was RMB 7.3bn (US$1.1bn), a significant year-on-year increase from RMB 1.5 bn in the first quarter of 2018.

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