Briefing

Alibaba reports strong quarterly earnings beating analyst estimates; Tencent and Baidu slump

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The Hangzhou-based firm’s revenues grew 42 per cent to 114.9 billion yuan ($21.8 billion), passing the average estimate of 111.6 billion yuan ($21.1 billion). Meanwhile, Baidu, China’s largest search-engine operator, posted its first quarterly net loss of 327 million yuan ($61.9 million) since going public in 2005. And, gaming and social giant Tencent’s market value lost $15.6 billion after missing analyst expectations on revenue, but beating them on earnings. Alibaba’s stock rose 3.04 per cent; Tencent and Baidu were down 2.82 per cent and 0.50 per cent, respectively, in late afternoon trading. (Bloomberg, South China Morning Post, CNBC)

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Talking point: Both Baidu and Tencent were negatively impacted by China’s macro environment as the trade war with the U.S. continues. They said falling advertising revenue, a result of the troubled economy, was responsible for their weaker-than-expected earnings. China’s ad market is projected to grow 22 per cent this year from 2018—down from 28 per cent growth between 2017 and 2018. But Alibaba doesn’t rely heavily on ad revenue; instead, its e-commerce business—including its mid-year online shopping festival in June on its subsidiaries, Taobao and Tmall—and personalized product-targeting have helped it grow its revenues, which are mainly domestic. Baidu, the smallest firm of the three by market cap, has also been facing increased competition in the search-engine space. Though it has a market share of over 70 per cent in China, rivals Alibaba and Tencent have created their own enclosed app ecosystems. That means users can get services like movie streaming and food delivery without needing to use a third-party search engine.