Revenue from its core commerce businesses rise 63% for Chinese online retail giant Alibaba in the third quarter, while profits surge 146% to $2.6 billion.

Comparing Inc. and China’s Alibaba Group Holding Ltd. is a bit like comparing a battleship to an aircraft carrier: They’re both big, powerful and on the move.

Alibaba’s earnings for its second fiscal quarter ended Sept. 30 released today make clear that the Chinese company is growing its dominance in its own sphere, mainly China and Southeast Asia, as inexorably as Amazon is in most of the rest of the world.

The company’s core commerce operations, mainly its Taobao and Tmall online marketplaces in China, registered 63.0% growth to $6.983 billion. The commerce segment represents 84% of Alibaba’s total revenue, which grew in the quarter 60.7% to $8.285 billion. Overall revenue growth was the fastest since Alibaba’s blockbuster $25 billion initial stock offering in 2014.

Amazon reported much higher revenue in its third quarter ended Sept. 30—$43.74 billion, up 33.7%. But that’s because about half of the items purchased on Amazon’s e-commerce sites are goods that Amazon owns, and thus include the purchase price of the item itself. Alibaba does not own any of the merchandise that other companies sell on its site and mainly make revenue in its commerce segment from marketing and fulfillment fees charged to merchants and commissions.

In that respect, Alibaba is more comparable to eBay Inc. than Amazon (which does collect commissions and other fees from the merchants whose sales account for about half of items sold on Amazon sites.) And, like eBay, Alibaba has consistently been profitable, which has not always been the case for Amazon.


In the quarter ended Sept. 30, Alibaba reported net income of $2.616 billion, an increase of 146% from the same period a year earlier. By comparison, Amazon reported Q3 net income of $256 million, an increase of 1.2% from the year-earlier period. EBay’s net income in Q3 increased 23.6% to $523 million.

Alibaba’s stock market value has roughly doubled this year to $470 billion, buoyed by strong spending by Chinese consumers. Amazon’s market value is at $524 billion and eBay’s is $39 billion.

Besides registering strong growth in China, Alibaba also booked an increase of 115% in international e-commerce revenue to $2.878 billion in the Sept. 30 quarter. That mainly comes from Alibaba’s 83% stake in Lazada, the dominant online marketplace operator in Southeast Asia. That international segment also includes revenue from AliExpress, an e-commerce site that enables Chinese companies to sell to consumers around the world.


Revenue grew more modestly, by 9.6%, to $248 million in the quarter for Alibaba’s international wholesale e-commerce segment, mainly, a web marketplace where mainly Chinese and other Asian manufacturers sell to retailers and wholesalers in other countries.

Wholesale revenue grew more quickly within China, where Alibaba’s processes transactions between international as well as Chinese suppliers and buyers in China. Revenue from increased 19%, to $258 million. One U.S. manufacturer selling through is Michelman Inc., a maker of materials used in industrial inks and coatings of metal and wood.

With a corporate bank account flush with profits, Alibaba’s billionaire chairman Jack Ma is now pushing deeper into shaking up China’s 4 trillion yuan ($610 billion) old-school retail sector. Alibaba is enlisting half a million mom-and-pop shops as part of a drive to woo customers both online and in-store as it opens its wallet to boost services to merchants on its platform. That’s on top of an avowed $30 billion spending plan for everything from artificial intelligence and cloud computing to logistics.

“They have multiple drivers of growth though, namely core e-commerce, impressive international expansion and cloud business,” says James Cordwell, a London-based analyst at Atlantic Equities LLP. “It will become more difficult for Alibaba to sustain this kind of growth, which is dependent on a Chinese economy that has been very strong.”


Cloud computing revenue doubled in the September quarter, cementing its place as one of Alibaba’s fastest-growing businesses, in direct competition with Amazon and Tencent Holdings Ltd. But in the long run, it’s staking the future on its bread-and-butter operation of catering to consumers.

Alibaba’s “new retail” plan carries a simple premise—to combine its online merchants with a vast swathe of physical stores now divorced from the internet, stripping out layers of profit-sipping middlemen and boosting Alibaba’s e-commerce in the process. Those outlets double as storage and delivery centers.

But the execution involves a battery of expensive and time-consuming investments: buying into department stores such as Intime, setting up “smart” grocery stores like Hema, investing $15 billion into expanding its delivery network into remote regions, and enlisting some half-a-million mom-and-pop stores that now serve the countryside.

Alibaba also acquired a 20% stake in 2015 in Chinese consumer electronics retailer Suning Commerce Group Co. Ltd., and the two companies have collaborated in logistics and in enabling consumers to see products in Suning’s 3,700 stores and then order them from Alibaba sites. Suning, No. 2 In Internet Retailer’s Asia 500 ranking of the region’s leading online retailers, reported today that generated operating revenue of 131.88 billion yuan ($19.95 billion) in the first nine months of the year, an increase of 27% from the same period a year ago.


Alibaba is trying to transform the way retailers large and small manage their inventory based on real-time demand. And drawing more physical customers into its network boosts its own online orders and provides abundant data to target future consumers.

Early results are promising. chief financial officer Maggie Wu said revenue from new retail—mainly Hema and Intime for now—more than quintupled in the September quarter. Efforts to integrate Cainiao, the loss-making logistics arm that it acquired, are proceeding apace. That gave Alibaba the confidence to predict a 49 to 53 percent rise in revenue in the current fiscal year, from 45 to 49 percent previously.

“We are seeing the early results from our efforts to integrate online and offline with our New Retail strategy,” CEO Daniel Zhang said in a statement. He said the company plans to franchise the Hema model that combines a supermarket, restaurant and fulfillment center in a single location on its technology platform.

A big test of Alibaba’s nascent offline store network will come next week, when it holds its annual Singles’ Day promotion, the biggest shopping event on the calendar. Last year, transactions on its platforms reached 120.7 billion yuan, dwarfing U.S. promotions Black Friday and Cyber Monday. This year, 100,000 physical stores will also take part.


Ultimately, the idea is to sustain growth—no small feat for a $470 billion company. Sales for the September quarter rose 61 percent to 55.1 billion yuan ($8.3 billion), surpassing the 52 billion-yuan projected by analysts. Adjusted earnings-per-share were 8.57 yuan compared with the 6.90 yuan average of estimates.

Core commerce, which remains by far the largest slice of Alibaba’s business, surged 63 percent to 46.5 billion yuan, buoyed by 488 million active consumers on its Chinese retail marketplaces. A lot of that growth stemmed from spending via smartphones, as mobile monthly active users reached 549 million. (Mobile monthly users counts the number of mobile devices that access Alibaba’s websites, which is why it can be larger than the number of consumers shopping there.)

“Alibaba is doing really well in advertisement monetization, in that sense it’s more like a media company than an e-commerce company,” Steven Zhu, a Shanghai-based analyst at consultancy Pacific Epoch, said before the release. “The company’s ability to make money from its mobile app has improved significantly.”