China’s largest e-commerce player Alibaba Group Holding Ltd has shown a huge rise in the first-quarter revenue estimates which is majorly due to the growth in its core e-commerce business. However, the company has stated that the investments in the food delivery business are increasing and might overpower the profits.
The revenue of the company increased 61 percent to 80.9 billion yuan ($11.77 billion) in the April-June period, as compared to the average estimate of 80.7 billion yuan in the previous quarter.
Though the overall revenue rose, the net income attributable to shareholders decreased 41 percent to 8.7 billion yuan or 3.3 yuan per share. Alibaba’s U.S.-listed shares rose about 3 percent in premarket trade.
The sales at the company’s core e-commerce business increased 61 percent to 69.2 billion yuan, as compared with a 58 percent increase in the same quarter a year earlier. The cloud computing business revenue increased highly to 4.7 billion yuan, and on the other hand, the entertainment unit revenue increased 46.4 percent to 6 billion yuan.
Alibaba has also formed a holding company for online food delivery service Ele.me and e-commerce platform Koubei.
With an increase in the revenue, the investments have also increased which are paving less way for the profit margins. Moving further, the executives claimed that the profits would continue to be affected by investments in new businesses, somewhat due to the consolidation of Koubei and expenses related to its newly-created local services unit.
“This investment into the local services area, combined with the consolidation of Koubei … will result in slower overall gross profit in near term,” said Alibaba chief financial officer Maggie Wu.
The local services business is one of the various large investments the company has made in recent months. Alibaba also invested in sports content, microchips, facial recognition technology and mobile payments in India.