Alibaba Group Holding Ltd (NYSE: BABA) reported its fourth quarter financial results, but missed earnings estimates. Alibaba shares opened up weaker on Thursday, trading 8 percent lower.
For the fourth quarter, Alibaba reported revenue of RMB83,028 million ($12.76 billion), increasing 56 percent year over year, and beating analysts’ estimates of $12.3 billion. Alibaba reported an adjusted EPS of RMB10.61 ($1.63), increasing 18 percent year over year, but falling short of analysts’ estimates of $1.67.
Alibaba’s segments showed significant growth year over year. Revenue from core commerce increased 57 percent year over year, cloud computing increased 104 percent, and digital media and entertainment increased 33 percent.
Alibaba’s China retail marketplaces reported 515 million annual active consumers for the full year, increasing 16 percent to the prior year. Older consumers have been reported to spend more time and place more orders on the marketplace. Mobile monthly active users reached 580 million at the end of the fourth quarter, an increase of 31 million users to the previous quarter.
“Alibaba had another great quarter driven by the continued strength of the Chinese consumer and the wide and innovative range of services we provide for merchants and consumers,” said Daniel Zhang, Chief Executive Officer of Alibaba Group.
Alibaba also agreed to a 33 percent equity stake with Ant Financial. The company believes the stake will strategic benefits, including its New Retail strategy with mobile payments. The stake will increase user acquisition as Ant may work hand in hand with Alipay digital wallet.
The Chinese tech giant has now adjusted its full year guidance for 2018. The company has upgraded its revenue guidance to 55 percent to 56 percent from the previous 49 percent to 53 percent.
But the biggest problem for Alibaba is that analysts are saying its consumer growth rate is beginning to slow down. Now, Alibaba is beginning to look into acquisitions so it can compete against other major Chinese tech companies such as Tencent Holdings Ltd., JD.com and Baidu.
Previously, Ant’s takeover attempt of MoneyGram failed when the U.S. government had stepped in and ended the agreement. The takeover attempt would have bolstered Ant’s payment solutions, allowing it to compete against companies like Tencent’s WeChat pay.
Core commerce still makes up almost all of Alibaba’s revenue, but as it slows down, the company will begin to invest more into other segments like cloud computing. With the strong growth rate, the smaller fraction segments could become even bigger in the future.