Amazon is once again the world’s most valuable e-commerce company, a position it previously had lost to Alibaba last fall after its competitor held a record-breaking IPO.
Today, Alibaba is trading almost 6 percent lower after the Chinese tech conglomerate reported mixed second-quarter results early this morning. The company’s shares are trading at $72.75 apiece, which is still 4.5 percent above its IPO price of $68, but is below its peak of $120. Overall, the company is valued at $183 billion in comparison to Amazon, which is now worth $245 billion following a sustained rally recently.
In the quarter ended June 30, Alibaba said revenue increased 28 percent to 20.25 million Chinese yuan ($3.27 billion), from 15.77 billion Chinese yuan a year ago. That missed analyst expectations of $3.32 billion. Net income rose to 12.34 million Chinese yuan, or 11.92 yuan ($1.92) per share. Excluding one-time items, net income was 59 cents per share, to beat expectations of 56 cents per share, according to FactSet. [Alibaba’s full press release here.]
“We had a strong quarter and we continued to build the foundations for future growth,” said Daniel Zhang, Chief Executive Officer of Alibaba Group. “We are excited about our top strategic priorities, including internationalization, winning in mobile, expanding our ecosystem from cities to villages, and investing in core technologies that will propel our cloud computing business.”
The lower annual growth was due mostly to the suspension of its online lottery business in February and a decrease in revenue from business loans. Excluding those two factors, year-over-year growth would have totaled 36 percent, the company said.
In recent months, the company’s founder Jack Ma handed over the top seat to Zhang and said it was were cutting back on spending by instituting a hiring freeze. At the same time, Ma has been actively soliciting U.S.-based brands and retailers looking to enter the Chinese market.
Separately today, Alibaba announced an agreement with Macy’s to allow the retailer to launch an exclusive online flagship store on its Tmall Global site to bring goods from Macy’s to hundreds of millions of Chinese consumers. The deal was inked through a joint venture between Macy’s and Hong Kong-based Fung Retailing Limited, a leading retailer in Greater China.
In some ways, Amazon and Alibaba are much different. For instance, Alibaba only operates as a marketplace, where other companies sell products to its large base of Chinese customers. In the U.S., Amazon is also a retailer that also ships inventory directly from its own warehouses.
But just last month, Alibaba said it plans to invest $1 billion into its cloud computing arm, called Aliyun, to challenge other cloud players like Amazon, Microsoft, Google and IBM. To be sure, the cloud business is one of Alibaba’s fastest growing sectors. During the quarter, cloud revenues increased 106 percent year over year to $78 million.
Some of of the pressure being put on Alibaba today may not necessarily have to do with the health of the company’s core business, but China’s economic climate, which is seeing slower consumer spending and currency fluctuations.
In a phone call with analysts this morning, Zhang addressed those concerns, saying “We will continue to closely monitor the change of micro-economy and consumer behaviors, but we are confident to grow our business in a long-term.”
For now, it seems like investors are actually choosing to invest in Amazon again after a flood of shareholders jumped to Alibaba for its public debut. According to data compiled by Bloomberg, JPMorgan Chase & Co., Wellington Management Group and TIAA-CREF Investment Management all reduced their share holdings in Alibaba by an average of 42 percent in the past three quarters, while increasing their holdings in Amazon by 65 percent.
In this time, Amazon has also changed its perception somewhat from being an unprofitable company that is willing to invest its last cent into new categories to a company that can turning a profit. It also started breaking out its financials for its cloud division, which is on track to become a $5 billion business annually.