Alibaba profit sees a double-digit decline in Q3 as heavy business investment bites

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Alibaba profit saw a double-digit decline in Q3 as a result of strong investment in business growth.

The marketplace have seen a total revenue growth of ¥166.1bn (£18.67bn), compared to ¥105.3bn (£11.83bn) last year’s Q3 quarter ending on September 30, 2017. That’s up by 58% on the year-on-year (YoY) rate.

While Alibaba’s revenues saw a 200% revenue increase over the three years, their earnings per share (EPS), which shows how much profit the company is making for its shareholders, saw a drop in profitability. Their earnings per share of ¥10.93 (£1.23) saw a 12% drop on the YoY rate from ¥12.43 (£1.40) in Q3 2017.

Alibaba profit decline is down to financial strain put on by investments into their cloud computing segment, digital entertainment, expansion initiatives out their homeland in China, as reported originally by The Money Fool.

Cost management vs innovation

While Alibaba are focusing on juggling their two main priorities such as company growth and international expansion they’re evidently seeing that the two are taking the toll on their profitability. Over the month, Alibaba have been making headlines with its biggest selling Singles Day and expansion plans into Europe.

What’s interesting is that two years ago Alibaba have confirmed their plans to move beyond its base in China to establish themselves in Europe, when they announced to create a digital ‘Silk Road’ trade route between Asia and Europe. The plan was aimed at establishing an efficiency of international trading between China and Europe. More recently, the marketplace said to open a dedicated fulfilment centre in France and a logistics hub in Liège, Brussels. As it appears the expansion initiatives remain in its planning stages. But, will we see Alibaba merchants becoming more bigger in European markets soon? However, what’s evident is that the marketplace aren’t shying away from making bold announcements. Are they aimed at staying well-publicised against the competition or the marketplace simply struggles to make enough funds to manifest their plans?

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