Alibaba Increases Forecast for Sales Following Strong Results

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Alibaba Group Holdings raised its overall outlook for revenue growth for the full year after posting sales that beat Wall Street estimates boosted by advertisers who invested more to lure in shoppers.

The biggest e-commerce business in China is now estimating a rise for its revenue of between 49% and 53% for its ongoing fiscal year, following its acquisition of Cainiao its logistics arm.

It posted a rise of 61% for sales to just over 55.1 billion yuan or $8.3 billion for the three-month period ending September. Analysts were expecting 52 billion yuan.

Shares of Alibaba were up 4.2% in trading before the opening bell on Thursday.

The giant in e-commerce has spent money to attract shoppers and to improve its marketing services for its merchants while laying out billions to find new sectors for growth.

It is shaking up department stores and supermarkets while investing in cloud computing and artificial intelligence, areas that are directly in competition with e-commerce giant Amazon.com.

One analyst based in Shanghai said that Alibaba has done extremely well in advertisement monetization as it is more like a full-fledged media company than it is an e-commerce business. The company added the analyst has increased its ability to earn money from its mobile app significantly.

Revenue from its core commerce, which is still by far its largest business, surged by 63% to over 46.5 billion yuan, boosted by active consumers that reached 488 million on its retail marketplaces in China. A lot of the growth came from spending on mobile devices, as active monthly mobile users topped 549 million.

Alibaba is building on the still growing user base through devising a number of expensive forays into brick and mortar retail part of Jack Ma’s ambitious revamp of the sector of $4 trillion.

His visions were echoed by Jeff Bezos of Amazon when he acquired Whole Foods Market. Alibaba is attempting to transform how retailers monitor their inventories based upon demand in real-time to make a number of layers of middleman redundant.

The effort however required very efficient logistics and Alibaba took over control of Cainiao a delivery business two months ago and has pledged to spend over $15 billion during the next five years on growing and improving its delivery network that covers over 2 million people in over 600 cities.

However, by taking over the unprofitable unit, Alibaba’s earnings could be eaten into by Cainiao over the coming quarters.

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