Profit Alibaba suffers from turnover rise

The Chinese Alibaba Group has achieved a 61 % turnover increase to 80.9 billion yuan (10 billion euro) in the latest quarter. One-off costs sent the net profit 45 % lower to 7.7 billion yuan (a billion euro), however.

Expansion and bonus keep margins low

As turnover rose to 80.92 billion yuan, it caused net profit to go down by 45 % due to a one-off bonus for employees. Without the bonus, profit would have gone up by 33 %. A large part of its growth came courtesy of the popularity of its Taobao app and the continuing investments in both physical stores and online. 

Alibaba’s aggressive expansion strategy however puts pressure on the operational margin, going down from 35 % last year and 15 % last quarter to a mere 10 % now. As Alibaba put it in the financial results statement: “As many of our newly developed and acquired businesses have different cost structures, we expect that our margin will continue to be negatively impacted by these businesses and the accounting treatment of revenue recorded on a gross basis.”