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Alibaba is squeezing more money from online shopping than expected

Chinese e-commerce company Alibaba Group Holding Limited reported third quarter sales and earnings on Tuesday that easily topped Wall Street’s forecasts.The company wrung out higher-than-expected revenue growth of 32 percent year-on-year, even as gross merchandise volume (GMV), the total value of goods transacted across its platforms, sank to its slowest annual growth rate in more than three years.  The company is squeezing more money from online shopping than expected, beating analyst forecasts for revenue growth and putting its shares on track for their biggest daily rise since the firm’s blockbuster flotation.

The strong results for the three months through September, announced on Tuesday, partly reflected healthy growth in shopping on mobile phones. “Mobile is the trend and Alibaba is capturing that trend,” said T.H. Capital Research analyst Tian Hou.

Alibaba is trying to replace decelerating volume growth in online shopping with new kinds of online buying, mirrored in its latest investments. During the quarter, Alibaba for instance invested $4.6 billion in Suning Commerce Group Co Ltd (002024.SZ).

It also offered $3.5 billion to become sole owner of Youku Tudou Inc (YOKU.N), known as China’s YouTube. Online video users in the country are beginning to cough up money for high-quality online streaming services.

But the majority of Alibaba’s revenue still come from China’s online shoppers buying from domestic businesses, a business driven by growth in GMV.

For the latest quarter, growth came mostly from Tmall, an Amazon-like website allowing business to sell to customers, where GMV rose 56 percent. Gains at Taobao, more akin to eBay and by far the company’s biggest contributor to GMV, showed signs of slowing at just 15 percent.

That prompted analysts to ask Alibaba executives if focus was shifting from Taobao, yet executives gave little away on that point.

Alibaba’s revenue rose to $3.49 billion in the three months ended Sept. 30, beating the average analyst estimate of $3.44 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to shareholders reached $3.58 billion, or $1.40 per share. Excluding items, Alibaba earned 57 cents per share, beating the average estimate of 54 cents.

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