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Alibaba Quarterly Profits Double to $2 Billion Despite Entertainment Losses

Chinese e-commerce giant Alibaba saw revenues increase by 56% to $7.4 billion in the three months to June, the company reported Thursday. Net income was up by 96% to $2.07 billion.

Alibaba’s digital media and entertainment division – now considered a core business area – had revenues of RMB4.08 billion ($600 million), but remained heavily loss-making. Net losses in the period were reported as RMB1.75 billion ($257 million), compared with RMB996 million ($146 million) in the comparable quarter in 2016.

The group portrayed the quarter as a period of continued investment in the division. “The management focus of our digital media and entertainment segment was on broadening our access to quality content, developing [streaming video platform] Youku Tudou’s subscription-based business, and expanding the products and services of [mobile browser] UCWeb,” the group said in a statement.

It said that its strategy of acquiring and developing licensed and original content yielded hit drama and variety shows during the quarter and that daily average subscribers of Youku video had more than doubled compared with a year ago. However, market reports now put Youku in third place behind streaming rivals iQIYI and Tencent Video.

“We believe a strong pipeline of content, especially with a focus on original content with visibility of content availability and broadcast timing flexibility, will bring us sustainable long-term advantages in video entertainment,” it said.

Alibaba shares are traded on the New York Stock Exchange and have climbed 29% in the past three months as the group has participated in the wider tech rally. They closed at $159.50 on Wednesday. Following publication of the quarterly results, the shares were up a further 5% to $167.60 in pre-market trading Thursday.

Management delivered a strongly bullish message about ongoing prospects. “Alibaba had a strong start to fiscal 2018, reflecting the strength and diversity of our businesses and the value we bring to customers on our platforms. Our technology is driving significant growth across our business and strengthening our position beyond core commerce,” said CEO Daniel Zhang.

The results reflect the ongoing strength of consumption by Chinese consumers – about 529 million mobile users were active on a monthly basis – and the popularity of e-commerce and doing business online. Major international brands including Moet Hennessy, Victoria’s Secret and Abercrombie & Fitch all used Alibaba’s T-Mall to build online platforms in China. The results include barely a month of the Intime brick-and-mortar department store chain in which Alibaba bought a controlling stake in May.

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