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Alibaba Surges in Second Quarter, Carries Expanded Entertainment Loss

Chinese online giant Alibaba reported a 61% surge in revenues in the three months to September and a 71% increase in net income. Driven by growth in its core e-commerce business and by a doubling of its cloud-computing operations, the group was easily able to contain the expanded losses it recorded in its digital entertainment unit.

For the July to September period, the second quarter of its financial year, revenues hit $8.28 billion. Net income was up 146% to $2.62 billion, and up 71% to $3 billion on a non-GAAP basis.

The company said that the figures were the early result of increased integration between online and offline activities. It claimed 488 million monthly active users of its online marketplaces, an increase of 22%. It also said that massive cash flow “enables us to invest in our future growth areas of core commerce, including logistics, cloud computing, digital entertainment and other innovation initiatives.”

Digital entertainment – which spans streaming giant Youku Tudou, as well as separately listed Alibaba Pictures – saw revenues increase by a third to $721 million.

Losses in the division reached $575 million (RMB3.83 billion), up from $340 million (RMB2.25 billion) in the equivalent three months last year. Youku Tudou, which is trying to convert users from a predominantly ad-supported model to a subscription basis, said that video subs increased by 180%.

“During the quarter, we successfully executed our strategy of acquiring and developing a mixture of licensed and original content that resulted in greater consumer mind share in both the drama and variety show categories. We believe a strong content pipeline, especially with a focus on original content, offering greater flexibility around availability and distribution, will bring us sustainable long-term advantages in video entertainment,” it said in a statement.

The group revealed that it had $24 billion of free cash in its vault at the end of the quarter. For the full year Alibaba increase its revenue guidance to a 49% to 53% range.

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