Shares of Chinese tech giant Alibaba (NYSE:BABA) were climbing in pre-market trading Wednesday morning after the company turned in solid fourth-quarter results.
Revenue jumped 51% to $13.9 billion in the quarter, topping estimates of $13.3 billion, as active customers reached 654 million, rising 18 million from the previous quarter and 102 million from the same period a year ago. Alibaba’s core commerce business, made up of e-commerce businesses including Taobao marketplace and Tmall, remained the main driver of its growth. Core commerce revenue increased 54% to $11.8 billion in the period as the company continues to expand into less developed cities and acquire new customers.
Meanwhile, Alibaba Cloud has emerged as a source of strength as revenue from the cloud computing segment jumped 76% to $1.15 billion, primarily due to an increase in average spending per customer. Alibaba Cloud is the largest cloud provider in the Asia-Pacific region based on market share, according to IT research firm Gartner.
“Our cloud and data technology and tremendous traction in New Retail have enabled us to continuously transform the way businesses operate in China and other emerging markets, which will contribute to our long-term growth,” CEO Daniel Zheng said.
Operating income actually fell 5% in the period. This was attributed to a $250 million lawsuit settlement in the United States, spending to consolidate Ele.me (the online food delivery platform that the company acquired a year ago), and increased inventory and logistics costs at its New Retail and direct sales businesses. Offsetting that operating income drop was investment income of $2.8 billion in the quarter from the business’ equity investments and its stake Alibaba Pictures. As a result, adjusted earnings per share increased 50% to $1.28, ahead of expectations at $0.93.
Management didn’t sound bothered by the U.S.-China trade war, which recently escalated. The company’s guidance called for revenue to grow 32.7% to 500 billion RMB, or $74.5 billion, in its fiscal 2020, the current fiscal year.
Joseph Tsai, Alibaba’s executive vice chairman, directly addressed concerns about the trade war on the earnings call, and said that Alibaba was on the right side of trade talks. He said negotiations to correct the trade imbalance and crack down on intellectual property infringements will favor the e-commerce giant by playing to its strengths, which includes encouraging more imports from outside of China. Tsai also noted that the company was at the forefront of IP verification with its own technology used to catch counterfeits.
Alibaba shares were up 2.8% in pre-market trading as of 9:15 a.m. EDT. While the drop in operating income may be concerning, the tech giant’s focus on the long term and execution on top-line growth is encouraging, especially as it sees no significant headwinds from the trade war.
This article originally appeared in The Motley Fool.