Alibaba vs Tencent: Which Came Out on Top After Latest Earnings?

Most investors will be familiar with the two Chinese tech giants that dominate all spheres of China’s economy; Alibaba Group (NYSE: BABA) and Tencent Holdings Limited (SEHK: 700). As it turns out, both companies also recently happened to report their latest quarterly earnings on the same day (15 May).

The ongoing US-China trade war gave investors an opportunity to see how the China economy was faring with the country’s two largest listed companies. Despite both companies’ results beating expectations, it looked like Alibaba gave investors more confidence. Here’s a breakdown of why.

Better revenue growth

Alibaba beat revenue estimates comfortably by registering a rise in revenue of 51% year-on-year to RMB93.5 billion (US$13.9 billion). What was even more impressive was the strong growth seen in its core commerce business – that include the well-known online marketplaces Taobao and Tmall. Here, revenue jumped 51% while its customer management (CRM) revenue, that includes advertising and fees charged to merchants, expanded 31%. It’s a sign that the business is succeeding in incentivising merchants to spend more.

Meanwhile, Tencent saw its slowest revenue growth in a decade, registering a 16% year-on-year rise to RMB85.5 billion in the first quarter of 2019. Its online ads business fell short of expectations over the quarter given the weaker Chinese economy, with video advertising one of the main culprits. However, on the revenue side, investors can take solace that growth will probably pick up in the current quarter on the back of the promising pipeline of new games.

Taking a lead in cloud

On the cloud computing side, Alibaba strengthened its grip on the market by posting a solid 76% year-on-year growth in revenue to RMB7.7 billion for the quarter. In its fiscal 2019, Alibaba Cloud served more than half of A-listed companies in China and, according to Gartner, is the largest cloud computing service provider in Asia – as measured by Infrastructure as a Service (IaaS) and Infrastructure Utility Service (IUS).

Although Tencent’s cloud business has expanded rapidly and its paying customer base has grown, in China it is still a fair way behind Alibaba Cloud. For example, in the first half of 2018, Alibaba Cloud had a 43% market share of China’s public cloud services market, followed by Tencent at 11.2%. So even if Tencent has managed to make up some of that ground (which is most likely has), the sheer size and breadth of Alibaba Cloud’s offering mean its dominance in the cloud arena in China is set to continue in the short term.

Where next?

Although both companies appear to be faring relatively well in the face of the ongoing trade uncertainty, each company has its own growth areas that investors can be optimistic about over the longer term. On the face of it though, Alibaba’s business has been more of the “steady ship” of late and the market has been recognising that fact, with its share price outperforming Tencent’s by over 10% so far in 2019.

分享給你的朋友

美股表現近年持續強勁,不知如何入手?我們精選了10隻高增長美股,並撰寫了《不應錯過的10隻高增長美股》免費報告。立即按此下載!

想提早退休? 想提高每月的被動收入?

我們撰寫的《必須收藏的收息股投資指南》電子書用實例教您挑選出真正可長期持續派息的收息股及揭示必要避開的收息「陷阱」。要知道打造穩健收息投資組合的竅訣,請立即按此免費下載!

本文所提供的信息僅供一般參考之用,並不構成任何個人化的投資勸誘或建議。作者沒持有以上提及的股票。
HK MoneyClub (www.hkmoneyclub.com)