By Paul Carsten
BEIJING (Reuters) - Alibaba Group Holding Ltd's (N:BABA) e-commerce and mobile businesses surged in the September quarter, far outpacing its rivals' and glossing over weakening margins and decelerating earnings growth.
Its shares edged as much as 3 percent higher to a record high after the Chinese e-commerce company reported a brisk 49 percent rise in the gross value of merchandise sold.
Revenue rose 53.7 percent in the three months ending in September, dwarfing Amazon.com Inc's (O:AMZN) 20 percent growth over the same period.
Alibaba's first quarterly report since its record $25 billion (15.63 billion pound) initial public offering affirmed Wall Street's expectations of industry-leading growth. Investors have focussed on its dominance in China, despite concerns about corporate governance and sliding margins.
The company indicated that its shopping spree, in which it has spent more than $6 billion since the beginning of the year, might not be ending yet as it aims to increase its user base.
Margins on earnings before interest, taxes, depreciation and amortisation contracted to a slightly weaker-than-expected 50.5 percent, from 54.4 percent in the previous quarter.
But on Tuesday, investors focussed on 52 percent growth in active users, to 307 million - roughly as many people as there are Americans - and an improvement in the mobile monetization rate to 1.87 percent versus 1.49 percent previously. That means the Chinese company is getting a larger percentage of every mobile transaction it handles.
Its shares rose to a high of $104.96, up more than 50 percent from its $68 debut price.
"Results came in strong, particularly on the top line, with accelerating revenue growth, while the bottom lines were somewhat noisy," said Cantor Fitzgerald's Youssef Squali.
Revenue totalled $2.74 billion, versus expected sales of $2.7 billion, its fastest growth in three quarters.
NON-STOP SHOP
The company's investments are geared toward adding more customers and converting them into users of Alibaba's core e-commerce businesses, as well as increasing the number of products and services Alibaba offers, said Joe Tsai, the company's executive vice chair.
Alibaba also said it would invest in new initiatives such as its mobile operating system, location-based services and digital entertainment, though those were long-term projects, he said.
The e-commerce giant "will continue to make strategic investments to grow our revenue," Chief Financial Officer Maggie Wu said on an earnings call with analysts.
Mobile revenue was more than 10 times higher than in the same period last year and accounted for 22 percent of total revenues.
Gross merchandise volume rose 48.7 percent to $90.5 billion. Mobile GMV accounted for 35.8 percent of that total, up from 14.7 percent in the same quarter of 2013.
The non-GAAP net income of $1.11 billion for the July-September quarter - which excludes the share-based compensation expenses and amortisation of intangible assets - compared with a consensus estimate of $1.17 billion based on a Thomson Reuters SmartEstimate poll of 21 analysts.
Diluted earnings per share were $0.20, while non-GAAP diluted earnings per share were $0.45, up 9.4 percent year-on-year and in line with Wall Street estimates.
But overall profit margins shrank to a two-year low of 18 percent, as extraordinary expenses the company chiefly attributed to share-based compensation charges of $490 million around the time of its initial public offering ate into profits.
(Reporting by Paul Carsten; additional reporting by Deepa Seetharaman in San Francisco; Editing by David Goodman, Elaine Hardcastle, Jane Merriman and Dan Grebler)