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Why Alibaba Doesn’t Lose Sleep over US-China Trade War

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Alibaba says growth is powered by domestic consumption

The trade tensions between the United States and China have left many business leaders and investors worried, as tariffs on imports have made items more expensive for consumers in both countries. Some companies like Cisco Systems (CSCO) have had to raise prices to cope with tariffs. However, Alibaba (BABA) may not have to worry too much about US-China trade friction curbing its growth even if the tensions escalate.

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At a recent investor briefing, Alibaba executive vice chair, Joseph Tsai, said, “Concerns about trade tensions might affect sentiment, but Alibaba’s exposure to the tangible effects of trade tariffs is small.” According to the executive, growth in Alibaba’s key businesses such as e-commerce, cloud computing, and consumer services has primarily been driven by domestic consumption, not exports.

Revenue jumped 41%

Alibaba’s revenue rose 41% YoY to $17.1 billion in the December quarter. Revenue growth has been slowing in recent times as Alibaba’s actual revenues rise. Alibaba’s revenues grew 56% YoY to $12.8 billion in the December quarter of 2017. The majority of Alibaba’s revenue comes from commerce-related operations, and China is the company’s largest commerce market.

Alibaba’s international e-commerce competitors Amazon (AMZN) and eBay (EBAY) reported 20% and 6.0% YoY revenue growth, respectively, in the December quarter. Alphabet (GOOGL), one of Alibaba’s main competitors in the global cloud market, grew revenue 22% YoY in the December quarter. Amazon is also an Alibaba cloud competitor.

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