(Yicai) Sept. 1 -- Alibaba Group Holding’s shares climbed after the Chinese internet giant reported a 76 percent jump in quarterly profit from a year earlier, outdoing rivals despite spending heavily in an intense cash-burning price war with them.

Alibaba [HKG: 9988] closed 18.5 percent higher at HKD137.10 (USD17.58) in Hong Kong today. Its New York-listed stock [NYSE: BABA] climbed 12.9 percent to USD135 on Aug. 29, the day the company’s earnings report was released.

Net profit was CNY42.4 billion (USD5.9 billion) in the fiscal first quarter ended June 30, mainly thanks to mark-to-market changes from equity investment and gains from the disposal of Turkish customer services business Trendynol, partly offset by a decrease in income from operations, the Hangzhou-based company’s report showed.

Alibaba’s two biggest rivals in the e-commerce, instant retail, and food delivery domains, JD.Com and Meituan, saw their net profits narrow 51 percent and 97 percent to CNY6.2 billion and CNY365.3 million (USD863.5 million and USD51.3 million), respectively, in the same period.

Alibaba’s revenue rose 2 percent to CNY247.7 billion (USD34.6 billion). Excluding income from the disposal of omnichannel retailer Sun Air Retail Group and department store operator Intime, revenue on a like-for-like basis would have grown 10 percent.

Artificial intelligence-related product revenue maintained triple-digit growth for the eighth quarter in a row, while cloud computing income grew faster quarter on quarter, climbing 26 percent, the report said.

“This quarter, our strategic focus on consumption and AI + Cloud delivered strong growth,” Chief Executive Officer Eddie Wu said in a statement. “Our decisive investment in the quick commerce business achieved key milestones as we won consumer mindshare.”

Instant Commerce as New Growth Point

Alibaba China E-Commerce Group reported revenue of CNY140 billion (USD19.6 billion), up 10 percent from a year earlier.

The company launched Taobao Instant Commerce in late April to offer on-demand delivery across a wide range of product categories, including food and electronics. The move, combined with substantial investment in instant commerce to build consumer mindshare and business scale, reinforced the Taobao app’s leadership in China’s e-commerce sector.

“Since we launched Taobao Instant Commerce four months ago, we believe that we’ve been highly successful in engaging users and merchants, building logistics capabilities and marketing,” Wu said during the firm’s earnings conference call.

He said the instant retail business outperformed expectations on multiple metrics. Peak daily orders reached 120 million last month and monthly active customers surged 200 percent to 300 million from before April, Wu noted, adding that daily active riders tripled to more than two million in the period.

In August, instant commerce drove 20 percent growth in the Taobao app’s daily active users and contributed to a surge in average daily purchases per user, according to Wu. This contributed to increases in advertising and consumer management revenue and heightened user engagement, incremental new user acquisition, and customer re-engagement and retention, which can reduce marketing expenses.

“In the past, our scale was just one-third of our peers,” Wu said. “Now, our Instant Commerce business is leading in scale, and we can quickly improve our operational efficiency.”

To do so, Alibaba aims to optimize its customer mix, increase the share of high-value orders, and improve fulfillment efficiency and costs, including halving unit economics losses, while maintaining current subsidy levels, Wu explained.

The report also outlined the cost of that growth. Alibaba’s free cash flow shifted to an outflow of CNY18.8 billion (USD2.6 billion) in the quarter, compared with an inflow of CNY17.4 billion a year ago, mainly because of higher expenditure on cloud infrastructure and increased investment in Taobao Instant Commerce.

Sales and marketing expenses surged to CNY53.2 billion, equivalent to 21.5 percent of total revenue, compared with 13.4 percent in the same period of last year. The increase was mainly driven by user acquisition and spending on better use experience at Taobao Instant Commerce.

Other Businesses

Revenue from Alibaba’s International Digital Commerce Group jumped 19 percent to CNY34.7 billion (USD4.9 billion) in the second quarter from a year earlier, mainly driven by strong performance in cross-border businesses.

“While maintaining a strategic emphasis on key regions, AIDC remained focused on operating efficiency, leading to significantly narrowed losses year-over-year and quarter-over-quarter,” Alibaba noted.

Cloud Intelligence Group saw its revenue rise 26 percent to CNY33.4 billion (USD4.7 billion) in the period, fueled by strong demand for artificial intelligence-related products, which achieved triple-digit growth for the eighth consecutive quarter.

“As AI demand continues to grow rapidly, we are also seeing increased demand for compute, storage, and other public cloud services to support AI adoption,” the firm pointed out. “We will continue to invest in anticipation of customer growth and technology innovation, including AI products and services, to increase cloud adoption for AI and maintain our market leadership.”

Alibaba’s revenue from all other segments fell 28 percent to CNY58.6 billion (USD8.2 billion), primarily due to the disposal of Sun Art and Intime and the decrease in revenue from logistics business Cainiao, partially offset by the growth in revenue from grocery arm Freshippo, telemedicine platform Alibaba Health, and navigation app Amap.

Editor: Futura Costaglione