Chinese companies like Alibaba see more consumption, helped by AI ads

BEIJING — Alibaba, Tencent and JD.com reported earnings this week that not only reflected improving Chinese consumer spending, but also the growing benefits of artificial intelligence in advertising.

E-commerce giant Alibaba said late Thursday its Taobao and Tmall group sales rose by 9% year on year to 101.37 billion yuan ($13.97 billion) for the three months ended March 31. That’s above the 97.94 billion yuan predicted by a FactSet analyst poll, and the quarterly growth figure was well above the 3% segment increase for the 12-month period ending March 31.

“The e-commerce and ad revenues were positive surprises as there were expectations tariffs would affect consumer behavior,” Kai Wang, Asia equity market strategist at Morningstar, said in an email regarding the three companies’ earnings results.

It’s important to note the earnings releases cover only the period before U.S.-China tensions escalated in April with new tariffs of more than 100% on products from both countries — an effective trade embargo. The two countries issued a rare joint statement Monday announcing a 90-day reduction in most of the recently added tariffs.

The U.S.-China trade dispute since April has negatively affected consumption to some extent, given the increased uncertainty for small and medium-sized businesses, Charlie Chen, managing director and head of Asia research at China Renaissance Securities, said Friday. He expects that as trade tensions ease, consumption will rise.

But despite lackluster consumption overall, sales of certain electronics and home appliances have done well since last year thanks to China’s trade-in subsidies for supporting such consumer spending.

JD.com on Tuesday said its sales of for that category surged by 17% from a year ago. Overall, the e-commerce company reported a 16.3% increase in revenue from its retail business to 263.85 billion yuan in the three months ended March 31. That was better than the 226.84 billion yuan in retail segment sales predicted by a FactSet poll.

On Wednesday, Tencent said its “fintech and business services” segment, a proxy for consumer-related business transactions, reported a 5% year-on-year revenue increase to 54.9 billion yuan in the first quarter.

While Nomura analysts said that segment revenue growth was in line with estimates, they pointed out in a note that “Tencent ads was a big outperformer in the Chinese ads industry despite the challenging macro environment.”

Tencent’s marketing services revenue surged by 20% to 31.9 billion yuan, helped by “robust advertiser demand” for short videos and other content inside its WeChat social media app. Tencent noted “ongoing AI upgrades” to its advertising platform.