China-based e-commerce titan Alibaba Group (NYSE:BABA) announced financial results early Thursday morning. The report, which covered the third quarter of fiscal 2018, exceeded some analyst expectations but fell short elsewhere. Rattled by the mixed results, Alibaba investors took share prices 8% lower over the next two days.

Alibaba's third quarter by the numbers


Q3 2018

Q3 2017

Year-Over-Year Change


$12.8 billion

$7.7 billion


Net income

$3.59 billion

$2.47 billion


Adjusted earnings per diluted share




Data source: Alibaba.

The provider of online sales infrastructure and tools saw sales surging 57% higher in its core commerce division. This segment accounted for 88% of Alibaba's total third-quarter revenues.

Though far smaller, the cloud computing division more than doubled its sales to $553 million. Alibaba's management plans to invest large chunks of the quarter's $7.1 billion in free cash flows into accelerating this vital business even further.

The company reached 580 million monthly active users in December, a 17% year-over-year gain. Annual active subscribers for calendar year 2017 landed at 515 million, a 16% increase from 2016's levels.

Alibaba's logo, featuring a smiling genie in gold on white.

Image source: Alibaba.

Growth drivers

User engagement and customer loyalty continue to rest on the popular Taobao and Tmall platforms. Alibaba is building artificial intelligence features into Taobao's personalized shopping recommendations while Tmall is partnering up with global luxury brands to boost its consumer appeal.

Elsewhere, international retail revenues nearly doubled to $727 million. Under the hood of that explosive growth engine, you'll find the AliExpress mall that connects producers in China with buyers worldwide, as well as Southeast Asian shopping portal Lazada.

If you ever bought a fidget spinner or a cut-rate smartphone case through the micro-store networks on eBay (NASDAQ:EBAY) or (NASDAQ:AMZN), those products were very likely sourced directly from AliExpress and its sister sites. This makes Alibaba an important partner to eBay and Amazon -- but also a future rival looming just beyond the horizon.

The world is a much bigger place than Greater China, so Alibaba is throwing plenty of support behind these stores too.

In a separate Thursday announcement, Alibaba established a 33% equity interest in micro-financing specialist Ant Financial. The two companies already have a long history of collaboration, since Ant Financial runs Alibaba's popular online payments service, Alipay.

The press release did not put a firm price tag on this investment, but Ant Financial's fundraising activity placed the company's total valuation at roughly $60 billion in the spring of 2016. We're not talking about pocket money here. The deal puts Alibaba closer to the money flowing through Alipay, and might pave the way to a full buyout somewhere down the road.

What's next?

Between international expansion, vibrant cloud computing sales, and skyrocketing sales growth, there's a lot to love about Alibaba right now.

And the stock's market cap may stand at a beefy $482 billion nowadays, making it one of the largest stock-based investment targets in the world, but those shares still look affordable at 28 times forward earnings. That's not a lot for a company sporting the fantastic growth rates you see in the table above.

I'm a happy Alibaba investor myself, and I can hardly wait to see the cloud computing and overseas retail operations growing into their britches.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.