Many people have observed that the run-up in Yahoo’s share price this year is largely due to its stake in Alibaba Group, China’s largest e-commerce company. But Yahoo’s latest earnings report shows just how valuable Alibaba is. And the stunning growth will likely spur even more buzz around Alibaba’s public offering, which could come at the end of this year.
Alibaba has to report its revenue to Yahoo because Yahoo owns a 24% stake in the Chinese company. In the first quarter, Alibaba’s revenue grew 71%, to almost $1.4 billion, while net income increased by 189% ,to $680 million. Yahoo’s net income that was attributable to the Alibaba jumped by 203%, to $669 million.
Alibaba has been trying to rein in enthusiasm for its upcoming IPO, which could be the largest this year, because it doesn’t want to become overheated and set unrealistic expectations. But these results are just going to fuel the excitement. Good luck to Alibaba in trying to tamp it down.