From the first days of China’s Internet, one of the biggest gripes of China’s tech entrepreneurs has been that Western investors just don’t understand them. Sohu.com founder Charles Zhang, one of China’s tech pioneers, launched into an epic rant on that subject when I interviewed him in 2006 for one of Fortune’s earliest stories about life behind “The Great Firewall of China.” “I have to deal with a bunch of investors who don’t live in China, can’t speak the language, and don’t even look at my site,” Zhang fumed. “All they want to talk about is the next quarterly earnings statement or how to replicate some business model from the U.S.”
Eleven years on, that remains a common lament among China’s tech founders. And maybe they have a point. Consider Wall Street’s reaction last Thursday to quarterly financial results announced by Alibaba (NYSE:BABA). The Chinese e-commerce giant reported that, in the three months ending in March 31, it raked in $1.55 billion in net income—nearly double net income in the same quarter last year. Good news, right? Well, global investors weren’t impressed. Alibaba’s shares tanked more than 5% in morning trading. Why? Apparently because the company’s 64 cent earnings-per-share ratio missed analysts’ expectations. By a penny.
BABA’s share price recovered later in the day as it dawned on folks that maybe it didn’t matter if net income lagged a little. The company is investing in data storage, entertainment and other areas expected drive future growth. Markets also were mollified by the fact that revenue for the quarter shot to $5.6 billion, up 60% (!) year-on-year. (Alibaba’s “disappointing” net income for the January to March quarter was double that of Amazon for the same period, and the Chinese company’s revenue grew nearly three times faster than Amazon’s.)
Since January, Alibaba’s share price is up almost 40%, and now trades at about $123, restoring Jack Ma to his position as China’s richest man. But you can see why maybe Jack and his co-founders might sympathize with Rodney Dangerfield.