Goldman Sachs Sees China Internet Profits Rising 9% in Third Quarter

Goldman Sachs forecasts aggregate net income at major Chinese internet companies will advance about 9% year over year in the third quarter, following declines in each of the prior two quarters.

The outlook covers Tencent, Alibaba, PDD Holdings, Meituan and JD.com. Goldman views gaming and entertainment as more resilient than e-commerce, advertising and local services while Chinese consumer spending remains weak. The 9% figure concerns combined net profit; the company-specific estimates cover different revenue and profit measures.

For Tencent, the bank expects gaming revenue to increase 8% and advertising revenue to rise 19%. Alibaba's cloud revenue could grow 53%, with the division's operating margin near 12.5%. Goldman also projects Alibaba's adjusted earnings before interest, taxes and amortization will climb 238% to about 31 billion yuan.

Meituan's adjusted operating profit is forecast to rise 104% to about 700 million yuan. JD.com's group net profit is projected to increase 39% to about 8 billion yuan.

Goldman sees PDD Holdings' cash position and free cash flow as strengths, while expecting expansion and platform-development spending to weigh on near-term earnings. These are forecasts, not reported third-quarter results.

JD.com is scheduled to release results Tuesday, Nov. 17, followed by Tencent on Wednesday, Nov. 18, and Alibaba on Thursday, Nov. 19.