LIVE
Economy|Business and Economy

China’s Alibaba misses revenue estimates on the back of crackdown
The growth slowdown underlines fears that new gov’t rules are constraining expansion, increasing the burden on firms.
Alibaba was among the first of China's internet giants to feel the heat of regulators [File: Qilai Shen/Bloomberg]
By Zheping HuangBloomberg
4 Aug 2021
Alibaba Group Holding Ltd.’s revenue missed estimates for the first time in more than two years, underscoring how Beijing’s months-long campaign against the internet sector is taking a toll.
Growth slowed in most of Alibaba’s major divisions from cloud to e-commerce, underlining fears that the mounting list of new government regulations is constraining expansion and increasing companies’ burdens. In a sign of the times, Chief Executive Officer Daniel Zhang on Tuesday endorsed a string of government policies enacted during a tumultuous 2021, from strict curbs on data collection to excessive subsidies. In particular, he voiced support for a six-month campaign kicked off last week by the internet industry overseer that expressly called out the blocking of rivals’ services.
KEEP READING
What’s behind China’s Big Tech crackdown and what does it mean?
Jack Ma’s Ant Group to be revamped amid China regulatory push
Billionaire Jack Ma is $3bn poorer after Ant IPO put on ice
Chinese President Xi personally halted $37bn Ant IPO: Report
Alibaba and arch-foe Tencent Holdings Ltd. have long excluded each other’s services from their platforms, creating so-called walled gardens. That rift helps perpetuate the empires of China’s two largest corporations and is a key point of contention with regulators concerned about the growing influence of internet firms, because it encourages merchants and startups to gravitate toward one or the other.
“We do see cross-platform openness and connectivity as a positive trend that could unlock greater dividends in the internet era,” Zhang told analysts.
Alibaba’s shares slid 1.4% in New York. Among the first of China’s internet giants to feel the heat from Beijing, the company has been closely watched for clues to the real-world impact of the upheaval that’s ensued since regulators went after industries from online commerce to ride-hailing and edtech.
Months after swallowing a $2.8 billion fine for violations such as forced exclusivity with merchants, Jack Ma’s flagship e-commerce firm is plowing money into areas like its bargains platform and community commerce to offset slowing growth, at a time when Pinduoduo Inc. and JD.com Inc. are eroding its dominance.
Revenue for the three months ended June climbed to 205.7 billion yuan ($31.8 billion), compared with the 209.4 billion yuan average of analyst estimates. Net income was 45.1 billion yuan, rebounding from a loss in the previous quarter following the record antitrust penalty. The company announced Tuesday it was boosting its share buyback program by 50% to $15 billion.
In the wake of the crackdown, Alibaba has made tentative steps to reach out to Tencent, applying to create a mini app for its Taobao Deals platform on Tencent’s WeChat service, Bloomberg News reported earlier this year. The Wall Street Journal also reported Alibaba is considering letting customers use WeChat Pay on Taobao and Tmall.
“If Tencent and Alibaba open to each other, it’ll be like each takes what they need,” Blue Lotus Capital Advisor analyst Shawn Yang said. “Alibaba will benefit more because it is hungry for user traffic, more than Tencent is for GMV. But no one knows how that would play out yet.”
Scrutiny on the tech sector has expanded since Alibaba’s penalty. The antitrust watchdog in April launched an investigation into Meituan and ordered 34 internet giants, including Alibaba and its units, to carry out internal reviews and rectify any excesses. In July, the cyberspace regulator stepped into the fray, announcing a probe into Didi Global Inc. and removing its services from Chinese app stores following its U.S. listing, expanding the crackdown into the realm of data security.
Alibaba has lost more than $300 billion in market value from its October peak, just before affiliate Ant Group Co.’s initial public offering was scrapped and the tech crackdown began in earnest. Ant’s profit fell to $2.1 billion in the March quarter after Chinese regulators told it to overhaul its sprawling operation.
But resurgent pandemic risks in China, the first major economy to recover last year, have clouded the outlook for companies like Alibaba. The country is currently battling its broadest coronavirus outbreak since the pathogen first emerged in late 2019.
Alibaba in May forecast revenue growth of at least 30% for the 12 months ending in March, a deceleration from the 41% seen a year earlier. That prediction suggests that Alibaba’s share of Chinese e-commerce sales will fall below 50% for the first time ever in 2021, industry researcher eMarketer said in a July 30 report.
Annual active consumers across its China retail marketplaces grew a slower-than-expected pace to 828 million in the June quarter, driving a 35% increase in its commerce business. Overall, the firm, which is targeting 1 billion users in its home market by the end of 2021, had 912 million users in China. Its bread-and-butter customer management revenue climbed just 14%, the weakest in at least three quarters, after Alibaba started combining commissions with the figure.
Cloud revenue climbed 29%, slowing for a second consecutive quarter after a major customer withdrew. Bloomberg News has previously reported that the client is TikTok-owner ByteDance Ltd. Management told analysts Tuesday the withdrawal will keep dragging on cloud growth for the remainder of this year, while the new regulatory regime for edtech companies will likely curb their spending on internet services.
Executives last quarter had pledged to channel all incremental profit into investment to refocus on its business. On Tuesday, executives pledged to sustain that strategy.
Alibaba last month combined its Ele.me food delivery app, Koubei local commerce platform as well as mapping and online travel business into a new lifestyle services division, a move that could help it better challenge Meituan’s dominance in those sectors. As part of the changes, the company also merged Tmall’s online grocery service with Alibaba’s cross-border commerce business.
SOURCE: BLOOMBERG
RELATED
Alibaba executive says Jack Ma ‘lying low’, focusing on hobbies
Ma, who is known for his outspokenness, has been largely out of the public view since criticising China’s regulators.
15 Jun 2021
China’s Alibaba promises to make life easier for smaller firms
After record fine, China’s largest e-commerce firm says it will lower entry barriers for merchants on its platform.
12 Apr 2021
China fines Alibaba record $2.75bn for anti-monopoly violations
Penalty is equivalent to about 4 percent of Alibaba’s revenues in 2019 and comes unprecedented regulatory crackdown.
10 Apr 2021
Alibaba reports first quarterly loss since going public
A $2.8bn fine by China’s market regulator led to a $1.19bn operating loss for Alibaba in the fourth quarter.
13 May 2021
MORE FROM ECONOMY
A decade on, Occupy Wall Street’s legacy on income inequality
Probe finds World Bank changed data to boost China ranking
Lebanon: Government hikes petrol prices again to tackle shortages
In Germany, debate on trade with China grows as Merkel nears exit
MOST READ
Afghans who fled Panjshir: ‘Everything can change by the hour’
Iran denounces ‘unilateralism’ as it becomes full SCO member
New Zealand abandons Pakistan cricket tour over ‘security alert’
What could an Evergrande debt default mean for China and beyond?
Advertisement
About
Connect
Our Channels
Our Network
Follow Al Jazeera English:
© 2021 Al Jazeera Media Network