Alibaba has faced growth challenges amid tightening regulation of China’s domestic technology sector and slowing growth in the world’s second-largest economy. However, analysts believe the e-commerce giant’s growth could accelerate by 2022.
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Ali Baba reported fiscal first-quarter earnings that beat expectations on Thursday, sending U.S. stocks higher in premarket trading.
Shares of the Chinese e-commerce giant rose more than 4% in Hong Kong after its earnings report. US-listed Alibaba shares were as much as 7% higher before paring gains.
Here’s how Alibaba fared in its fiscal first quarter, compared to the Refinitiv consensus:
- Revenue: 205.55 billion Chinese yuan ($30.68 billion), compared to an expected 203.19 billion.
- Earnings per American depositary share (ADS): 11.73 Chinese yuan, compared with 10.39 yuan expected, down 29% year-on-year.
- Net income: 22.73 billion yuan, compared with 18.72 billion yuan expected.
Despite Alibaba’s forecast exceeding estimates, this is the first time in its history that the company has seen slow growth.
Alibaba faced a number of headwinds during the quarter, including a resurgence of Covid in China that put major cities such as financial metropolis Shanghai on lockdown. This prompted a sluggish Chinese economy in the second quarter of the year.
But as cities came out of lockdown in late May and early June, growth began to pick up.
“After a relatively slow April and May, we saw a recovery in June for our businesses,” Alibaba CEO Daniel Zhang said in a press release.
Meanwhile, the e-commerce giant continues to face a tough regulatory environment after more than a year and a half of Beijing’s crackdown on its domestic technology sector.
While Alibaba had a tough quarter, analysts are optimistic growth will accelerate in the coming months.
Revenue from Alibaba’s biggest business, the China commerce unit that includes popular marketplace Taobao, fell 1% year-on-year to $141.93 billion. yuan. This was mainly due to a 10% decrease in client management revenue. CMR is the revenue Alibaba receives from services such as marketing, which the company sells to merchants on its Taobao and Tmall e-commerce sites. trading platforms.
Alibaba said CMR fell as total online sales of physical goods on Taobao and Tmall fell by “single digits year-over-year” and order cancellations increased due to the resurgence of Covid and “due to restrictions”. supply chain and logistics disruptions in April and most of May.”
In June, Alibaba reported a rebound in so-called gross merchandise volume (GMV) thanks to improving logistics and China’s annual 6.18 trade festival, which culminates in June. GMV is a measure of sales transactions on Alibaba’s platforms, but it does not directly equate to revenue. At the shopping event, e-commerce players are offering massive discounts to customers.
As part of its China commerce business, Alibaba has also tried to boost revenue and users for its discount platform Taobao Deals and grocery and fresh food service Taocaicai. The Hangzhou-based company sees these newer ventures as a way to attract less affluent customers in China’s smaller cities.
Investors have been watching to see if Alibaba can control its costs as it grows these businesses. Alibaba said Taobao Deals “significantly reduced losses year-over-year and quarter-over-quarter by optimizing user acquisition costs and increasing average active user spend.” The company did not disclose Taobao Deals’ losses.
Alibaba said Taocaicai’s GMV grew more than 200% year-on-year in the June quarter, while losses “increased slightly compared to the same quarter last year.”
Although cloud computing accounts for only 9% of Alibaba’s total revenue, it is seen as an important part of the company’s future growth and profitability.
In the June quarter, Alibaba announced $17.68 billion. yuan in cloud computing revenue, up 10% year-on-year. But that was a slowdown from 12% annual revenue growth in the March quarter and a 29% increase in the same period last year.
The company’s cloud division has been hit by a major customer loss and a Chinese government crackdown on industries such as online education that used Alibaba products.
But Alibaba said the rise in cloud revenue reflected “recovery growth in overall non-Internet industries, driven by financial services, public services and telecommunications industries.”
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