Alibaba Q3 earnings: Company prepares to face investors as crackdown intensifies in China

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According to Refinitiv analysts, the company is expected to report a 33% revenue increase for the quarter ended December compared to a year earlier.

But strong earnings may not be enough to allay the concerns of investors, who are wary of concerns about how hard the Chinese authorities could get on Jack Ma’s tech empire.

Ma, who co-founded Alibaba more than two decades ago, built the company into one of China’s most powerful tech titans. It generated nearly $ 80 billion in revenue for the fiscal year ended March and it has a market cap of more than $ 700 billion, making it one of the world’s most valuable technology companies.

But Beijing is increasingly concerned about the impact that large, private technology companies have on the financial sector and other sensitive areas, and how entrenched they are in China’s everyday life through digital payment apps and other services.

Alibaba faces an 'existential crisis'
Last November, shares in Alibaba fell, although the company’s earnings were above estimates, as it reported results just after regulators suspended a highly anticipated IPO of its financial subsidiary, Ant Group.

Since then, the landscape has deteriorated for Alibaba and other Chinese technology companies. President Xi Jinping named efforts to tighten anti-monopoly rules against online platforms as one of the top goals for 2021 in December, according to state news agency Xinhua. And regulators announced an antitrust investigation into Alibaba on Christmas Eve.

Ant Group, meanwhile, has been told to overhaul its online financial operations after authorities criticized driving out rivals from the market, harming consumer rights and taking advantage of regulatory loopholes for its own profit.

Yi Gang, the governor of the People’s Bank of China, said at a virtual forum in Davos last week that regulators’ involvement in that company is ongoing.

Alibaba co-founder, Ma – who has retired but is still a figurehead – has largely been hidden from view through all of this. He disappeared from the public eye for months before appearing briefly in January to speak with teachers at a philanthropic event.

The issues facing Alibaba and Ant have dented the former’s stock price. New York-listed shares of Alibaba are down about 17% since a peak in late October, a plunge that has wiped out more than $ 140 billion in market cap.

Some analysts suspect that Alibaba can survive control from China relatively intact. Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, said Chinese authorities are likely to be careful not to “kill the goose that lays the golden eggs.”

But experts warn that the days of uncontrolled growth are likely to be over.

“It’s clear that [Beijing] will limit the scope of management independence through regulation and informal ‘guidance’ to the [Alibaba] conglomerate, ”says Doug Fuller, an associate professor at City University of Hong Kong who studies technological development in Asia.

As for Ant Group, the company will likely still be allowed to proceed with an IPO once regulators are done grilling the company over anti-monopoly concerns and consumer privacy issues, said Kevin Kwek, CEO and senior analyst at Alliance Bernstein.

But if it’s forced to make drastic changes, that could hurt Ant’s appreciation when it’s finally able to make a list. Before the IPO was withdrawn, Ant was expected to become the largest IPO ever with a share sale of $ 34 billion.

‘You can count on Ant’s best ghosts [are] while we work on the challenges, “said Kwek.” The question is how much they ‘give up’ in the end and what that could mean for valuations. “

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