(Bloomberg) – The sales of Alibaba Group Holding Ltd. rose faster than expected, providing a much-needed boost to the company grappling with regulatory action against Jack Ma’s tech empire.
Revenue increased 37% to 221.1 billion yuan ($ 34.2 billion) in the three months ended December, compared to the average of 215.3 billion yuan according to analyst forecasts. Net income attributable to shareholders increased 52% to 79 billion yuan. Alibaba has established a special task force to conduct internal assessments and is actively communicating with antitrust regulators about meeting their requirements, the company said in the earnings statement.
The stronger-than-expected revenues may be overshadowed by an ongoing antitrust investigation that has already wiped out more than $ 130 billion of the e-commerce giant’s value since its October record. The uncertainty began in November when regulators first saw the record opening of Ant Group Co. torpedoed and then began their investigation into the online retailer. Alibaba shares are down 13% since Ant’s aborted debut, the worst performer on the Hong Kong benchmark Hang Seng Index.
“Company performance is strong and many feel the stock is undervalued compared to the roadmap and trajectory of some of their companies,” said Andy Halliwell, an analyst at technology consultant Publicis Sapient, in a research note following the outcome. “However, if the Chinese government wants to crack down on outspoken entrepreneurs and take a more conservative stance on their larger technology companies, it will erode investor confidence in the brand and could create an opening for others to exploit.”
Read More: Jack Ma Appears For The First Time Since Ant, Alibaba Crackdown
Alibaba’s shares have made up for some of their losses after Ma emerged publicly during a live-streamed video conference last month, in a clear signal that worst-case scenarios – such as a government-led takeover or the breakup of its companies – are likely now of table. Few expect Beijing to pull out completely its campaign to tighten up Ant, Alibaba and the rest of China’s high-tech giants. But the stock’s partial recovery suggests that investors are beginning to weigh the risk of a crackdown that would seriously endanger the country’s wealthiest entrepreneurs and most innovative companies.
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Alibaba’s cloud division reported its first positively adjusted earnings before interest, tax and depreciation, a milestone for the growing business. Sales for this segment were up 50%, driven by internet, retail and public sector customers. Cainiao, the logistics unit, also had positive operating cash flow, the company said.
The annual number of active consumers grew to 779 million in the December quarter, driving a 38% increase in the core business of commerce. Alibaba posted $ 75 billion in sales during its annual Singles’ Day promotions last November, easily beating the 2019 price after the company started promotions early and added additional services to the count for the first time. The higher spending came even as total retail sales fell 3.9% last year, with consumption lagging industrial activity during the broader economic recovery.
But investors are wondering if Alibaba can support that growth as Beijing steps up surveillance of Chinese technology giants, particularly in online commerce. Ma’s company, once the flag-bearer of China’s fast-growing private business and thriving Internet atmosphere, is now facing fines of as much as 10% of its revenues or about $ 7.8 billion if it is found to have broken rules against practices such as enforced exclusive agreements with merchants known as ‘Pick one of the two’, predatory pricing or algorithms favoring new users.
According to San Francisco-based Octahedron Capital Management, any regulation requiring Alibaba to completely discontinue its enforced exclusivity policy could hurt Tmall’s 2021 sales by nearly one-tenth before sales return to 18-20 % annual growth in 2022 and beyond. LP. At the moment, less than 10% of the top-selling brands are exclusive, they estimate.
Regulations may also impede JD.com Inc.’s ability to defeat rivals. to Pinduoduo Inc. repel, whose 730 million annual consumers are approaching Alibaba’s user base. Meanwhile, short video platforms such as ByteDance Ltd. and Tencent-backed Kuaishou Technology also live streaming as a point of sale to capture a larger share of e-commerce. Beijing-based ByteDance first unveiled its Singles’ Day earnings in 2020, with Douyin, the Chinese version of global sensation TikTok, posting 18.7 billion yuan in gross trade value.
Ant contributed 4.8 billion yuan to Alibaba’s earnings in the quarter, indicating that the company earned 14.5 billion yuan in the three months ended September – before the $ 35 billion IPO was sunk – because revenues lag behind Alibaba by a quarter. As part of the crackdown, Ant has been ordered to “correct” its credit, insurance and asset management services. As its affiliate is still developing its recovery plan, Alibaba said on Tuesday it is unable to make a “full and fair assessment” of the impact on its business.
Tighter capital requirements could undermine Ant’s ability to lend as freely, adding to the challenges for the sister company’s trading activities. While Alibaba Chief Executive Officer Daniel Zhang said the company does not quantify how many of its sales are funded by Ant’s loans, the fintech giant provides small unsecured loans to about 500 million people through its Huabei (Just Spend) and Jiebei (Just Lend). ) platforms. These are used in part to pay for clothing and makeup purchases from the Taobao market or for trips booked on Fliggy, the group’s online travel site.
Read more: Ant Plans Credit Unit Overhaul to Avoid Sharp Fall in Loans
Tighter regulatory scrutiny of mergers may also deter the tech giant from picking up promising startups in emerging industries or taking outrageous stakes in other companies to fend off competition. Alibaba – which had spent billions in recent years on stakes in hypermart operator Sun Art Retail Group Ltd. and NetEase Inc.’s Kaola e-commerce platform – was fined 500,000 yuan in December for not seeking approval before expanding his interests in the Intime Retail Group Co. in 2017.
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Originally published