(Bloomberg) – The sale of Alibaba Group Holding Ltd. has risen at a faster pace than expected, providing a much-needed boost to the company struggling with a regulatory suppression of Jack Ma’s technological empire.
Revenue rose 37% to 221.1 billion yuan ($ 34.2 billion) in the three months ended December, compared to an average of 215.3 billion yuan from analysts’ forecasts. The net income attributable to shareholders increased by 52% to 79 billion yuan. Alibaba has set up a special task force to conduct internal reviews and actively communicate with antitrust regulators to meet their requirements, the company said in the earnings release.
The stronger-than-expected earnings could be overshadowed by an ongoing antitrust investigation that has wiped out more than $ 130 billion in the value of the e-commerce giant since the October record. Uncertainty began in November when regulators launched Ant Group Co.’s initial initial public offering. torpedoed and subsequently launched their investigation into the online retailer. Alibaba shares have fallen 13% since Ant’s debuted debut, the worst performance on the Hong Kong standard Hang Seng index.
“The operating performance is strong and many feel that the shares are undervalued compared to the roadmap and trajectory of some of their businesses,” Andy Halliwell, an analyst at technology consulting firm Publicis Sapient, said in a research note after the result. ‘However, if the Chinese government wants to crack down on outspoken entrepreneurs and pursue a more conservative line with their larger technology ventures, then 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 recovered some of their losses after Ma appeared in public during a live video conference last month, in a clear signal that the worst-case scenarios – such as a takeover by the government or the dissolution of its companies – is probably off the table now. Little does Beijing expect its campaign to more tightly regulate Ant, Alibaba and the rest of China’s high-tech giants to completely withdraw. But the stock’s partial recovery suggests investors are beginning to price up the risk of a repression, which would jeopardize the country’s richest entrepreneurs and most innovative businesses.
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Alibaba’s cloud division reported its first positive adjusted earnings before interest, tax and amortization ever, a milestone for the growing business. Turnover for the segment increased by 50%, driven by customers in the internet, retail and public sector. Cainiao, its logistics unit, was also positive with the cash flow, the company said.
Annual active consumers grew to 779 million in the December quarter, causing a 38% increase in its core industry. Alibaba discussed $ 75 billion in sales last November during its annual Singles’ Day promotion, which could easily beat the 2019 run after the company started promotions early and added additional services to the score for the first time. The increase in spending took place, although overall retail sales fell by 3.9% last year, with consumption lagging behind operating activity in the broader economic recovery.
However, investors are asking whether Alibaba can sustain the growth as Beijing intensifies oversight of Chinese technology giants, particularly in online commerce. Ma’s firm, once the standard-bearer for China’s fast-rising private enterprises and thriving Internet sphere, now faces fines of as much as 10% of its revenue or about $ 7.8 billion if it is found to violate rules practices such as forced exclusive arrangements with merchants known as ‘Choose one of two’, predatory pricing or algorithms that benefit new users.
Any regulations that require Alibaba to completely discontinue forced exclusivity policy could reach Tmall’s sales by almost a tenth in 2021, before sales return to 20-20% annual growth in 2022 and beyond, according to the San Francisco-based Octahedron Capital Management LP. According to them, it is currently less than 10% of the top-selling brands.
The regulations may also impede its ability to compete with competitors of JD.com Inc. to Pinduoduo Inc. down, whose 730 million consumers a year close on Alibaba’s user base. Meanwhile, tap short video platforms like ByteDance Ltd. and Tencent-backed Kuaishou Technology also live streams as a selling point to gain a larger e-commerce share. Beijing-based ByteDance unveiled its Singles’ Day recording for the first time in 2020, with Douyin, the Chinese version of the global sensation TikTok, discussing 18.7 billion yuan in gross trade value.
Ant contributed 4.8 billion yuan to Alibaba’s profit for the quarter, indicating that the company earned 14.5 billion yuan in the three months ended September – before scrapping its $ 35 billion IPO – because its earnings was a quarter behind Alibaba. As part of the crackdown, Ant was told to ‘fix’ his loan, insurance and wealth management services. While its subsidiary is still developing the rectification plan, Alibaba said on Tuesday that it could not make a “full and fair assessment” of the impact on its business.
Stricter capital requirements could hamper Ant’s ability to issue loans just as freely, resulting in challenges for its sister company’s trading operations. Alibaba CEO Daniel Zhang said the company does not determine how much of its sales are financed by Ant’s loans, but the fintech giant offers small unsecured credit to about 500 million people through its Huabei (Just Spend) and Jiebei ( Just Lend). ) platforms. It is used in part for the purchase of clothing and makeup from the Taobao market or trips booked on Fliggy, the group’s online travel website.
Read more: Ant plans credit unit application to prevent sharp drop in loans
Through stricter regulatory scrutiny of mergers, it can also hinder the technology giant from incorporating promising businesses into emerging industries or taking on extraordinary interests in other businesses to prevent competition. Alibaba, which has spent billions over the past few years on hypermart operator Sun Art Retail Group Ltd. and NetEase Inc. ‘s Kaola e-commerce platform, was fined 500,000 yuan in December for failing to seek approval before strengthening its stake in the department. retail chain Intime Retail Group Co. in 2017.
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Originally published