Alibaba faces growth challenges amid tighter regulation of China’s domestic tech sector and a slowdown in the world’s second-largest economy. However, analysts believe the e-commerce giant’s growth could pick up throughout the rest of his 2022.
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Alibaba reported first-quarter earnings on Thursday, beating expectations and boosting shares higher in US pre-market trading.
Shares of the Chinese e-commerce giant in Hong Kong rose more than 4% ahead of its earnings release. Alibaba’s U.S.-listed stock surged 7% before rising slightly.
Compared to Refinitiv’s consensus forecast, Alibaba’s first quarter results are as follows:
- Revenue: CNY 205.55 billion ($30.68 billion) vs. CNY 203.19 billion forecast, flat YoY.
- Earnings per American Depositary Share (ADS): 11.73 yuan vs. 10.39 yuan forecast, down 29% year-on-year.
- Net profit: RMB 22.73 billion vs. forecast RMB 18.72 billion.
This is the first time in the company’s history that the company has recorded flat growth even though Alibaba has outperformed estimates.
Alibaba faced many headwinds this quarter. This included the lockdown of major cities such as the financial capital of Shanghai due to his Covid flare-up in China. as a result, Chinese economic downturn in the second quarter of this year.
However, growth began to accelerate once the city lifted lockdowns in late May/early June.
Alibaba CEO Daniel Zhang said in a press release: “June saw signs of recovery across the business following relatively weak April and May.
Meanwhile, the e-commerce giant continues to face a tough regulatory environment after the Chinese government cracked down on the domestic tech sector for more than a year and a half.
Alibaba had a tough quarter, but analysts expect Growth to pick up in coming months.
Revenue from the Chinese commerce sector, which includes Alibaba’s biggest business, the popular marketplace Taobao, fell 1% year-on-year to 141.93 billion yuan. This was largely due to his 10% decline in customer management revenue. CMR is the revenue Alibaba makes from marketing and other services that it sells to merchants on Taobao and his Tmall e-commerce platform.
Alibaba said overall sales of online physical goods on its Taobao and Tmall platforms fell “mid-single digits year-on-year” and orders fell due to the impact of the Covid resurgence and “resulting restrictions”. You said your CMR decreased because you had more cancellations. Supply chain and logistics disruptions have occurred for most of April and May. ”
Alibaba said in June that its so-called gross merchandise volume (GMV) recovered thanks to improved logistics and the annual June 18 shopping festival in China, which culminates in June. GMV is a measure of sales transacted across Alibaba’s platform, but is not directly related to revenue. At shopping events, e-commerce players offer their customers significant discounts.
Under its Chinese commerce business, Alibaba seeks to grow revenue and users for its discount platform called Taobao Deals and grocery and fresh food service Taocaicai. The Hangzhou-based company sees these new businesses as a way to attract less wealthy customers in China’s smaller cities.
Investors are watching to see if Alibaba can keep costs down while growing these businesses. Alibaba said that Taobao Deals “significantly narrowed its losses year-on-year and quarter-over-quarter by optimizing spend on user acquisition and improving the average spend of active consumers.” The company has not disclosed his Taobao Deals losses.
Alibaba said Taocaicai’s GMV grew more than 200% year-on-year in the June quarter, while losses “increased modestly compared to the same quarter last year.”
Cloud computing represents just 9% of Alibaba’s overall revenue, but is seen as a key part of the company’s future growth and profitability.
Alibaba posted cloud computing revenue of 17.68 billion yuan in the June quarter, up 10% year-on-year. However, this was a slowdown from the 12% year-over-year earnings growth seen in his March quarter and the 29% increase seen in the same period last year.
The company’s cloud division has been hit by the loss of a major customer and the Chinese government’s crackdown on industries such as online education that used Alibaba’s products.
However, Alibaba said its cloud revenue growth reflected “a rebound in growth across non-internet industries, driven by financial services, public services and telecoms.”
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