Alibaba, the Chinese e-commerce giant, announced Thursday that profit for the October-December period was down 74%. This is the third consecutive quarterly drop for the company, which faces a host of challenges, including a government crackdown and slowing sales growth.
Hangzhou-based Alibaba Group announced net income of 20.43 Billion Yuan ($3.2 Billion), a drop of 74 percent from the year-ago.
According to Bloomberg financial news revenue grew by just 10% to 242.6 million yuan. This is the smallest percentage increase the company has reported since 2014 when it went public.
Alibaba’s Hong Kong shares and US-listed shares have lost half of their value over the past twelve months due to the company’s troubles. The company’s problems were highlighted by a broad crackdown by Chinese regulators regarding alleged anticompetitive practices.
The scrutiny began in late 2020 and caused a record-breaking Alibaba’s digital-payments affiliate Ant Group IPO to be pulled at the very last minute. Alibaba was also hit with a $2.75 billion record for its alleged unfair practices.
Other tech giants were also hit with fines, as well as business restrictions.
The government has taken action against allegations of abuse of user information and monopolistic business practices. Authorities have expressed concern that Ant Group’s entry into online lending could lead to worrying debt levels in the economy.
The crackdown may also have been motivated by the perception that Chinese Big Tech was too powerful and not enough regulated.
As Alibaba’s days are over, the pressure mounts as earnings growth and sales jumps continue to diminish.
China’s annual “Singles Day” shopping spree, which culminates in November 11, is a highlight of the quarter.
It is the world’s largest shopping festival. It was originally patterned on, but now it dwarfs the “Black Friday” promotions in America.
However, sales increased at a slower rate than usual this time around.
Alibaba’s quarterly revenue growth of 10 percent was significantly lower than its previous years of over 40 percent growth.
Analysts claim Alibaba is facing sales challenges as China’s zero tolerance approach towards Covid (which can include targeted lockdowns or business closures) disrupts consumer spending and as Pinduoduo and JD.com intensify their competition.
The government’s pressure is not abating.
According to a Bloomberg report earlier in the week, Chinese regulators have directed the country’s top state-owned banks to start a new round to check their financial exposure and other links with Ant Group and its subsidiaries.
Alibaba reports profit drop of 81% in China as China cracksdown on big tech
2022 AFP
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