Connect with us

Investing

Alibaba sees annual growth slowing sharply as consumption lags

Alibaba sees annual growth slowing sharply as consumption lags 1

By Josh Horwitz and Subrat Patnaik

LONDON (Reuters) – China’s Alibaba forecast annual revenue to grow at its slowest pace since its 2014 stock market debut as second-quarter results missed expectations due to slowing consumption, increasing competition and a regulatory crackdown.

U.S.-listed shares of Alibaba Group Holding Ltd, which expects fiscal year 2022 revenue to grow by 20% to 23%, tumbled 10.3% in pre-market trading on Thursday.

Beijing has come down hard on China’s big tech, citing antimonopoly and security reasons, hitting bottomlines and stock prices at companies including Alibaba and gaming giant Tencent Holdings Ltd. Tencent last week posted its slowest revenue growth since it went public in 2004.

Chinese shoppers have become more cautious about spending, in part due to new coronavirus outbreaks.

This, along with supply disruptions, has contributed to China’s economy suffering its slowest growth in a year in the third quarter.

On an earnings call on Thursday, Alibaba CEO Daniel Zhang said increasing competition and slowing consumption in China were the primary causes for slowing growth, adding that it was hard to say which one hurt earnings more.

For the quarter ended Sept. 30, the e-commerce juggernaut’s revenue growth rose 29% to 200.69 billion yuan ($31.44 billion), its slowest rate of growth in six quarters. Analysts on average had expected revenue of 204.93 billion yuan, according to Refinitiv data.

Revenue at Alibaba’s China commerce retail business, its main e-commerce unit, rose 33%. On an adjusted basis, Alibaba earned 11.20 yuan per share, below the average estimate of 12.36 yuan.

Separately, Alibaba’s chief rival JD.com Inc, said it expects weak demand will weigh on the company’s overall performance in the year’s second half.

Alibaba, which last week recorded its slowest sales growth during its annual Singles’ Day online shopping fest, said it will continue to invest heavily in areas such as Taobao Deals, an e-commerce service targeting lower-tier cities, and offline retail initiatives.

Alibaba’s fintech affiliate Ant Group recorded a quarterly profit of about 19.7 billion yuan for the quarter ended June. Alibaba records its profit from Ant one quarter in arrears.

Authorities forced the suspension of Ant’s $37 billion initial public offering of last November, and imposed a record $2.8 billion fine on Alibaba for anti-competitive business practices in April.

Alibaba logged its first operating loss as a public company the same quarter it faced the penalty, and has lost about a third of its market value so far this year.

($1 = 6.3838 Chinese yuan renminbi)

(Reporting by Subrat Patnaik in Bengaluru and Josh Horwitz in Shanghai; Editing by Arun Koyyur, Kirsten Donovan and Emelia Sithole-Matarise)

Editorial & Advertiser disclosure
Our website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.
Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Recommended

Newsletters with Secrets & Analysis. Subscribe Now