Alibaba Group Holding logged better-than-projected quarterly revenue, after the e-commerce giant fought to course-correct while navigating both US and Chinese regulatory scrutiny.
Revenue came to 205.6 billion yuan (US$30.4 billion, $41.9 billion) in the June quarter, barely changed from a year earlier but enough to beat an average projection for 204 billion yuan. Net income fell 50% to 22.7 billion yuan. Its US shares surged more than 5% in pre-market trading in New York.
Alibaba is still grappling with the economic fallout from nationwide Covid-related lockdowns and a near-economic contraction in China. Smaller rival JD.com Inc., which escaped the worst of the crackdown, is overtaking Alibaba in sales growth, while up-and-coming competitors such as ByteDance Ltd. to Pinduoduo Inc. are drawing more users away.
It’s also managing a series of run-ins with regulators. These range from antitrust fines to tax evasion probes, but have culminated in China’s largest recorded cybersecurity breach, which experts linked to Alibaba’s cloud business.
Abroad, the US added Alibaba to a growing roster of companies facing removal from US stock exchanges, because of Beijing’s refusal to permit American officials to review their auditors’ work. The company is seeking a primary listing in Hong Kong that would enable it to tap more mainland investors, while also maintaining its listing status on the New York Stock Exchange.
Once the most valuable company in China, Alibaba has seen its market value erode after Beijing launched its sweeping crackdown on the private sector more than a year ago. The government forced Alibaba’s finance affiliate, Ant Group Co., to call off what would have been the world’s largest initial public offering in 2020, and then launched reforms that have undercut Alibaba’s business model.
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Following a ferocious crackdown on the country’s most prominent billionaires, Alibaba’s co-founder Jack Ma has made significant concessions to appease Beijing. Last week, Ant said in a filing that Ma will cede control over the fintech arm and reduce his Ant shareholding over time to a percentage that does not exceed 8.8%. Ma currently holds 50.52% voting rights in Ant.
The move, likely to reduce some of Alibaba and Ant’s regulatory headwinds, has weighed on Alibaba shares, on fears that a leadership change could further delay Ant’s initial public offering.
Revenue from China commerce, its main division, slid 1% during the quarter -- the first contraction on record.
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In response to slowing growth, Alibaba said in May it will take a “more disciplined” approach to spending and scale back spending in areas that aren’t generating long-term value. This shift -- in line with Beijing’s incentives -- marks a major shift from the aggressive and wide-ranging market-share grab that characterized the e-commerce giant in the past.
Alibaba has also turned increasingly outward, building Lazada, its Southeast Asian arm, Trendyol in Turkey and Daraz around South Asia into important units of the company. Alibaba has outlined a long-term goal of quintupling Lazada’s gross merchandise value, the sum of transactions across its platforms, to US$100 billion.
