Undermined by anti-Covid restrictions and tightening regulations, Alibaba is faltering
AFP, published on Thursday, August 04, 2022 at 14:41
Undermined by anti-Covid restrictions and regulatory tightening, Alibaba began its shaky fiscal year with a slight decline in its quarterly revenue, a first for the e-commerce giant but one that beat expectations.
In the first quarter of its fiscal year, which ran from April to June 2022, revenue totaled 205.55 billion yuan or $30.7 billion, the group detailed in a press release, citing a “decline” in trading activity caused by compensated for those in the cloud.
Profit plummeted again, down nearly 50% to 22.8 billion yuan ($3.4 billion) from 45.1 billion yuan a year earlier.
For the full year, released in late May, earnings were down almost 60%.
“After a relatively weak April and May, we are seeing signs of a recovery in our business in June,” Group CEO Daniel Zhang was quoted as saying in the statement.
– IPO –
A glimmer of hope echoed in the stock market, investors welcomed this release better than expected. Stocks listed in the United States were up 4.5% ahead of the opening of Wall Street in electronic trading.
Last year, at the same time, sales rose 34% to 205.7 billion yuan in one year.
Since the end of 2020, the Chinese authorities have cracked down on certain previously widely condoned practices by the digital giants regarding personal data collection and competition.
Beijing has thus multiplied the strikes against powerful Internet companies, prevented them from raising money internationally or fined them for abusing a dominant position in the market.
These actions have caused the sector to lose billions of dollars in market cap.
– Supply chains under pressure –
Alibaba has long been considered a success model in China and was the first to be punished by the public sector.
At the end of 2020, the regulators derailed the gigantic IPO of their subsidiary Ant Group.
The company, which wanted to raise $34 billion in Hong Kong and Shanghai, was severely blocked by the authorities for fear of possible financial risks.
Jack Ma had disappeared from the radar for two and a half months, a silence that had subsequently raised many questions, mostly of a political nature.
The country’s economy is also being held back by anti-Covid restrictions, which in turn makes consumers very cautious and penalizes e-commerce companies.
China has been facing a resurgence of the pandemic for several months, affecting several parts of the country to varying degrees.
As part of a strict zero-Covid public health strategy, several cities, starting with the economic capital Shanghai, went into lockdown for two months in the spring, significantly impacting the world’s second-largest economy.
Alibaba also mentions in its release the “restrictions that disrupted logistics and supply chains in April and throughout much of May,” which undermined business performance.