Alibaba profits plunge as Beijing's bans – and beefy competitors – bite
(2021/11/19)
- Reference: 1637305028
- News link: https://www.theregister.co.uk/2021/11/19/alibaba_q2_21/
- Source link:
Beijing's tech regulation blitz has bitten Alibaba on the bottom line, as the tech giant reported net profit has sunk cut and lowered revenue guidance for the year.
The bad news came as the company announced its Q2 results, at the same time as CEO Daniel Zhang told investors to expect revenue growth of merely 22 or 23 per cent – down from previous predictions of 29.5 per cent growth.
"The adjustment primarily reflects lowering of commerce revenues that include both direct sales and customer management revenue," Zhang said.
[1]
The CEO outlined several other factors he feels have dented profitability, including more rivals with deep enough pockets to with compete with Alibaba. As for Alibaba's merchants, Zhang said they had "strong transaction growth and high user retention rate, setting a strong foundation to compete for the long term".
[2]
[3]
Zhang also said the tech giant was growing its international commerce biz and its cloud contender is about to take off, now that digitalization is here to stay. These two efforts promise Alibaba a chance to go into new markets.
As for other numbers, adjusted EBITDA for Q2 was down 32 per cent year-on-year to ¥28 billion ($4.4B). Net income had a massive fall year-on-year from ¥26.5 billion ($4.15B) to ¥3.38 billion ($530M) representing a decrease of more than 87 per cent.
[4]
Cloud computing did better. Revenue came in at ¥20 billion, an increase of 33 per cent year-over-year.
"The decline of ¥13.2 billion year-over-year in total adjusted EBITA is a result of our investment in strategic areas and merchant support," reasoned CFO Maggie Wu. According to Wu, the commerce adjusted EBITDA decline "reflects ¥12.6 billion year-over-year increase in combined losses of key strategic areas, such as Taobao Deals, local consumer service, community marketplaces, and Lazada within commerce".
Alibaba's US-listed shares fell by 11.1 per cent after the results were announced.
[5]Ready, player anyone? China's gaming ban left cloud providers looking for someone to play with
[6]UK Telecommunications Act – aka 'power to strip out Huawei' – makes it to the statute book
[7]China Telecom's US arm sues in last-ditch bid to retain license
China's economy as a whole has recently slowed, so it's not hard to see how the tech industry – already riddled by antitrust, data protection and other regulations from Beijing in addition to the economic slowdown – would be affected.
"Looking forward, we remain confident in development of China consumption," cheerled Zhang, despite the call being peppered with details of international expansion to offset slowdown. Revenue growth outside the Middle Kingdom was reported at 34 per cent year-on-year during the quarter while domestic revenue growth was reported at 30 per cent year-on-year.
[8]
Alibaba, alongside other tech giants, has faced a barrage of government regulations under Xi Jinping's drive to create a new "network society". In September, the e-commerce giant was among those ordered to [9]stop blocking links to rivals' e-tail services. The multi-pronged behemoth's financial services biz Ant Group was [10]forced to restructure after having its IPO blocked, and the company as a whole has been [11]ordered to rectify naughty data collection behavior. ®
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[5] https://www.theregister.com/2021/11/17/china_gaming_ban_cloud_glut/
[6] https://www.theregister.com/2021/11/18/dcms_tca/
[7] https://www.theregister.com/2021/11/16/china_telecom_us_emergency_lawsuit/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YZeD3CR2wOY5pamZlcsdbgAAAQY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2021/09/14/beijing_to_industry_stop_blocking/
[10] https://www.theregister.com/2021/06/04/beijing_gives_ant_the_blessing/
[11] https://www.theregister.com/2021/05/24/china_demands_microsoft_apps_rectify_data_use/
[12] https://whitepapers.theregister.com/
The bad news came as the company announced its Q2 results, at the same time as CEO Daniel Zhang told investors to expect revenue growth of merely 22 or 23 per cent – down from previous predictions of 29.5 per cent growth.
"The adjustment primarily reflects lowering of commerce revenues that include both direct sales and customer management revenue," Zhang said.
[1]
The CEO outlined several other factors he feels have dented profitability, including more rivals with deep enough pockets to with compete with Alibaba. As for Alibaba's merchants, Zhang said they had "strong transaction growth and high user retention rate, setting a strong foundation to compete for the long term".
[2]
[3]
Zhang also said the tech giant was growing its international commerce biz and its cloud contender is about to take off, now that digitalization is here to stay. These two efforts promise Alibaba a chance to go into new markets.
As for other numbers, adjusted EBITDA for Q2 was down 32 per cent year-on-year to ¥28 billion ($4.4B). Net income had a massive fall year-on-year from ¥26.5 billion ($4.15B) to ¥3.38 billion ($530M) representing a decrease of more than 87 per cent.
[4]
Cloud computing did better. Revenue came in at ¥20 billion, an increase of 33 per cent year-over-year.
"The decline of ¥13.2 billion year-over-year in total adjusted EBITA is a result of our investment in strategic areas and merchant support," reasoned CFO Maggie Wu. According to Wu, the commerce adjusted EBITDA decline "reflects ¥12.6 billion year-over-year increase in combined losses of key strategic areas, such as Taobao Deals, local consumer service, community marketplaces, and Lazada within commerce".
Alibaba's US-listed shares fell by 11.1 per cent after the results were announced.
[5]Ready, player anyone? China's gaming ban left cloud providers looking for someone to play with
[6]UK Telecommunications Act – aka 'power to strip out Huawei' – makes it to the statute book
[7]China Telecom's US arm sues in last-ditch bid to retain license
China's economy as a whole has recently slowed, so it's not hard to see how the tech industry – already riddled by antitrust, data protection and other regulations from Beijing in addition to the economic slowdown – would be affected.
"Looking forward, we remain confident in development of China consumption," cheerled Zhang, despite the call being peppered with details of international expansion to offset slowdown. Revenue growth outside the Middle Kingdom was reported at 34 per cent year-on-year during the quarter while domestic revenue growth was reported at 30 per cent year-on-year.
[8]
Alibaba, alongside other tech giants, has faced a barrage of government regulations under Xi Jinping's drive to create a new "network society". In September, the e-commerce giant was among those ordered to [9]stop blocking links to rivals' e-tail services. The multi-pronged behemoth's financial services biz Ant Group was [10]forced to restructure after having its IPO blocked, and the company as a whole has been [11]ordered to rectify naughty data collection behavior. ®
Get our [12]Tech Resources
[1] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YZeD3CR2wOY5pamZlcsdbgAAAQY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
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[5] https://www.theregister.com/2021/11/17/china_gaming_ban_cloud_glut/
[6] https://www.theregister.com/2021/11/18/dcms_tca/
[7] https://www.theregister.com/2021/11/16/china_telecom_us_emergency_lawsuit/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YZeD3CR2wOY5pamZlcsdbgAAAQY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2021/09/14/beijing_to_industry_stop_blocking/
[10] https://www.theregister.com/2021/06/04/beijing_gives_ant_the_blessing/
[11] https://www.theregister.com/2021/05/24/china_demands_microsoft_apps_rectify_data_use/
[12] https://whitepapers.theregister.com/
Re: Winnie the Pooh
Pascal Monett
The CCP has always been ruining China.
First they did it by murdering anyone capable of critical thinking, removing vast amounts of experienced people in a horribly brutal fashion.
Then they did it with pie-in-the-sky economic rules that starved millions, to the point where they had to actually re-allow personal vegetable fields to avoid emptying the country completely.
What's happening now is a stroll in the park compared to what has already happened.
"we remain confident in development of China consumption"
Pascal Monett
And that is the great strength of China, which has an interior market that dwarfs that of three continents on its own.
India is the only other country with a comparable population and, therefor, market size.
And the OHSG has pushed China to become technically independant with his hare-brained idiotic schemes.
The dragon has woken, and it is stirring. We will feel its bite sooner rather than later.
Re: "we remain confident in development of China consumption"
Anonymous Coward
It will die of choking as it bites its own tail.
Winnie the Pooh
Due to the man that made calling him Winnie the Pooh illegal. Why not own it, everyone liked Winnie the Pooh, they don't much like Xi.
The CCP are ruining China, he is becoming the next Mao.