Alibaba posts first quarterly loss in nine years after US$2.8 billion antitrust fine, spoiling the sales surge on consumer recovery
- Sales increased 64 per cent to 187.4 billion yuan, beating forecasts
- The company swung to a loss of 7.65 billion yuan, after paying out US$2.8 billion in fines to the State Administration for Market Regulation (SAMR)
The company reported a loss of 7.65 billion yuan (US$1.185 billion), after accounting for 18.2 billion yuan in fines to the State Administration for Market Regulation (SAMR). Sales jumped 64 per cent to 187.4 billion yuan for the three months ended March, in line with analysts’ estimates.
“Revenue was ahead, with customer management revenue broadly in line with expectations, but a larger-than-expected step-up in investment led to a material adjusted Ebita [earnings before interest, taxes, and amortisation] miss,” Atlantic Equities analyst James Cordwell told Bloomberg. Cordwell has an overweight rating on Alibaba.
Alibaba chairman and chief executive Daniel Zhang Yong was keen to play up growth in consumers amid the pandemic.
“We have gone through all kinds of challenges, including Covid-19, fierce competition, as well as the anti-monopoly investigation,” Zhang said in an earnings call with analysts, noting that the company reached the milestone of one billion annual active customers. “We plan to invest all of our incremental profits in the coming year into core strategic areas such as technology innovation, support for merchants to lower their operating costs, user acquisition and experience enhancement.”
Active consumers on the company’s e-commerce retail platforms rose 41 per cent in Alibaba’s last financial year to 811 million users, beating the 788.4 million customers at Pinduoduo, and helping to bolster the annual gross merchandise volume (GMV) to a record US$1.2 trillion. The company aims to grow its customer base to surpass 1 billion by the end of this financial year.
Alibaba is China’s largest provider of cloud computing services, competing with Amazon, Microsoft and Tencent Holdings. The division’s revenue grew 50 per cent last year to 60.12 billion yuan, driven by customers in the internet, public sector and financial industries, with the quarter’s growth increasing 37 per cent to 16.76 billion, Alibaba said.
Alibaba “remains committed to investment in globalisation and the enterprise internet, which could drive long-term revenue and earnings growth, ” Huatai Securities wrote in a research report.
Zhang acknowledged on the call that the SAMR penalty had resulted in an operating loss for the quarter, the first in Alibaba’s history as a public company.
“The increase in revenue came mainly from Alibaba’s existing channels and platforms, but it is facing fierce competition now from the likes of Pinduoduo and JD.com,” said Li Chengdong, chief executive of e-commerce consultancy Dolphin Think Tank. “It could lose its edge easily. Besides, the showdown over the anti-monopoly investigation is not over yet, so there’s still uncertainty.”
Alibaba’s share price has dropped 8 per cent since the start of the year, closing at HK$213.2 in Hong Kong on Thursday before the latest quarterly results were announced. Alibaba’s US-listed shares were down about 3 per cent at US$213.3 in early New York trading on Thursday.
Additional reporting by Bloomberg