Overview

  • Third quarter revenue increased 10% to $243 billion versus forecast of $246 billion
  • Account management revenue down 1% year-over-year
  • Shares were down about 3% in pre-market trading

Sales at the core business unit of Chinese commerce giant Alibaba Group Holding Ltd. (9988.HK) fell due to increased competition. The company's report, released Feb. 24, marked the slowest quarterly revenue growth since its IPO in 2014.

The slowdown in China is also taking a huge toll on companies as consumers reduce their discretionary spending.

From October 2021 to December 2021, group revenue grew about 10% to RMB 242.6 billion ($38.37 billion), with quarterly sales growth falling below 20% for the first time. Analysts were expecting average revenue of 246.37 billion yuan, according to Lufte data.

The amount merchants spend on advertising and promotions on Alibaba.com is tracked using a key metric called customer management revenue, which fell 1 percent year-over-year.

It marked the first time since the company's initial public offering that revenue from the division, which accounts for 41 percent of Alibaba's total revenue, fell. Toby Xu, deputy chief financial officer, said on an investor call that lower merchant fees in a slowing economy were partly to blame for the decline.

Alibaba

The company's annual Double Eleven sale in China last November saw an 8.5 percent increase in the total value of merchandise, a record low.

Shares of Alibaba were down about 3 percent in New York before the opening bell. After the results were announced, shares fell nearly 7 percent, trailing the decline in global stocks after Russia's full-scale invasion of Ukraine last week.

The company's competitors, such as Hong Kong-based Jitterbug and Racer, are also putting increasing pressure on Alibaba by capitalizing on the booming trend of live e-commerce.

Vinci Zhang, who tracks China's e-commerce industry at research firm Pacific Epoch, said.

“Merchants are now having to allocate their ad revenue to different platforms. In the past, if you were an apparel merchant, maybe you would allocate 100% to Alibaba, but now a portion of that is allocated to short-form video players.”

Alibaba's fintech subsidiary Ant Group reported profits of about CNY17.6 billion for the quarter ended September, compared with CNY15 billion a year earlier, according to the company's Feb. 24 filing.

Alibaba is owed profits from Ant Group. China conducted a complete restructuring of Ant, leading to the derailment of its $37 billion initial public offering at the end of 2021.

In the nine months ended December, the company purchased about $7.7 billion worth of stock.

While revenue from the company's cloud business rose 20 percent year-over-year to CNY19.5 billion ($3.08 billion) in the fiscal third quarter, the division's adjusted core earnings (EBITDA) declined 66 percent sequentially compared to the previous quarter.

Oshadhi Kumarasiri, an analyst at Lightstream Research, said.

“Alibaba appears to be finding it difficult to maintain its growth trajectory in most markets, including its cloud business.”

Net profit attributable to shareholders plummeted to 20.43 billion yuan in the quarter from 79.43 billion yuan the previous year. Alibaba, once Asia's largest publicly traded company, has long since ceded its throne to Taiwanese chipmaker TSMC, trailing even beverage maker Guizhou Maotai (600519.SS) and local rival Tencent (0700.HK).

The company's U.S.-listed shares have fallen by about half in the past 12 months amid Beijing's regulatory crackdown on certain industries

(1 USD = 6.3226 RMB)