Alibaba misses Revenue Estimates as E-commerce Growth Descends

China’s popular Alibaba Group Holding Ltd, missed analyst estimates for first-quarter revenue on August 3, 2021, the reason being the descending e-commerce business and rising competition from smaller players such as JD. Com Inc (9618.HK) and Pinduoduo Inc (PDD.O).

 

Due to the liberty in restrictions which were laid down by the pandemic, customers are now visiting physical stores rather than ordering online and this has led to decrease in the e commerce giants’ sales.

According to IBES data from Refinitiv, core commerce revenue for Alibaba increased 35% to 180.24 billion yuan in the quarter, in comparison to estimates of 184.23 billion yuan. In the fourth quarter, the unit’s revenue rose more than 70%. Overall, revenue increased about 34% to 205.74 billion yuan ($31.83 billion) in the first quarter ended June 30, below estimates for 209.39 billion-yuan, Net income attributable to shareholders fell to 45.14 billion yuan, compared with 47.59 billion yuan a year earlier. The company earned 16.60 yuan per share, above estimates for 14.43 yuan.

According to the Chinese e-commerce giant’s reports, Alibaba, which dominates on about a third of Ant, recorded a profit of 4.49 billion yuan for the quarter ended June 30 from its investments in the financial leader.

Revenue in Alibaba’s cloud computing division increased 29% year over year, reaching 16.05 billion yuan ($2.49 billion).

Alibaba had become one of the main targets of the ongoing Chinese regulatory crackdown on industry, the results added a toll on to them which worsened the impact of the company.

In the end of 2020, the regulators halted a planned $37 billion IPO of Ant Group in Shanghai and demanded restructuring of the financial unit.

Earlier in April, Alibaba had to face a fine of $2.75 billion by China‘s anti-monopoly regulator for engaging in anti-competitive practices.

Alibaba CEO Daniel Zhang said he would continue to monitor the impact of ongoing regulatory changes on the company’s business – in an earnings call with investors. He cited a recent regulatory crackdown on community marketplace platforms allowing sellers to offer items below market value as an example of an area the company is monitoring, in addition to the Data Security Law and an investigation from the Ministry of Industry and Information Technology into open links between rival platforms.

“We are in the process of studying the regulatory requirements, evaluating the potential impacts on our relevant businesses and we will respond positively with actions,” – Zhang said.

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