(Bloomberg) — Alibaba Group Holding Ltd.’s revenue missed estimates for the first time in more than two years, underscoring how Beijing’s months-long campaign against the internet sector is taking a toll.
Growth slowed in most of Alibaba’s major divisions from cloud to e-commerce, underlining fears that the mounting list of new government regulations is constraining expansion and increasing companies’ burdens. In a sign of the times, Chief Executive Officer Daniel Zhang on Tuesday endorsed a string of government policies enacted during a tumultuous 2021, from strict curbs on data collection to excessive subsidies. In particular, he voiced support for a six-month campaign kicked off last week by the internet industry overseer that expressly called out the blocking of rivals’ services.
Alibaba and arch-foe Tencent Holdings Ltd. have long excluded each other’s services from their platforms, creating so-called walled gardens. That rift helps perpetuate the empires of China’s two largest corporations and is a key point of contention with regulators concerned about the growing influence of internet firms because it encourages merchants and startups to gravitate toward one or the other.
“We do see cross-platform openness and connectivity as a positive trend that could unlock greater dividends in the internet era,” Zhang told analysts.
Read more: Alibaba Analysts Ignore Sales Miss to Stay Positive: Street Wrap
Alibaba’s shares slid 1.4% in New York. Among the first of China’s internet giants to feel the heat from Beijing, the company has been closely watched for clues to the real-world impact of the upheaval that’s ensued since regulators went after industries from online commerce to ride-hailing and edtech.
Months after swallowing a $2.8 billion fine for violations such as forced exclusivity with merchants, Jack Ma’s flagship e-commerce firm is ploughing money into areas like its bargains platform and community commerce to offset slowing growth, at a time when Pinduoduo Inc. and JD.com Inc. are eroding its dominance.
Revenue for the three months ended June climbed to 205.7 billion yuan ($31.8 billion), compared with the 209.4 billion yuan average of analyst estimates. Net income was 45.1 billion yuan, rebounding from a loss in the previous quarter following the record antitrust penalty. The company announced Tuesday it was boosting its share buyback program by 50% to $15 billion.
In the wake of the crackdown, Alibaba has made tentative steps to reach out to Tencent, applying to create a mini-app for its Taobao Deals platform on Tencent’s WeChat service, Bloomberg News reported earlier this year. The Wall Street Journal also reported Alibaba is considering letting customers use WeChat Pay on Taobao and Tmall.
“If Tencent and Alibaba open to each other, it’ll be like each takes what they need,” Blue Lotus Capital Advisor analyst Shawn Yang said. “Alibaba will benefit more because it is hungry for user traffic, more than Tencent is for GMV. But no one knows how that would play out yet.”
Scrutiny on the tech sector has expanded since Alibaba’s penalty. The antitrust watchdog in April launched an investigation into Meituan and ordered 34 internet giants, including Alibaba and its units, to carry out internal reviews and rectify any excesses. In July, the cyberspace regulator stepped into the fray, announcing a probe into Didi Global Inc. and removing its services from Chinese app stores following its U.S. listing, expanding the crackdown into the realm of data security.
Alibaba has lost more than $300 billion in market value from its October peak, just before affiliate Ant Group Co.’s initial public offering was scrapped and the tech crackdown began in earnest. Ant’s profit fell to $2.1 billion in the March quarter after Chinese regulators told it to overhaul its sprawling operation.
Alibaba Is Stuck With E-Commerce — At Least for Now: Tim Culpan
What Bloomberg Intelligence Says
Fiscal 2022 profit may be saddled as Alibaba increases spending to make its order-fulfilment services and marketing campaigns more efficient for strategic businesses such as Taobao Deals, Ele. me and Lazada and to spur commerce-revenue gains from a bigger customer base.
