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Alibaba shares fall by 20%, struggling to maintain the growth trajectory

Key Highlights:

  • Alibaba’s customer management revenue is falling 1% year on year.
  • The fiscal Q3 revenue is up 10% which is 243 billion Yuan as compared to the forecasted 246 billion Yuan.
  • Alibaba shares are down by 3% in premarket trade.

Alibaba Group Holding has reported a slow quarterly growth since going public in 2014. The company has faced a drop in sales due to the rising competition. The Chinese economy has also taken a hit since the consumers have cut back discretionary spending.

The company did record a rise in revenue of about 10% in October-December 2021. The analysts had expected revenue of 246.37 billion Yuan but the Q1 sales growth has fallen by 20%, also, the customer management revenue has fallen 1% year after year.

Alibaba affected by slowing economy

Since the company’s IPO, Alibaba’s total revenue has fallen drastically. Toby Xu, the CFO of Alibaba, commented that the drop has been caused due to the lowering merchant fees amid the slowing economy.

In November, Alibaba’s singles’ day promotional event recorded only gross merchandise value growth of 8.5%, which is a record low. Alibaba’s shares fall by 3% in New York before the opening bell and decreased 7% after the results were announced.

Alibaba is also facing pressure from the competitors like ByteDance, which has capitalized on the popular trend of live streaming e-commerce.

Merchants are exploring other platforms

Previously, the merchants would invest 100% of their ad marketing on Alibaba but now are exploring different platforms for advertising. Alibaba has been affected by this trend. Ant Group—Alibaba’s fintech affiliate—has accounted profit of 17.6 billion Yuan for the Quarter ended September (which was 15 billion Yuan last year).

Q3 revenue for Alibaba’s cloud business grew 20% year-on-year to hot 19.5 billion Yuan, but by adjusting core earnings for the unit declined 66% sequentially from the previous quarter.

Alibaba’s unsteady growth trajectory

Alibaba is struggling to maintain a steady growth trajectory in most of the markets. Previously remarked as Asia’s biggest listed company has now fallen behind Taiwanese chipmaker TSMC, its local rival Tencent (0700. HK), and beverage maker Kweichow Moutai (600519. SS).

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