Alibaba swings to first loss since going public

Chinese ecommerce group Alibaba swung to its first quarterly loss since its US listing six years ago as a record fine levied by Beijing authorities weighed on its earnings.

On Thursday, a month after it was hit with a $2.8bn penalty for allegedly abusing its market dominance, the company reported a net loss of Rmb5.5bn ($836m) on Rmb187bn in revenues for the quarter from January to March.

Revenues rose 64 per cent year on year, boosted by the acquisition of a supermarket chain last year, and came in ahead of analyst expectations.

“In the past fiscal year we’ve gone through all kinds of challenges, including the Covid-19 pandemic, fierce competition, as well as an anti-monopoly investigation,” said chief executive Daniel Zhang.

Zhang said the company had accepted the record antitrust penalty “with sincerity” and would ensure future compliance “with determination”. He added it had helped them reflect on their “social responsibilities and commitments”.

Alibaba’s US listed shares rose more than 2 per cent in pre-market trading.

China’s reigning ecommerce leader also outlined a large investment plan aimed at competing with upstart rivals such as Pinduoduo, which overtook Alibaba in annual shoppers at the end of last year, in part by offering them massive discounts. Alibaba has also invested in taking on rival Meituan in food delivery.

“We can see so many of our competitors are running huge losses and investing huge amounts . . . there is no reason for us not to be investing,” said chief financial officer Maggie Wu. 

Alibaba said it would invest all of its incremental profits over the next 12 months to build out its technology platform, support its merchants and attract new customers. It expects revenue to exceed Rmb930bn during the period, up from Rmb717bn this past year. 

For the first quarter, sales picked up at Alibaba’s main ecommerce sites Taobao and Tmall, but growth in its cloud computing business slowed to a 37 per cent year-on-year rise as a key customer cut usage internationally. Alibaba did not disclose the customer’s name.

Cloud is a key profit driver for foreign tech giants like Amazon and analysts had expected Alibaba to benefit as the business finally turned profitable last year.

Meanwhile, Alibaba’s results showed that its fintech arm, Ant Group, posted record profits in the fourth quarter of last year, the first indication of the condition of its business after Chinese authorities cancelled its $37bn initial public offering in early November.

Ant earned an estimated Rmb21.8bn in profit during the quarter, with its listing suspension coming midway through the October to December period. Alibaba books one-third of Ant’s profit a quarter late. 

The fourth-quarter profit equalled Ant’s reported 2020 first-half profit and was an increase on the estimated Rmb14.5bn it earned in the third quarter.

Still, the profit came before Chinese authorities forced a wide-ranging restructuring of the company that will shrink its business this year.