Caixin
May 14, 2021 07:39 AM
BUSINESS & TECH

Alibaba’s Revenue Beats Estimates but Swings to Loss on Antitrust Fine

Alibaba swung to a 5.5 billion yuan net loss after the company coughed up a $2.8 billion fine for monopolistic behavior imposed by Beijing.
Alibaba swung to a 5.5 billion yuan net loss after the company coughed up a $2.8 billion fine for monopolistic behavior imposed by Beijing.

(Bloomberg) — Alibaba Group Holding Ltd.’s revenue beat estimates after China’s e-commerce leader rode a post-pandemic recovery and began to move past a bruising antitrust investigation.

Jack Ma’s flagship e-commerce business reported revenue of 187.4 billion yuan ($29 billion) in the March quarter, compared with the 180.4 billion yuan average of analysts’ estimates. But it swung to a 5.5 billion yuan net loss after the company coughed up a $2.8 billion fine for monopolistic behavior imposed by Beijing. It forecast revenue of more than 930 billion yuan for the coming year.

In U.S. trading, Alibaba shares fell 6.28%. Executives have sought to put behind them a crackdown on Ma’s internet empire that’s shaved $260 billion off the Chinese internet behemoth’s market value. The $2.8 billion fine marked the conclusion of a four-month probe, but the threat of future action is likely to cast a shadow over Alibaba’s business for some time.

Following the fine, Alibaba joined 33 other tech companies in pledging to abide by anti-monopoly laws and eradicate abuses like forced exclusivity agreements. The government has also pushed for greater control over the invaluable online data amassed by its internet giants that has enabled their meteoric expansion over the past decade. Antitrust watchdogs are screening previous investments and could force a divestment if any are deemed in violation of regulations.

Alibaba’s regulatory overhang may lift with the April fine potentially marking an end to the worst of the scrutiny, which began in late 2020. Meanwhile the company could continue to benefit from accelerated user and merchant adoption of its online grocery shopping, cloud computing and remote-work applications in the aftermath of the pandemic. Longer-term sales and profit growth could be driven by global expansion and the monetization of newer business segments such as logistics, media and entertainment, said Vey-Sern Ling and Tiffany Tam, analysts at Bloomberg Intelligence.

Alibaba is keen to convey the impression that it’s back to business as normal. Ma was spotted this week at an annual staff and family celebration at its sprawling Hangzhou campus, where kids played in ball pits while company mascots posed for photos with employees. But several key issues remain unresolved as China continues to rein in Alibaba and its increasingly powerful rivals from Tencent Holdings Ltd. to Meituan.

Alibaba’s finance affiliate — Ant Group Co. Ltd., a major provider of financing for Alibaba’s consumers — is still wrangling with regulators over a forced restructuring that could curb its lending. Beijing is debating how it will regulate control and ownership of online data, core to Alibaba’s competitive advantage. And the government is said to be considering whether to compel Alibaba to shed media assets that have supported its brand.

Alibaba’s shares fell 3.2% in Hong Kong before the results were released. The stock is down 31% from its October peak, just before regulators blocked Ant’s $35 billion initial public offering and launched its probe into the company.

Contact editor Bob Simison (bobsimison@caixin.com)

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