Alibaba reports worse-than-expected profit drop of 75% amid challenges
Published: Feb 24, 2022 10:11 PM
Alibaba's headquarters in Hangzhou, East China's Zhejiang Province Photo: cnsphoto

Alibaba's headquarters in Hangzhou, East China's Zhejiang Province Photo: cnsphoto

Chinese e-commerce giant Alibaba reported a worse-than-expected profit drop in the three months ended on December 31, 2021, as the Chinese internet firm struggled to deal with rising competition from rival tech companies in China as well as strengthening regulations on the online sector. 

Revenue totaled $38.066 billion, up 10 percent on a yearly basis, but net income dropped 75 percent to $3 billion, according to financial data revealed by Alibaba on Thursday. The profit drop exceeded market estimates of 60 percent. 

Revenues from China's commercial retail business stood at $26 billion during the period, up 7 percent on a yearly basis, the data showed. Customer management revenue decreased by 1 percent, which the company attributed to slowing market conditions and competition. 

The company's shares gyrated on Thursday. The price fell 6.67 percent to a record low of HK$104.9 ($13.4) on Thursday on the Hong Kong stock market. In the US, the shares were down 4.74 percent as of press time. 

Experts attributed Alibaba's profit drop primarily to the rising competition among Chinese online companies, especially the rise of domestic technology company ByteDance and its short video-sharing app Douyin, which has seized a lot of advertising revenues from Alibaba's platforms. 

"China's e-commerce platforms have reached a turning point from high expansion to slow growth. Alibaba's backbone e-commerce is under such downward pressure and it has to find new points of growth for future development," independent e-commerce expert Lu Zhenwang told the Global Times.

Although Alibaba has ventured into many areas to multiply its revenue sources, its investment in the past few years was not successful, being too small in scale or in terms of returns, Lu said, especially compared with companies with similar strategies like Tencent and ByteDance. 

He also said that strict regulations on domestic platforms added pressure on companies like Alibaba, although the impact of such management is limited to e-commerce.

"As regulators gradually toughen management of online companies, it will become even more common for companies to see sagging profits in spite of revenue growth. Particular segments will be especially hurt like Tencent's gaming sector or Alibaba's financial arm," he noted.