Alibaba has released its financial results for the last quarter of 2021, spanning October through December, and they are lackluster.
Only 10% increase compared to 2020
The e-commerce giant recorded a turnover of 38.06 billion dollars. In addition to falling short of analysts’ estimates, this result represents a 10% increase in the company’s revenues compared to the previous year. It is simply Alibaba’s weakest year-over-year profit increase since its IPO in 2014.
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As for its net income, the Chinese firm reached 20.43 billion yuan against 79.43 billion yuan a year earlier, a record drop of 74%. The decrease is mainly attributable to the impairment of goodwill for a total amount of 25.14 billion yuan and a decrease in net gains from changes in the fair value of its holdings, explains the South China Morning Post.
More specifically, the company’s cloud division continued to see its profits increase with a 20% increase over the previous year to reach 19.54 billion yuan. If this increase is less significant than in the previous quarter, Alibaba notes lower losses for this branch. This trend is explained by two factors: ByteDance, the parent company of TikTok, continued to transfer its overseas operations away from Alibaba’s cloud services, while a slowdown in demand from customers from online entertainment or education has been noted. As a reminder, the company is the largest cloud service provider in the Middle Kingdom ahead of Huawei.
The group’s local consumer services business, which includes online food delivery platform Ele.me, saw its revenue increase 27% to 12.14 billion yuan, representing 5 % of Alibaba’s total revenue.
Alibaba is based in Hangzhou, in the Chinese province of Zhejiang. Photography: 远扩王 / Unsplash
Alibaba is impacted by different trends
In general, the lackluster results of the Chinese giant were predictable and can be explained by three major trends; firstly, the firm had to deal with Beijing’s regulation, which has greatly increased over the past year. It has thus been fined a record 2.3 billion euros for anti-competitive practices, and must still prepare for other measures since the Chinese authorities are not done with their technological giants.
Then, the Covid-19 pandemic, and the emergence of new variants, also impacted the retail sector in the country during the last quarter of 2021. Total retail sales in the country increased by only 3.9% in 2020 and 2021, according to data from the National Bureau of Statistics, directly affecting Alibaba whose main business remains e-commerce.
In this sector precisely, the company has also seen more and more serious competitors, in addition to JD.com, coming to grab market share. This is particularly the case for the equivalent of TikTok, Douyin, but also for Pinduoduo or even Kuaishou. Thus, sales of Alibaba’s business activity in China totaled 172.23 billion yuan in the fourth quarter, up 7% from a year earlier, to account for 71% of the overall revenue of the group.
In order to diversify and reach more remote areas of China, Alibaba launched Taobao Deals. The company also unveiled its ambition to conquer the e-commerce sector in Southeast Asia.
Expand internationally
International activities also represent a real growth opportunity for Alibaba. Indeed, its international trade-related segment grew 18% in the last quarter to reach 16.45 billion yuan, representing a 7% contribution to the company’s total quarterly revenue.
” Alibaba made steady progress this quarter as we continued to execute our multi-driver growth strategy in a complex and volatile market environment. We have achieved positive momentum in key strategic businesses through a disciplined focus on building capabilities and creating value to fuel our future growth. Our global annual active consumers grew at a solid pace, reaching 1.28 billion thanks to a quarterly net increase of 43 million said Alibaba CEO Daniel Zhang Yong in a statement.