Alibaba reports first ever loss under the weight of $2.8bn fine

13 May 2021

Image: © zhu difeng/Stock.adobe.com

While Alibaba smashed expectations with its continued revenue growth, a fine issued in April has dramatically impacted its bottom line.

Earlier this year, Alibaba reported strong earnings in its February financial results. The Chinese company had scored a 37pc year-on-year increase in revenue for the quarter, amounting to about $33.9bn, and a net income of almost $12bn.

However, regulatory hurdles were already on the horizon for the e-commerce giant even as these results were announced in February. Alibaba was under the investigation of authorities in China for alleged anti-competitive practices. Last month, the authorities brought the hammer down with a $2.8bn anti-monopoly fine.

The massive fine has impacted Alibaba’s most recent earnings call today (13 May), which saw the company record a net loss of 5.47bn yuan ($836bn) – its first ever reported loss since going public.

This loss has been largely attributed to the anti-monopoly fine. Alibaba reports that, without this cost and “certain other items”, net income at the company for the quarter was 26.2bn yuan ($4bn), representing a rise of 18pc year-on-year.

The loss was a shock to market expectations which had forecast a net profit for the company, according to CNBC.

Alibaba’s revenue for the quarter ended 31 March also beat market expectations at 187.4bn yuan ($28.6bn), up 64pc year-on-year. This has been attributed to continued growth in online shopping.

Alibaba also recorded continued revenue growth for its cloud computing division, which first became profitable last year.

Ant Group, Alibaba’s fintech affiliate, is also dealing with the fallout of tightening regulation. Just when it was about to complete the world’s largest IPO last November, its listing on the Shanghai Stock Exchange was suspended due to changes in the financial technology regulatory environment in China.

Last month, the People’s Bank of China announced that Ant Group would restructure as a financial holding company.

Alibaba’s upward trajectory appears unimpeded, however. The company is expecting further growth for its 2022 fiscal year, with CFO Maggie Wu setting the forecast at 930bn yuan.

“Given the market potential and our proven profit and cash flow generation capabilities, we plan to use all of our incremental profits and additional capital in fiscal year 2022 to support our merchants and invest into new businesses and key strategic areas that will help us increase consumer wallet share and penetrate into new addressable markets,” she said.

Elaine Burke is the editor of Silicon Republic

editorial@siliconrepublic.com