The Chinese e-commerce giant and media owner Alibaba posted a 50% drop in net profit to $3.4 billion (22.7 billion yuan) in the three months from April to June in the first quarter of this fiscal year. Revenue was unchanged at $30.7 billion (206 billion yuan).
Using Alibaba’s preferred non-GAAP measure of profitability, net profit for the quarter still fell 30%, from 45.1 billion yuan to 3.02 yuan or $4.52 billion.
The figures, while not as bad as some analysts had predicted, added to a period of turmoil and uncertainty for the iconic company that was once one of China’s most respected businesses.
“In the past quarter, we have actively adapted to changes in the macro environment, continued to focus on our long-term strategy, and continued to strengthen our customer value creation capabilities,” Alibaba Chairman and CEO Zhang Yong said in a statement on Thursday.
Alibaba’s problem is a combination of the effects of China’s slowing economic growth and a campaign of political repression that has overwhelmed the country’s tech sector for nearly two years. The purpose of the squeeze is to reduce the impact of tech giants on Chinese daily life, especially Alibaba. Some critics call it the castration process.
In recent months, company founder Jack Ma announced that he would sell all of his shares in Alibaba and Ant Group, the financial giant he founded. Ant also announced that it would no longer benefit from accessing Alibaba’s customer data, making it an even more monotonous problem.
SoftBank, a Japanese tech investment firm that has been a core investor for more than a decade, revealed this week that it has raised about $22 billion in cash from deals that will significantly reduce its stake in Alibaba over the next few years. So much so that SoftBank could lose its seat on Alibaba’s board.
It’s a disgrace to SoftBank and Alibaba, and a concession to Alibaba’s difficult revival. But the stock sale comes after Alibaba, rival Tencent and China’s tech sector have lost as much as $1 trillion in market value since the government crackdown began. (Tencent will report quarterly results on Aug. 17.)
And Alibaba has recently prepared to make Hong Kong a joint primary listing place for its shares. It’s a tacit approval that could be forced out of the New York Stock Exchange — earlier this week, the company said it failed to comply with US regulators on its audit report — and greater scrutiny in Beijing Down to the stock market.
On the positive side, video streaming platform Youku’s average daily paying user base grew by 15% year on year, but the total number of subscriptions was not disclosed. The company said the improvement was “primarily driven by premium content and continued contributions from our 88VIP membership program.” “Youku has continued to improve operational efficiency through strict investment in content and production capabilities, and has narrowed year-on-year losses for five consecutive quarters.”
Revenue from Alibaba’s broader digital and media unit, which includes Youku, film production and distribution, internet browser, and movie ticketing service Taopiao, fell 10% to RMB 7.23 billion (from RMB 8.07 billion a year earlier). Deepening losses: Its adjusted EBITDA deficit increased from RMB 419 million to RMB 630 million or US$93 million.
Alibaba’s shares in Hong Kong rose 5 percent to HK$95 on Thursday ahead of the results. ADR shares rose 3.4 percent to $100.12 in premarket trading in New York.