Alibaba Group’s financial report released on Tuesday, May 14th, indicated that despite the company’s revenue exceeding expectations in the fourth quarter ending in March, net profit plunged by 86%. This news led to a temporary 7% dip in Alibaba’s US-listed stocks during early trading.
According to Alibaba’s financial report on Tuesday, the net profit for the fourth quarter ending in March was 32.7 billion RMB ($4.52 billion USD), significantly lower than the 235.2 billion RMB from the same period last year, marking an 86% year-over-year decline. Alibaba attributed this drop to the adverse impact of net losses from changes in fair value of investments during the quarter.
The group also mentioned that in response to cautious consumer spending habits, Alibaba has been focusing on low-cost products, which is aiding in boosting domestic e-commerce sales.
Since Alibaba announced its largest restructuring in 25 years last March, splitting the company into six business groups and refocusing on core businesses including domestic e-commerce, the company has experienced a tumultuous year.
Against the backdrop of a slowing economy and a sluggish real estate market, Chinese consumers have been exercising caution in their spending habits.
Alibaba’s revenue for the fourth quarter totaled 221.87 billion RMB, slightly exceeding the market’s general expectation of 219.66 billion RMB.
In the context of a slowing domestic economy and increasingly fierce competition from low-cost enterprises like Pinduoduo, Alibaba has been intensifying its efforts in expanding overseas.
Not only Alibaba, but also Ant Group saw a decline in profits in the third quarter. Both Ant Group and Alibaba were founded by Chinese billionaire Jack Ma. Alibaba holds a 33% stake in Ant Group.
According to data calculated by Reuters based on Alibaba’s financial report released on Tuesday, in the three months ending on December 31, Ant Group’s net profit dropped by 19% to 7.87 billion RMB ($1.09 billion USD).
The Chinese Communist Party’s regulatory crackdown has made it difficult for Ant Group to find new growth drivers. Jack Ma relinquished his control over the group last year. In July last year, Chinese authorities imposed a 7.12 billion RMB fine on Ant Group for violating laws related to consumer protection and corporate governance.
In October 2020, Jack Ma publicly criticized the Chinese government’s financial and regulatory system for stifling innovation. Shortly after, Chinese authorities not only halted Ant Group’s $37 billion IPO but also ordered the group to rectify its operations, initiating a crackdown on Ma’s “business empire,” including an antitrust investigation into Alibaba.