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Alibaba misses Q2 revenue target, invests in diversified retail and consumption formats

Written by AJ Cortese Published on     2 mins read

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The company is investing all of its excess profits in key technologies and products.

Alibaba generated RMB 205.7 billion (USD 31.8 billion) in total revenues for the quarter ending in June, up 34% year-on-year but falling short of market expectations of RMB 251 billion (38.8 billion), the company said in an earnings release on Tuesday.

After being slammed with a USD 2.8 billion fine for antitrust violations in April, the e-commerce giant managed to grow its user base across all platforms in China to 912 million from 890 million in Q1 2021, while deepening its e-commerce offerings.

The more affordable Taobao Deals platform added 10 million annual active customers during the recent quarter, bringing the total to more than 190 million. Idle Fish (or Xianyu), Alibaba’s secondhand trading platform, surpassed 100 million monthly active users in the June quarter. GMV generated by the company’s Community Marketplaces, which allow users to place and pick up grocery orders at local service stations, tripled quarter-over-quarter.

Alibaba is ramping up various consumption formats beyond its core e-commerce business, as the company integrates on-demand services into its mapping app, AutoNavi. What started as simple a navigation app now offers ride-hailing, fuel services, hotel booking, and tourist attraction ticketing. “AutoNavi, after years of investments, is evolving from a map service provider to an important entry point for consumers’ discovery of local services near their destinations,” chairman and CEO Daniel Zhang told investors on the earnings call. By collaborating closely with Alibaba’s travel booking platform Fliggy, AutoNavi expects to have 100 million transacting customers by the end of March 2022.

While Alibaba Cloud’s revenue increased by 29% YoY to RMB 16.1 billion (USD 2.49 billion), the growth rate was slower than the 37% YoY increase recorded in the March quarter. The adverse impact on Alibaba Cloud’s business was attributed to ByteDance’s international operations shifting to a different provider in the March quarter. Disregarding the absence of this major client, the segment’s revenue growth would have been closer to 40% YoY, CFO Maggie Wu told investors. Alibaba Cloud is actively working to diversify its client mix and is providing more data analytics services in addition to storage, Zhang said. Wu also cautioned that the recent crackdown on after-school education and tutoring may harm Alibaba’s cloud business as demand for cloud computing from private education companies wanes.

“We are in the process of studying the regulatory requirements, evaluating the potential impacts on our relevant businesses, and we will respond positively with actions. We believe all these new regulations aim to foster the healthy development of the internet industry over the long run,” said Zhang on the regulatory changes in China’s tech sector. Alibaba’s share price fell by 1.35% to USD 197.38 in Tuesday trading following the earnings release, which marked the company’s first time missing quarterly revenue expectations in over two years.

Read this: Alibaba and Tencent weigh openings in “walled gardens” to make services accessible to each other

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