Alibaba ekes out sales growth despite Covid-hit quarter

Alibaba achieved sales growth of 2 per cent in the final quarter of last year, despite zero-Covid lockdowns paralysing much of China during the period.

The Chinese ecommerce giant reported adjusted net income rose 12 per cent from a year earlier to Rmb50bn ($7.2bn) on the back of Rmb248bn of revenue, above analysts’ estimates.

“This past quarter, our business and operations experienced significant challenges due to the rapid change in the Covid situation,” said chief executive Daniel Zhang, noting the group had seen a sales uptick starting in February.

“We are optimistic about continued improvement in the situation,” Zhang said.

The better than expected results sent Alibaba’s shares climbing more than 2 per cent in early trading in New York on Thursday. But the group has lost more than 65 per cent of its market value since officials in Beijing called off the planned public listing of sister fintech company Ant Group more than two years ago.

Ant’s failed IPO in November 2020 marked the beginning of Beijing’s broad crackdown on China’s largest internet groups, which is now beginning to ease amid stuttering economic growth.

While Chinese officials have signalled they are stepping away from the crackdown’s heavy handed fines and punishments, their desire to keep close tabs on their tech giants’ operations remains. At Alibaba, that has meant state groups have recently taken “golden shares” in two of its onshore units.

The tough environment has spurred Alibaba to cut costs and reduce staff headcount. The group’s total staff count fell by nearly 20 thousand over the course of last year.

Key pillars of Alibaba’s business also face challenges. Growth at the group’s cloud computing arm continued to slow in the December quarter, with sales rising only 3 per cent year-on-year. Zhang took personal control of the business in December in part to help sort out issues at the business line that management sees as central to the group’s future.

Zhang on Thursday said Alibaba’s robust cloud infrastructure would support its efforts to build generative artificial intelligence capabilities similar to ChatGPT, as well as provide the computing power other companies in the field need.

“We’re not talking about having a chatbot for the sake of a chatbot rather we’re talking about integrating that capability deeply into [our] business,” he said.

Alibaba is one of the many Chinese tech groups racing to replicate ChatGPT. Furthest ahead is Baidu whose founder Robin Li on Wednesday said its generative AI effort would be “revolutionary” for its search business.

Results for Alibaba’s high margin ecommerce platforms Taobao and Tmall continued to deteriorate amid Covid lockdowns and rising competition from the likes of ByteDance’s Douyin and Pinduoduo.

Captured in the group’s customer management segment, the results for those ecommerce platforms showed sales fell 9 per cent year on year during the fourth quarter, worse than the 7 per cent decline in the third quarter.

Robin Zhu, an analyst at Bernstein said investors would be relieved to hear the group was not abandoning its efficiency drive and engaging in another marketing battle to win over shoppers. “Management comments on post [Chinese new year] trends were constructive,” he added.

Alibaba said it had spent more than $3bn to repurchase 45mn shares during the three-month period, or about 2 per cent of its outstanding share count. The group has about $21bn left to utilise as part of a previously authorised buyback programme.