Why did Alibaba saw a loss for the first time in years?

Alibaba Group Holding Limited which is also known as Alibaba group is a Chinese based technology company. The company was founded in the year 1999 and has its headquarters located in Zhejiang. Alibaba group specializes in e-commerce, internet, technology and retail sectors. The company has recorded a loss for the first time ever, so let’s look at the reason behind it.

Results of Alibaba
Reason for the Loss
The shares of Alibaba
FAQ

Results of Alibaba

The top e-commerce platform of China Alibaba had recorded a loss of 7.66 billion yuan on 13 May 2021 for its first quarterly results. This is the first time the company has recorded a loss in its history after going public in the year 2014.

The company has recorded an annual revenue of 930 billion yuan for the year ending March 2022 which is more than what they had estimated that is 982.25 billion yuan.

There was an increase in the core commerce revenue of the company of around 72% which was amounted to 161.37 billion yuan in the fourth quarter. But the company’s cloud computing has seen a slow in its growth which had reduced by 58% to 37 % compared to the previous year to 16.8 billion yuan. This is considered to be the most weakest growth since the year 2016.

The overall revenue of the company has seen an increase with 187.4 billion yuan for the fourth quarter when compared to the Refinitiv forecast of 180.41 billion.

JackMa Pens down Letter Ahead of Stepping Down

Jack Ma, the executive chairman of Chinese e-commerce giant, Alibaba is to stepdown in September 2019. With just a year left, JackMa has penned down a letterto his employees, shareholders and customers. He pointed out that a companycannot be forever cradled by its founders and there’s a need to b…

StartupTalkyShubham Kumar

Reason for the Loss

The main reason for the recorded loss by the company is considered to be the regulations bought in by the Chinese regulators. The regulatory crackdown in China had led to the suspension of one of the biggest IPO of the affiliate company of Alibaba Group, Ant group where the IPO was estimated to be USD 37 billion.

Other than that, the company was fined by the Chinese regulators on the basis of anti-competitive business practices with a fine of USD 2.8 billion. The fine had led to an operating loss in the fourth quarter of around 7.66 billion yuan.

The slow growth in the cloud computing sector is due to a top customer which had a huge presence outside of China in the cloud computing business of Alibaba. The company had conveyed that the customer had ended its business for non-product related reasons which led to the slower growth.

The reasons why Alibaba might be fined $1 billion by China

Alibaba Group was founded on 28 June 1999. It is known as Alibaba Group HoldingLimited and also as Alibaba.com. It is a multi-national company which is basedin Zhejiang, China. Alibaba group specializes in e-commerce, technology, retail,and the internet. Alibaba is one of the world’s largest e-c…

StartupTalkyAlan Joseph

The shares of Alibaba

The US listed shares of Alibaba group had seen a fall of around 3% in the choppy market even though there was an increase in the revenue of the company as the pandemic had forced people to depend more on the e-commerce solutions and would help the company recover easily from its losses.

It is seen that since the shares of Alibaba group had hit a record high in October, the US listed shares have fallen more than 30% as the founder Jack Ma had delivered a speech in Shanghai where he criticized the financial regulators of China.

Brock Silvers who is the Chief Investment Officer at the Hong-Kong based Adamas Asset Management has said that the fall in the share price of Alibaba reflects that there is anxiety amongst the investor community in regards to the regulation.

He added that the company has currently faced a huge regulatory risk, which has now become a threat to the entire technology sector.

Daniel Zhang who is the Chief Executive officer had conveyed in an earnings call that the penalty decision had motivated them to reflect on the relationship between the economy of the platform and society, as well as their commitments and their social responsibilities.

FAQ

Who owns Alibaba now?

SoftBank Group is the major shareholder of Alibaba.

Who is the current CEO of Alibaba?

Daniel Zhang is the current CEO of Alibaba.

Is Alibaba bigger than Amazon?

Amazon is vastly larger than Alibaba.

Conclusion

Alibaba group is one of the largest and successful e-commerce groups in China. As of 2020, the company has around 779 million active subscribers.