Alibaba Exceeds Revenue Estimates as Covid Restrictions Ease

The e-commerce giant Alibaba has surpassed revenue estimates for its fiscal third quarter as Covid-related restrictions in China ease.

The company reported a 2% increase in revenue, reaching 247.76 billion yuan ($35.92 billion) for the period ending on December 31.

This figure exceeded the consensus estimate of 245.18 billion yuan from 23 analysts.

Additionally, net income attributable to ordinary shareholders rose by 69% to 46.82 billion yuan, compared to 27.69 billion yuan in the previous year.

Alibaba’s success in navigating the weak economy can be attributed to a strategic rollback of its international operations and staff reduction.

The company reported a total reduction of 19,576 employees in 2022, amounting to a 7.5% decrease.

Despite China’s total retail sales contracting by 1.8% in December and a low growth rate for the economy in 2022, Alibaba remains optimistic about the future.

Retail spending in China is expected to remain weak in the first part of the year.

However, analysts anticipate stimulus policies and the eventual release of consumer savings to stimulate growth in the spring.

During an earnings call with investors, Alibaba’s CEO, Daniel Zhang, expressed confidence in the recovering economy.

He emphasized that consumer confidence and business confidence are rising.

It’s worth noting that Alibaba’s key customer management revenue metric, which tracks payments from vendors, experienced a 9% decline year-on-year.

This segment represents the company’s largest sales segment.

In addition to economic challenges, Alibaba must navigate a regulatory crackdown.

The company’s founder, Jack Ma, relinquished control of Ant Group, a fintech company 33% owned by Alibaba and a major target for Beijing regulators.

While Ant reported a profit of 3.05 billion yuan for the quarter ending in late September, down 82.7% compared to the previous year, Alibaba reports its profit from Ant Group one quarter in arrears.

Chinese authorities have expressed their intent to support private firms and ease the regulatory measures, aiming to restore private sector confidence and stimulate economic activity.

Looking ahead, Alibaba is focused on innovation.

The company recently announced the development of an AI tool similar to ChatGPT, which it is currently testing internally.

This move aligns with the global enthusiasm for OpenAi’s chatbot and follows other Chinese tech giants and research institutes such as Baidu and who are also developing similar platforms..

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