Technology

Alibaba blames nearly $4 billion in quarterly losses due to Covid

The poor performance of the e-commerce champion is far from an isolated incident in China in the tech world. (Photo: 123RF)

BEIJING — Chinese e-commerce giant Alibaba posted a quarterly loss of nearly $4 billion on Thursday amid China’s economic downturn and tightening tech regulations.

Since the end of 2020, the authorities have taken a hard line on some of the digital giants’ previously largely tolerated practices in terms of personal data collection and competition.

Thus, Beijing has multiplied its strikes against powerful internet companies that are prevented from raising money internationally or fined for abusing dominance.

These moves have cost the industry billions of dollars in market capitalization.

Alibaba, long considered a success story in China, was the first to be punished by the authorities.

The country’s economy is also undermined by anti-Covid restrictions that heavily penalize consumption.

Against this backdrop, Alibaba on Thursday posted a loss of 20.5 billion yuan ($3.8 billion) in the second quarter of its breakdown financial year.

On the other hand, its turnover rose 3% year-on-year to 207.1 billion yuan ($38 billion) from July to September.

For the first time in Alibaba’s history, there was no progress in the previous quarter.

Sluggish consumption

China has been facing a resurgence of the Covid-19 epidemic for several months now, affecting several parts of the country to varying degrees.

Health restrictions and the uncertainty that accompanies them put a brake on consumption.

The weakness in household spending is weighing heavily on e-commerce companies, accustomed so far to exponential growth with the ease of shopping online.

As a result, Alibaba was more cautious than usual on its Singles Day, which resulted in huge online sales.

The group did not release any sales data for the event, which ended on November 11th.

Over the years, these sales have been accompanied by an intense media campaign from Alibaba, with a giant screen showing live the change in the number of transactions carried out on its platforms.

Amid sluggish economic growth, Alibaba reported a 1% year-on-year drop in sales in China this fiscal year. On the other hand, internationally, its sales grew by 4% in a year.

low profile

The group, which has been under the guns of the authorities since 2020, is now keeping a low profile.

That same year, Beijing halted the giant IPO of its payments subsidiary Ant Group in Hong Kong 48 hours before the event.

The operation, then billed as the largest fundraiser of all time, was expected to bring in $38 billion.

The following month, Alibaba was investigated for obstruction of competition.

The group, founded by the charismatic Jack Ma, was fined $3.15 billion. And the billionaire sacked from Alibaba is limiting his public appearances.

A sign of difficulty is that the Hangzhou (eastern China) group has spun off nearly 15,000 employees, according to a comparison of its workforce with the same quarter last year.

The poor performance of the e-commerce champion is far from an isolated incident in China in the tech world.

On Wednesday, internet and video game giant Tencent announced a further decline in its quarterly turnover.

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