Alibaba exceeds quarterly revenue and profit estimates
The company is optimistic despite the latest shift in US policies towards ChinaBy Adrian Potoroaca
Bottom line: Chinese companies like Alibaba are doing fine as a result of the pandemic, which is spearheading the country's economic recovery. However, many of them face the threat of being victims of the US "Clean Network" initiative, which is already affecting ByteDance and Tencent.
Alibaba's latest quarterly report is out, and it looks like it has once again managed to impress with better than expected performance. The company posted revenues of 153.6 billion yuan ($22.1 billion) for the three months ending in June, which is a 34 percent year-over-year increase and above the consensus projections of 147.8 billion yuan ($21.4 billion).
Net profit saw an even more significant jump to 47.6 billion yuan ($6.9 billion) from the 21.2 billion yuan ($3.1 billion) registered over the same period of last year. At least in part, this increase is attributed to a surge in online retail customers as a result of pandemic-related store closures and has given Chinese investors a glimmer of hope for the country's economic recovery.
For perspective, Alibaba's Chinese retail marketplace saw 874 million monthly active users, 28 million more than the peak achieved during the previous quarter.
During the investor call, CEO and chairman Daniel Zhang noted that "we face uncertainties from not only the global pandemic but also increasing tensions between the US and China. We are assessing the situation and any potential impact carefully and thoroughly, and will take necessary actions to comply with any new regulations."
Some analysts believe that Alibaba may be next on the list after Tencent-owned WeChat and ByteDance-owned TikTok for a potential US ban in the context of the proposed "Clean Network" plan. Such a ban would endanger not only Alibaba's online retail presence, but also its cloud efforts, which aim well beyond the local Chinese market. The cloud business brought in 12.3 billion yuan ($1.8 billion) for the April-June timeframe, making it the second-biggest revenue stream for the Alibaba Group.
Overall, this is a $695 billion empire that includes online retail, cloud computing, voice assistants, enterprise collaboration tools, and food delivery. And that doesn't include Alibaba's plans to make a RISC-V processor for high-performance computing scenarios.
Zhang also reassured investors that his company's "primary commercial focus in the US is to support American brands, retailers, small businesses and farmers to sell consumers and trade partners, as well as other key markets round [sic] the world." He further noted that Alibaba's vision is "fully aligned with the interests of both China and the United States."