Once high-flying Chinese tech giants are now looking to scale back costs
It comes after Alibaba and Tencent posted a set of second-quarter results that confirmed these once high-flying behemoths are not growing anymore.
Alibaba reported flat growth for the first time ever for its April to June quarter. On last Wednesday, gaming and social media giant Tencent posted its first-ever quarterly year-on-year revenue decline.
Alibaba and Tencent have felt the effects of a Covid-induced economic slowdown in China that is hitting everything from consumer spending to advertising budgets.
As revenue remains under pressure, both giants have looked to be more disciplined in their approach to spending.
Alibaba flagged its cost cutting drive earlier this year and continues to push forward with it.
“In the coming quarters and the remainder of this fiscal year, we will continue to pursue the strategy of cost optimization and cost control,” Toby Xu, chief financial officer at Alibaba, said during the company’s earnings call this month.
Where’s the growth coming from?
Alibaba has been focusing on boosting its cloud computing business, an area executives and investors believe is key to better profitability at the company in the future. Cloud was Alibaba’s fastest-growing area by revenue in the June quarter.
Alibaba will continue to focus on areas with “long-term potential” such as cloud computing and overseas e-commerce, Chelsey Tam, senior equity analyst at Morningstar said. “For the unprofitable businesses it will evaluate the cost and benefits.”
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