Facing regulatory scrutiny, will Alibaba be influenced by public opinion?
Chinese e-commerce giant $阿里巴巴 (BABA.US)$ on Tuesday reported fiscal third quarter financial results that beat analysts' forecasts, but its share price slipped after the announcement amid an ongoing regulatory crackdown and uncertainty about Alibaba's iconic founder Jack Ma. Alibaba reported profitability for its cloud computing business for the first time in a continued push to diversify its business beyond e-commerce as it faces regulatory scrutiny in China. It reported adjusted EBITA (earnings before interest, taxes, and amortization) of 24 million yuan ($3 million) for its cloud business in the December quarter. Adjusted EBITA is one measure of profitability. That compares to a loss of 356 million yuan in the same period in 2019. Come and see what happened in the FY21 Q3 earnings call! ![]()
This article is a script from the Q&A session of Alibaba's earnings call on February 2. In order to facilitate reading, we have made appropriate cuts. If you want to know more details, you can click the link provided by @moo_Live below to re-watch the earnings call.
Q: How is Ant Group coming along? Whether any potential reduction in available consumer credit where Ant Group offerings, such as Huabei, would impact consumer spending on your China retail marketplaces?
A: Due to recent significant change in the fintech regulatory environment in China, Ant Group is in the process of developing its ratification plan, which will need to go through the relevant regulatory procedures. Therefore, Ant Group's business prospects and IPO plans are subject to substantial uncertainties. Currently, we are unable to make a complete and fair assessment of the impact that these changes and uncertainties will have on Alibaba Group. We will update the market when -- once Ant Group has completed the relevant regulatory procedures for its ratification plan. I want to highlight that the availability of credit is not a major reason that motivates consumers to shop on our China retail marketplaces. They are attracted by our comprehensive and high-quality product and service offerings, our competitive pricing and our ability to satisfy and stimulate consumption needs.
Q: Taking on more social responsibility, how will that translate in operational terms, into changes on the operation side? And if you could help us think through a bit how those kinds of operational changes may have an impact on the Company’s financials?
A: Something very important for Alibaba in particular is mainstreaming that responsibility and making it part and parcel of everything we do, be it helping to create jobs, to stimulate employment, helping SMEs, on every front from product distribution all the way through manufacturing. On the manufacturing side, we can play a role and also helping them to export their products. And I think the key point here is the social responsibility for Alibaba is not something separate from our operations and our business rather is at the mainstream of everything we’re doing around operations and business as a platform. So we don’t look at it in terms of the economic value that can be generated by social initiatives, rather we see this in terms of a holistic ecosystem value.
Q: Would we expect to see that growth rate moderate as a result of those investments including around Taobao Deals, live streaming and so on? Or would that possibly be offset by improvements in the profitability of other new businesses like cloud, Ele.me or Trendyol?
A: We are always investing in future growth. If you look at where Alibaba is today in terms of profitability, adjusted EBITA was 147.8 billion. That's very strong. But that figure already includes various reinvestments of profit that we have made. So I think we're in a good place and have the ability to continue to invest. You can also look at our profit increment, say, over the last two-year period, if you compare the first nine months of this year to the first nine months of the year before last, you're talking about a fairly substantial figure of 30 billion. So this is our development strategy. And when it comes to profit growth, we have a very strong foundation in place, in particular with Taobao, Tmall and the China retail marketplace. We’re building on a very strong foundation of profitability.
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