Alibaba Inc., China’s crown jewel, managed to soar above market estimates, and registered a 22% growth in revenue for Q1 2020. While the nature of the news is inherently good, as the company managed to generate 114.3 billion yuan in revenues, it is worth noting that this is the lowest growth rate for the company there has ever been. With this, what does the company’s future for the corona-ridden year looks like?
Alibaba had predicted way back in the early stages of coronavirus expansion that it expects things to slow down in the quarter ending in March. The uncertainty in the market, along with the inability of the workforce to return to offices after Chinese new year, made for the perfect recipe for disaster. Still, as things in China returned to normal(ish?), the company managed to avert a disaster. Even though the company has lost about $40 billion since the start of the virus, Alibaba expects things to get better, comparatively, as the company hopes to end the year with a 27.5% growth in sales, which is still leagues behind the 35% growth rate it registered last year.
On the income end, Alibaba recorded fiscal fourth-quarter net income of RMB3.1 billion ($447 million), or RMB1.16 a share, down from RMB25.8 billion, or RMB9.84 a share, in the year earlier period. But the sudden drop income is due to declining value of Alibaba’s investments in public companies. Markets across the world have been sent crashing by coronavirus and it was bound to impact all public company investments.
However, Alibaba is also struggling with worsening U.S. China relationships, as the two countries are engaged in a technological and trade war. U.S. keeps making new rules to limit the expansion of Chinese companies in the region. Being pushed to the sidelines in the biggest market of the world cannot be a good news for a company with aspirations as big as Alibaba’s. That, along with coronavirus uncertainty and tough competition from Tencent Holdings Ltd. in just about every field the company is in, pushed net revenue for Alibaba to 3.2 billion yuan, down 88% from a year ago when it booked an 18.7 billion yuan one-time gain on investments.
“The year-over-year decrease was primarily due to a net loss in investment income, mainly reflecting decreases in the market prices of our equity investments in
publicly-traded companies, compared to a net gain recorded in the same quarter of 2019. NonGAAP net income, which excludes the above-mentioned loss and gain, was RMB22,287 million (US$3,148 million), an increase of 11% year-over-year,” the filing from the company said.
For the fiscal year ending in March 2020, the company witnessed a revenue of $71,985 million, an increase of 35% year-over-year Moreover, Alibaba’s bread and butter, its customer management or marketing business grew just 3% in the March quarter.