The headquarters of Alibaba Group Holdings Ltd. lights up the night before Singles ’November 11 annual online shopping event in Hangzhou, China, on Sunday, November 10, 2019.
Qilai Shen | Bloomberg | Getty Images
GUANGZHOU, China – Alibaba first reported on the profitability of its cloud computing business in a continued push to diversify its business beyond e-commerce as it faces regulatory scrutiny in China.
The Chinese technology giant reported an 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 a measure of profitability. This compares to a loss of 356 million yuan in the same period in 2019.
Alibaba previously said it expects its cloud division to be profitable within its current fiscal year, which began in April and will end on March 31, 2021.
The milestone will be well received by investors who have given great importance to cloud computing to drive Alibaba’s future growth. Current chairman and CEO Daniel Zhang told CNBC in a 2018 interview that cloud computing would be Alibaba’s “main business” in the future.
Alibaba’s third-quarter fiscal cloud computing revenue reached 16.1 billion yuan, up 50% year-on-year. That’s lower than the projected 16.69 million yuan, according to a consensus estimate by StreetAccount.
“Our cloud computing business continues to expand market leadership and show strong growth, reflecting the huge potential of China’s nascent cloud computing market, as well as our years of technology investment,” he said. said Alibaba CEO Daniel Zhang in a press release.
Regulating probe, cancellation of the listing of antiques
Alibaba’s profits come as the company faces increasing pressure from Chinese regulators on its business practices. In December, the Chinese State Administration for Market Regulation (MRSA) opened an investigation into Alibaba on monopolistic practices. The main problem was a practice that forces marketers to choose one of the two e-commerce platforms, rather than being able to work with both.
The Chinese e-commerce giant has said it has set up a “special working group with leaders from our relevant business units to conduct internal reviews” regarding the SAMR probe.
“We will continue to actively communicate with the MRSA on compliance with regulatory requirements,” Alibaba said, adding that it will provide an update when the investigation is completed.
In November, regulators pushed forward what would have been the record initial public offering (IPO) of Ant Group, Alibaba’s financial technology subsidiary. Alibaba founder Jack Ma, whose negative comments to executives were seen as a factor behind the cancellation of the IPO Ant, remained out of public view for a few months to reappear. in a short video in January.
Alibaba said Ant Group is developing a “rectification plan, which will have to go through the relevant regulatory procedures,” due to “significant changes” in the financial technology regulatory environment in China.
“Therefore, Ant Group’s business prospects and IPO plans are subject to substantial uncertainties. We are currently unable to make a full and fair assessment of the impact that these changes and uncertainties will have on Alibaba Group. We will update the market once Ant Group has completed the relevant regulatory procedures for its rectification plan, ”the company said in its income statement.
Gains exceeded
Alibaba’s total revenue reached 221.08 billion yuan ($ 33.88 million) for the December quarter, surpassing analysts ’estimates of 214.4 billion yuan.
Earnings per share were 22.03 yuan ahead of analysts’ estimated 20.87 yuan.
It was Alibaba’s core trading business, which accounts for 89% of revenue, that drove growth. Basic trade revenue amounted to 195.54 million yuan during the third fiscal quarter, up 38% year-on-year.