Alibaba's profit tumbles; Ant posts higher earnings

Shanghai

CHINESE e-commerce leader Alibaba Group said on Thursday (Nov 18) that its profit for the most recent quarter tumbled 81 per cent as a government crackdown on the country's big tech champions bit into its bottom line.

Alibaba said its profit came in at 5.37 billion yuan (S$1.14 billion) for the July-September period, falling from 28.77 billion yuan earned over the same stretch last year.

The Hangzhou-based company's revenues, generated mainly by its core e-commerce operations, reached 200.7 billion yuan, up 29 per cent, roughly in line with previous years' growth rates.

Alibaba's earnings results have been keenly anticipated for a gauge of how one of the country's highest-profile companies was faring under the government's drive to rein in big tech.

China's ruling Communist Party had previously relied upon its tech giants to push forward digital transformation in the country. But it abruptly turned on the sector late last year as concerns mounted over its aggressive expansion, alleged monopolistic practices, and data security - paralleling similar unease with tech firms in the United States and elsewhere.

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Alibaba was the first to feel the wrath. Last year, the government scuppered what would have been a world-record stock IPO by Alibaba's financial arm, Ant Group, and in April fined Alibaba a record US$2.78 billion for anti-competitive practices.

Since then, the government has taken a number of other measures against major Chinese digital players, sending their share prices tumbling.

Meanwhile, Ant said its profit rose an estimated 39 per cent in the June quarter, attributed to a gain in investments. The company contributed 6.5 billion yuan to Alibaba's earnings, a filing showed on Thursday. Based on Alibaba's one-third stake in Ant, that translates to an estimated 19.71 billion yuan in profit, up 39 per cent from a year earlier. Ant's earnings lag one quarter behind Alibaba's.

"The year-over-year increase in share of profit of Ant Group was mainly due to an increase in net gains arising from fair value changes in the investments held by Ant Group," Alibaba said in its statement.

Executives are grappling with how to carve the sprawling firm into separate ventures with state-backed partners, people familiar with the plans have said.

While regulators led by the central bank have handed down broad guidelines, they've been short on details, leaving Ant to proceed by trial and error, the people have said. AFP, BLOOMBERG