Alibaba's
Of course, this optimism was dashed as the Chinese government began a brutal crackdown on the tech sector for a variety of offenses including abuse of market power, violations of users' data privacies, harsh fines, and restrictions on certain activities. It was also a change in behavior from the last decade when the Chinese government had encouraged the growth and development of these firms to balance the influence of Western tech giants.
For investors, the actions caused massive losses in the sector. Alibaba's stock is down more than 60% since its peak in October of last year. Going forward, there's little reason for optimism as the government doesn't seem likely to change, while the Chinese economy continues to decelerate, and Alibaba is seeing revenue declaration as the economy returns to normal.
Inside the Numbers
In its fiscal Q2, Alibaba reported $31.4 billion in revenue which fell short of expectations of $32.6 billion. Earnings per share also came in short at $1.75 per share vs expectations of $1.93 per share. This was a 38% decline from last year, while revenue was 29% higher.
Equally concerning, the company slashed revenue guidance for the full year, implying growth between 20% and 23%. Previous guidance indicated 29.5% revenue growth. In addition to the government's crackdown, the company has been affected by the slowdown in the economy which has reduced consumption.
In total, Alibaba's e-commerce division saw 31% revenue growth, while analysts were looking for 36%. Most e-commerce companies have missed this quarter due to facing tough comps and people eager to shop in stores. One concern is that Alibaba's high-margin segment of customer management revenue only saw 3% growth which the company attributed to increased competition from new entrants in the market.