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Alibaba’s sales surge but cloud growth slows

Alibaba has reported earnings for the first time since China imposed a record fine on the tech giant — and the numbers were not as awful as some feared.

Alibaba posted a loss of about $1.2 billion in the first quarter, mainly due to the $2.8 billion fine imposed on it by Beijing earlier this year. Excluding that, net income was up 18%, to $4 billion.

Revenue grew at a healthy 64% clip from a year ago, to $28.6 billion. That topped analysts’ forecasts and is another sign of the rebounding Chinese economy following last year’s Covid-19 induced slump. Alibaba also said that it expected revenue for its next fiscal year would grow about 30% from fiscal 2021.

Still, shares of Alibaba, which are down more than 10% this year and 35% below their 52-week high, fell about 6% Thursday. Revenue in its cloud business grew at a slower pace than recent quarters.

Co-founded by legendary entrepreneur Jack Ma, Alibaba is one of China’s most prominent and successful private businesses. But the company’s shares have struggled since Beijing began tightening the screws on the country’s tech champions late last year.

Chinese President Xi Jinping has described the regulatory crackdown on the internet sector as one of the country’s top priorities for 2021 and is aimed at “maintaining social stability.”

Alibaba has been a particularly notable target. The fine was reached after antitrust regulators concluded that the online shopping giant had been behaving like a monopoly, and was equivalent to 4% of Alibaba’s sales in China in 2019.

Alibaba said when the fine was announced that it had accepted the penalty with “sincerity and will ensure our compliance with determination.”

Alibaba cloud momentum slows

It appears that the tougher regulatory environment had no major impact on Alibaba’s core businesses though.

The company said Thursday that it finished the quarter with 925 million mobile active users, up 23 million from the end of December.

“Our overall business delivered strong growth on a healthy foundation,” said Alibaba chairman and CEO Daniel Zhang in a statement.

“We remain very excited about the growth of China’s consumption economy, which is benefiting from the acceleration of digitalization in all aspects of life and work,” he added.

Cloud revenue rose 37% from a year ago, an impressive growth rate but a slowdown from previous quarters.

Alibaba said in its earnings release that this was due to a sales decline from a top customer with a big presence outside of China that decided to stop using its services. Alibaba did not name the customer.

The global cloud business is incredibly competitive. Alibaba not only has to contend with Chinese rival Tencent. It is also going up against the likes of Amazon, Microsoft and Google owner Alphabet when trying to win cloud contracts.

Article Topic Follows: Money

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