Alibaba posts slowest quarterly growth on record, will review marketing spend

Chinese internet giant Alibaba has posted mixed numbers for its fourth quarter and full financial year of 2022. While the firm's cloud business broke even, its fiscal performance was dragged down by diving valuations of its equity investments and this pulled down its earnings for the period.

After enduring a rough third quarter, the firm made some progress towards stability, even as market uncertainty clouded its performance in Q4. For the fourth quarter of its financial year, Alibaba posted a 9% increase in revenue to over RMB204 billion ($32.2 billion), while diving valuations of its equity investments saw net losses swell to RMB16.24 billion (US$2.4 billion) from RMB5.47 billion (US$800 million) in the corresponding period last fiscal. 

"We saw the national retail sales reporting negative year-over-year growth in March and April, and online sales of physical goods also reported a historical decline year over year," Daniel Zhang, chairman and CEO of Alibaba Group told analysts in a post-results call. "The resurgence of Covid has also impacted our business to varying degrees. Overall speaking, we saw a low single-digit decline in revenue growth in April compared to the same period last year."

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As the firm tried to turn around its performance, leaders suggested sales and marketing expenses would be moderated to prune costs. "We will control costs and improve returns for our major businesses that are already at significant scale compared to peers," CFO Toby Xu told analysts. "At a high level, we will seek to improve gross margin of our direct sales businesses, optimise logistics and fulfilment costs for consumer-facing businesses, and control our overall sales and marketing spend." 

In the fourth quarter of its financial year, Alibaba notched up some significant milestones, but its leaders pointed to a challenging time ahead. Its cloud business, identified as a key growth driver, with revenue growing 12% year-on-year for the fourth quarter to nearly RMB19 billion (US$3 billion), while it posted a profit of RMB1billion (US$150 million), turning around a historically loss-making business. 

Elsewhere, its domestic business too crossed the billion-user mark and with the local consumer and cloud segments, were key drivers of growth for the company. Its local consumer business grew by 29%, the fastest rate across its reporting segments. 

“Alibaba delivered on the goal of serving one billion annual active consumers in China this past quarter," CEO Zhang said in a media release. "We saw tangible progress across our businesses, especially in operational improvements in key strategic areas.” 

Despite these gains, CFO Xu noted that the tech giant foresaw a challenging environment ahead and wouldn’t provide guidance for the coming quarter or year. "In fiscal year '22, we have faced with increasing challenges from many fronts," he noted in a call with analysts. "These have been brought about by slowing macro activities, increased competition, and Covid resurgence domestically as well as changes in geopolitical conditions internationally."

For the full financial year, Alibaba reported a 19% increase in its revenue to RMB853.1 billion yuan (US$134.5 billion), while net income was down 59% to RMB62 billion (US$21.5 billion).