Alibaba Q2 Net Profit Declines Year-on-Year Due to Regulatory Impact

[Photo by AFP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Alibaba's second-quarter earnings this year fell short of market expectations due to regulatory impacts from Chinese authorities.

According to Chinese economic media Caixin and others, Alibaba announced in its quarterly earnings report released on the afternoon of the 3rd that its second-quarter revenue reached 205.74 billion yuan (approximately 36.5435 trillion KRW), a 34% increase compared to the same period last year. However, the second-quarter revenue fell short of the market expectation of 210.3 billion yuan.

The second-quarter net profit was 45.14 billion yuan, lower than 47.59 billion yuan in the second quarter of last year.

The growth of Ant Group, Alibaba's core fintech affiliate, also weakened.

Alibaba explained that Ant Group contributed about 4.5 billion yuan to the second-quarter net profit. Bloomberg estimated that considering Alibaba holds about one-third of Ant Group's shares, the total net profit of the unlisted Ant Group in the second quarter would be approximately 13.6 billion yuan. Ant Group is Alibaba's core fintech affiliate operating Alipay, China's largest electronic payment service.

Chinese authorities have strongly regulated Alibaba Group since October last year, after Alibaba founder Jack Ma openly criticized Chinese regulations at a public forum. In November, they halted Ant Group's IPO, and in April this year, imposed a record fine of 18.228 billion yuan (approximately 3.1 trillion KRW) on Alibaba. Despite a 64% year-on-year increase in revenue in the first quarter due to the record fine, Alibaba reported an operating loss of 7.65 billion yuan caused by a one-time impact from the fine, as disclosed in the quarterly earnings report in May.

Alibaba Chairman Daniel Zhang stated in a conference call immediately after the second-quarter earnings announcement, "We are studying the demands of regulatory authorities and assessing the potential impact on our business," adding, "We will respond positively to these actions."