Alibaba Bounces Back from Chinese Regulatory Crackdown... Strong Q2 Sales Performance

Net Profit Up 51%·Sales Up 14%
E-commerce Subsidiary Drives Strong Performance
Major Cost-Cutting and Organizational Restructuring Effects

Alibaba, China's largest e-commerce company, recorded an earnings surprise for the first time in two years. Although Alibaba struggled due to regulatory crackdowns by the Chinese government and competition from latecomers, significant cost-cutting and organizational restructuring proved effective, resulting in strong performance in the second quarter of this year.

Alibaba announced on the 10th (local time) that its net profit for the second quarter of this year reached 34.33 billion yuan (approximately 6.2514 trillion KRW), a 51% increase compared to 22.74 billion yuan last year. Revenue was recorded at 234.16 billion yuan, up 14% year-on-year.

The strong performance of e-commerce subsidiaries drove Alibaba's earnings growth. The retail sales revenue of Taobao and Tmall, Alibaba’s e-commerce platforms, reached 109.828 billion yuan, a 13% increase compared to the previous year. For AliExpress, global retail sales (171.377 billion yuan) jumped 60% year-on-year. Bloomberg explained, "The steady increase in sales volume around China’s largest shopping event, the ‘618 Shopping Day,’ was reflected in the improved performance."

The largest organizational restructuring since its founding also contributed to the improved results. In the second quarter of this year, Alibaba undertook a restructuring to separate into a holding company and six independent business groups. This move was made to reduce decision-making processes and enable faster business responses, and analysts believe this decision increased efficiency across the business. Additionally, cutting 6,500 employees last year significantly reduced labor costs, helping to offset previous poor performance.

Market experts in China evaluated Alibaba’s earnings growth as noteworthy amid the recent economic downturn in China. Especially considering that Alibaba had lost market share to latecomers JD.com and Pinduoduo (PDD), the fact that it raised e-commerce sales by more than 10% is seen as a successful comeback for Alibaba.

Major foreign media stated, "The growth this quarter largely reflects the positive results of the business restructuring," but also noted, "However, given the pressure from latecomers, whether Alibaba can maintain strong performance going forward remains a key issue."

Meanwhile, after Alibaba’s founder Jack Ma fell out of favor with the Chinese government, the company became a prime example of the government’s crackdown on big tech. Chinese authorities imposed a 3 trillion won fine on Alibaba for violating antitrust laws and abruptly halted the IPO plans of its subsidiary Ant Group. However, as the Chinese economy failed to revive despite the COVID reopening this year, the government has eased big tech regulations.