The disappointing week for Chinese tech giants continued overnight as Alibaba Group (NYSE:BABA) shares fell in US trading after its sales came in short of forecasts for the first time in more than two years.
Revenue of RMB 205.7bn (US$31.8bn) from the world's largest e-commerce platform company for the three months to end-June was up 34% on the same quarter last year but well shy of average Wall Street estimates of RMB 251bn as growth slowed in its key e-commerce and Ali Cloud divisions.
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Global annual active consumers across the group's various platforms reached 1.18bn, an increase of 45mln from the previous quarter. Alibaba says 0.91bn consumers in China use its services each year.
On the other side of the coin, underlying profits (EBITDA) fell 5% year-on-year to RMB 48.6bn but were ahead of the RMB 46.7bn predicted.
In the ongoing efforts by Chinese regulators to corral the country's big tech companies the period included a record RMB 18.2bn fine meted out to Alibaba in April as part of an anti-monopoly investigation. China’s State Administration for Market Regulation said the penalty was for Alibaba abusing its market dominance.
Free cash flow tumbled 42% to RMB 20.7bn (US$3.2bn) in part due to investments in the business and the fine, with the company making a partial settlement of RMB 9.1bn.
Amid the heightened regulatory pressure, chief executive officer Daniel Zhang gave his support for a new regulatory campaign against companies blocking services from rivals, having for many years resisted working with longtime rival Tencent Holdings Limited (HKG:0700).
Zhang said: “We do see cross-platform openness and connectivity as a positive trend that could unlock greater dividends in the internet era.”
He also announced a 50% increase in the share buyback program to US$15bn, the largest in its history.
But this was not enough to stop the shares falling 1.4% to $197.38, down 37% from all-time highs in October.
Goldman Sachs (NYSE:GS) lowered its share price target 8% as it expects the company "to step up investments into new business initiatives and operations to address the ever-evolving consumer trends in China/globally and capture long-term growth opportunities".
Revenue forecasts for the full year were cut by 2% due to softer near-term revenue prospects of Ali Cloud, but underlying operating profit forecasts were revised up 10% due to lower admin expenses.
Analysts expect Alibaba to be on track to reach its 1bn annual active customers goal in China within the current year to next March, "and remain constructive on the company’s ability to enlarge its total addressable market and drive continuous value-add for merchants/consumers in the long run".