Alibaba reports slowest quarterly growth since 2014

Alibaba Group Holding Ltd reported its slowest quarterly sales growth since its 2014 public listing, amid regulatory scrutiny, the tough macroeconomic environment and stifling competition.

Total sales revenue of the e-commerce behemoth rose by just 10 percent to 243 billion yuan ($38.49 billion) in the quarter ended December, as slower growth was registered in its core e-commerce business.

"Alibaba delivered steady progress this quarter as we continued to execute our multi-engine growth strategy in a complex and volatile market environment," CEO and Chairman Daniel Zhang said in a statement. "We achieved positive momentum in key strategic businesses through a disciplined focus on capacity building and value creation to fuel our future growth."

Danny Law, an analyst at Guotai Junan Securities, said ahead of the release of the results the numbers are "the consequence of slowing revenue growth and accelerating spending."

Competition built up as e-commerce rival Pinduoduo marched ahead by effectively mobilizing people's social network contacts, and upstarts like short video app Douyin gained popularity by helping influencers peddle merchandise through short videos and livestreaming sessions.

"E-commerce-derived growth of other platforms is outpacing that of Alibaba, meaning they are eating into the market share of Alibaba," said Lu Zhenwang, CEO of Shanghai Wanqing Consultancy. "Douyin and Kuaishou are no doubt the shepherds of livestreaming-based commerce."

Consultancy QuestMobile said users spent an average 1,871 minutes on Douyin in October, versus only 350 minutes on Alibaba's Taobao.

Macroeconomic conditions and sporadic instances of COVID-19 cases also weighed on consumer spending into the end of last year, which dented growth of e-commerce companies.

In a major adjustment from previous practice, Alibaba started in the December quarter to separate its China and international retail businesses into different reporting categories. It has also broken out figures for its logistics arm Cainiao, and its local consumer service.

Its China commerce business, which is the single largest portion of the company's revenue, came in at 100.09 billion yuan, representing a 1 percent year-on-year fall.

On the bright side, its cloud segment jumped 20 percent year-on-year, and international commerce was up 18 percent during the December quarter.

Revenue from Cainiao, before inter-segment elimination, grew 23 percent year-over-year to 19.6 billion yuan, driven by both the growth of fulfillment solutions and value-added services provided to China commerce retail businesses and increases in cross-border and international commerce retail businesses.

Its fintech arm Ant Group delivered 5.8 billion yuan in income for the quarter. Alibaba said the year-on-year increase in the share of profit of Ant was mainly due to an increase in net gains from investments held by Ant.

To boost growth, the company is finding new avenues such as penetrating smaller Chinese cities with a product called Taobao Deals. It reported paid orders on Taobao Deals doubled year-on-year in the December quarter.

It is also looking to invest in some of its newer businesses such as food delivery that is under its local consumer services division, along with other products such as travel app Fliggy.

The segment reported 27 percent growth thanks to improved "unit economics per order" and "improving gross margin from enhanced supply chain capabilities".

"We think it is reasonable for China's tech sector to increase spending in research and development, sales and marketing, and administration expenses, edging up their competitive advantages," Law said.

Alibaba in November cut year-on-year revenue growth forecast to 20 percent to 23 percent, from the nearly 30 percent in May. The latest earnings brought no updated guidance.