Alibaba sales soar but US crackdown may be looming

Alibaba (BABA) posted strong sales and earnings growth Thursday morning that topped Wall Street’s forecasts. Overall revenue was up nearly 35% from a year ago and the company also posted solid increases in total and mobile users.

The stock fell about 2% during early trading Thursday but it is still up more than 20% so far in 2020.

“Although the global community continues to struggle with uncertainties surrounding the pandemic, we have seen encouraging signs of recovery in China due to effective management of the outbreak in vast majority of the country,” said Alibaba chairman and CEO Daniel Zhang during a call with analysts.

Zhang acknowledged during the conference call with analysts that Alibaba faces “uncertainties from not only the global pandemic, but also increasing tensions between US and China.”

“We are closely monitoring the latest shift in US government policies towards Chinese companies, which is a very fluid situation,” Zhang added. “We are assessing the situation and any potential impact carefully and thoroughly and will take necessary actions to comply with any new regulations.

Alibaba does not have a major retail presence in the United States. But a growing number of small businesses in America use Alibaba’s cloud hosting services to set up their own digital commerce operations.

After TikTok and WeChat, Alibaba could be the next target in Trump's tech war
Alibaba competes with the likes of Amazon (AMZN), Microsoft (MSFT) and Google owner Alphabet (GOOGL) in the lucrative cloud market. Alibaba said its cloud revenue rose nearly 60% from a year ago.

Zhang touted its cloud prowess — and how that helps American companies — during the conference call.

“As the world’s largest e-commerce platform, Alibaba’s primary commercial focus in the US is to support American brands, retailers, small businesses and farmers to sell to consumers and trade partners in China as well as the other key markets around the world,” Zhang said.

“We believe global trade will continue, and Alibaba’s active pursuit of our mission to make it easy to do business anywhere are fully aligned with the interest of both China and the United States,” he added.

Still, US Secretary of State Mike Pompeo said earlier this month that American businesses must be wary of “untrusted” Chinese technology. He said it was dangerous to have too much information about intellectual property stored on cloud networks run by Alibaba and other Chinese firms.

Zhang pointed out though that Alibaba has a big opportunity in the Chinese cloud market, which is still in its early stages and has the potential to grow more rapidly than cloud computing in the United States.

Alibaba rival (JD) reported a better-than-expected jump in quarterly sales of 35% from a year ago earlier this week. Another Chinese e-commerce site, group deals platform Pinduoduo (PDD), will report its latest results Friday morning.

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