Alibaba released its quarterly earnings yesterday. Investors were not all that enthusiastic about the result; among other things, the increased level of investment is going to margins in the coming year.
"we plan to invest all of our incremental profits in this coming year into core strategic areas, such as technology innovation, support programs for merchants to lower their operating cost, user acquisition and experience enhancements, merchandising and supply chain capabilities, infrastructure development and new business initiatives. Considering that our incremental profits are expected to be significant, our investments will be highly targeted and disciplined. They will be designed to enlarge our total addressable market, efficient consumer and the merchant value proposition from our competitors and generate greater consumer engagement and purchase frequency. We will establish key metrics to measure the effectiveness of these investments, which we believe will generate significant results in the long-term."
Company CEO Daniel Zhang
In additional, the regulatory concern is still ongoing:
"We have stated that we accept the penalty with sincerity and will ensure our compliance with determination. As a result of the anti-monopoly fine of RMB18.2 billion level by the SAMR, we recorded an operating loss this quarter for the first time since our history as a public company. The penalty decision motivated us to reflect on the relationship between a platform economy and the society, as well as our social responsibilities and commitments. We believe the self-reflection and adjustment, we've made will help us better serve our community of consumers, merchants and partners and position us well in the future."
Company CEO Daniel Zhang
There is a pretty comprehensive video from Bloomberg on this topic
That said, in terms of the Company's topline growth, the revenue growth has been very decent in 2020, growing by >40% year on year. More specifically, the cloud computing / China retail commerce / Cainiao logistics business grew their revenue by 50% / 40% / 70% respectively year on year. I like the cloud computing business in particular, where the Company highlights a "historical opportunity" as China braces for industrial digitalization.
Source: Company presentation
Net net, the Company will need some time to get back its track, but we still like their position in the long run.
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