The news: Alibaba reported lower revenues for Q3 2022 (ended December 31, 2021) than analysts expected, per the company’s earnings release.
How we got here: Alibaba has been a major target of Beijing’s crackdown on Big Tech, which has forced the company to move cautiously.
On the other hand: Alibaba can’t blame its weak performance on government intervention alone. The company has struggled in recent years to innovate and create new revenue streams, leaving the door open for companies like Pinduoduo and JD.com to build market share.
Attempts to diversify: In a 2018 interview with The Information, Alibaba CEO Daniel Zhang said, “If, five years from now, Alibaba doesn’t have a new main business, we must have made a very big mistake.” Yet despite the company’s best efforts, it still makes most of its money from its ecommerce division.
Looking ahead: The biggest problem facing Alibaba in the coming year is weakening consumer demand. Despite strong economic growth in 2021, economic uncertainty related to problems in China’s property sector and its “zero tolerance” policy regarding the pandemic have led consumers to spend less.