What’s going on?

Alibaba reported surprisingly good Q2 results.

What does this mean?

• One special thing about Alibaba is that it’s so big that at least one of its businesses is destined to thrive in any market scenario. This time, those businesses are:
  • Taocaicai’s (fresh food platform), whose transactions value boomed by more than 200% yoy in 2Q 2022;
  • The rest of Alibaba’s e-commerce segment, which recovered in June from the slowdown in April and May, partly thanks to China’s annual shopping festival;
  • Alibaba’s cloud computing business, which posted a 10% increase in sales even as the government eliminated multiple online industries;
• So while Alibaba’s revenue fell slightly, it was better than the initial scenario, and investors sent NYSE:ADR up 6%.

Why should I care?

The bigger picture: A turnaround

• This was Alibaba’s first revenue drop in history, but isn’t expected to become a habit:
  • Alibaba has recently promised to invest more in “long-term” areas;
  • The Chinese government has realized it’ll need to be less harsh on tech businesses and boost economic support if it wants to accomplish its increasingly unrealistic growth targets.

Zooming out: Some better run

• Multiple Chinese companies have been threatened to be delisted from the US stock market after they failed to comply with disclosure rules.
• Alibaba has been added to the list, putting it into an uncomfortable situation:
  • A delisting would force some funds to sell ADR, sending the share price down;
  • SoftBank (investment giant) has reportedly started selling “forward contracts” that reduce its stake in Alibaba significantly over the next few years.

Content source: Finimize (2022) Alibaba’s Revenue Fell For The First Time, But Investors Still Took It As A Win. Available at: https://subscriptions.finimize.com/content/UHVibGljQ29udGVudFBpZWNlOjQ3ODk=/daily-brief-alibabas-revenue-fell-for-the-first-time-but-investors-still-took-it-as-a-win [Accessed on Aug 05, 2022]