Alibaba shares were up after the company reported its fiscal first-quarter earnings report which surpassed the expectations of analysts. While the company’s shares were up 4 percent ahead of its earnings report, they soared as high as 7 percent in the US on its report.
The company reported fiscal first-quarter revenue of 205.55 billion Chinese yuan ($30.68 billion) beating analysts’ estimate of 203.19 billion yuan. Revenue, however, remained flat year on year. Earnings per American depositary share (ADS) came in at 11.73 yuan compared to an estimate of 10.39 yuan that analysts expected and was down 29 percent year-on-year. Net income came in at 22.73 billion yuan, beating the 18.72 billion yuan that analysts had forecasted.
Although the company surpassed analysts’ expectations, this is the first time Alibaba reported flat growth. The company faced a handful of challenges in the quarter. The company was affected by a resurgence of the coronavirus disease which led to the shut down of major Chinese cities. This also affected the country’s economy in the second quarter of the year.
Growth has started to appear after the lockdown on these Chinese cities were lifted in late May and early June. “Following a relatively slow April and May, we saw signs of recovery across our businesses in June,” Alibaba’s CEO Daniel Zhang said in a press release.
The coronavirus resurgence apart, Alibaba is also faced with the challenge of a tough regulatory environment as the crackdown on the country’s local technology sector continues. Growth is expected to reappear in the coming months.
Alibaba saw revenue from its largest business, its commerce division, fell 1 percent year-over-year to 141.93 billion yuan. This was driven by a 10 percent decline in customer management revenue.
The company reported cloud computing revenue of 17.68 billion yuan in the quarter. This was up 10 percent year-on-year. It, however, declined 12 percent from the previous quarter and 29 percent from the same period a year ago.