Alibaba Q2 Profit Grows 34% Despite Covid-19, Looming US Threats

Domestic online purchases, cloud computing fuel increase in revenues

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E-Commerce giant Alibaba reported an increase of 16 million users in the last 12 months boosting their 742 million active annual customers in 2020. Image Source: Alibaba Group

E-commerce giant Alibaba reported a solid 34 percent profit for the second quarter of 2020 as a result of a growth in sales.

The positive growth revenues show that the Chinese tech giant has been resilient if not recovering from the Covid-19 pandemic that started in China early this year.

Alibaba Group Holdings Ltd. met early expectations of increased revenues for the quarter ending June 30 despite a looming threat from U.S. government officials that it will follow the same path as WeChat and TikTok owned by Chinese tech giants Tencent and ByteDance.

Revenues were up at 153 billion yuan ($21.762 billion) this year fueled by soaring online purchases buoyed by lockdowns imposed during the Covid-19 pandemic.

Alibaba Group Chairman and Chief Executive Daniel Zhang said:

“Alibaba delivered excellent results this past quarter. We were well-positioned to capture growth from the ongoing digital transformation, which has been accelerated by the pandemic, in both consumption and enterprise operations.”

Zhang said the company mobilized its entire digital infrastructure to support the economic recovery of businesses across a wide range of sectors while broadening and diversifying consumer base by addressing their changing preferences in a post-COVID-19 environment.

E-commerce showed robust growth amid a pandemic

Launched in 1999, the Alibaba Group based in Hangzhou, China by its founder Jack Ma has had a steady growth this past year with a 20 percent growth in stock rates since January.

With close to 742 million active annual customers, Alibaba’s e-commerce platforms have captured at least 60 percent of the e-commerce market in mainland China with competitors like JD.com and Pinduoduo among others taking the remaining percentage of the market.

In the past 12 months ending March 31, the company reported an increase of over 16 million annual active consumers compared to the previous year.

Mobile active users in China marketplaces reached 874 million in June 2020. The company also reported an increase in mobile users by as much as 28 million as of March 2020.

Despite Covid-19, Alibaba Chief Financial Officer Maggie Wu said the figures only showed domestic commerce business has fully recovered.

The company has been reaching out to value-conscious consumers by connecting manufacturers and merchants through Taobao Deals which grew to 40 million mobile users in June.

Internationally, particularly in Southeast Asia their e-commerce platform Lazada achieved over 100% quarterly order growth.

Cloud computing growth might get affected by US-China tech war

Cloud computing, another sector that Alibaba has been dominating, grew by as much as 59% this quarter.

Alibaba Cloud is currently the largest public cloud provider in China with 12.34 billion yuan ($1.74 billion) earnings in the June 2020 quarter.

While Alibaba does not have a major retail presence in the United States, its cloud computing and hosting business are currently being used by many small companies in the U.S. in starting their digital commerce businesses.

Chief Executive Zhang admitted during a conference call on Thursday that Alibaba faces uncertainties not only from the Covid-19 pandemic, but also increased tensions between the US and China.

Chinese tech companies such as Huawei, ByteDance, and Tencent have been receiving threats and restrictions from executive orders issued by the U.S. government.

“We are closely monitoring the latest shift in US government policies towards Chinese companies, which is a very fluid situation,” Zhang said in a report by CNN Business.

“We are assessing the situation and any potential impact carefully and thoroughly and will take necessary actions to comply with any new regulations,” the Alibaba executive said.

U.S. President Donald Trump, in a report by Fox News Business, said that they are also looking into other Chinese businesses using American technology.

To recall, U.S. Secretary of State Michael Pompeo in a press briefing August 5, reiterated his April announcement of implementing the Clean Path Initiative to keep American data safe from untrusted vendors.

Among the lines of effort in the five-pronged Clean Path Initiative, according to Pompeo, is Clean Cloud that would protect Americans’ most sensitive personal information and our businesses’ most valuable intellectual property – including COVID vaccine research – from being accessed on cloud-based systems run by companies such as Alibaba, Baidu, China Mobile, China Telecom, and Tencent.

The State Department said it will work closely with the Commerce Department and other agencies to limit the ability of Chinese cloud service providers to collect, store, and process vast amounts of data and sensitive information in the United States.


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JM Agreda
JM Agreda is a freelance journalist for more than 12 years writing for numerous international publications, research journals, and news websites. He mainly covers business, tech, transportation, and political news for Businessner.