Dull tech earnings chalked up to increased spending
Q3 reports from China’s tech giants were a mixed bag, and even the few winners signaled rough times ahead:
Tencent and Alibaba’s revenue missed expectations, with Tencent’s growing at the slowest pace since its 2004 IPO. Alibaba warned of a similar trend: it expects slower-than-2014 growth in the next two quarters.
Alibaba’s market value is still just half what it was last November, before Ant Group’s aborted IPO.
Bilibili and iQiyi’s losses grew 145% at and 42%, respectively, compared to last year. The streaming companies gave different explanations: Bilibili’s high marketing spend outweighed its user growth, while iQiyi spent much more on content development and overseas growth.
ByteDance’s ad revenue in China hasn’t grown in six months, the first time ever since it commercialized in 2013, it reportedly told its staff. Advertising accounted for 77% of the company’s total revenue last year, indicating that it could be in trouble across the board.
The winners — sort of:
JD.com’s sales grew nearly 23% and revenue beat expectations — but the company warned of weakened consumer spending, rising raw material costs, COVID outbreaks, and extreme weather dampening growth in the next two quarters.
Baidu also beat expectations, with revenue growing 13%, thanks to its cloud and AI businesses, though it swung from a 13.7 billion yuan ($2.14 billion) profit last year to a 16.6 billion yuan ($2.6 billion) loss last quarter. That was mainly because of a mark-to-market adjustment on its low-performing investment in Kuaishou.
The takeaway: Alibaba explained weaker growth by citing government crackdowns — without getting into specifics — which could mean tech giants will find the most success investing in next-generation technologies that Beijing is trumpeting: one bright spot in Alibaba’s quarterly report was that cloud computing revenue skyrocketed.
Author: Matthew Silberman, SupChina