Alibaba Group: Surge in Quarterly Profits Amid Coronavirus Outbreak
Post reporting a 58% increase in quarterly profits ended December 31, the Executive Chairman and Chief Executive of Alibaba Group – Daniel Zhang Yong is sceptical about the negative impact of the coronavirus outbreak on the global economy.
The revenue hike is because of the record breaking sales during the Singles’ Day, which is the world’s largest shopping festival.
In the earnings call with analysts yesterday, Zhang said, “The [coronavirus] outbreak is having significant impact on China’s economy, and may potentially affect the global economy.” He added, “It will present near-term challenges to the development of Alibaba’s business across the board.”
Based on the Chief Financial Officer of Alibaba Group, Maggie Wu Wei, “What we’ve seen, particularly in the past 12 to 13 days since the start of February, is that our overall revenue growth rate will be negatively impacted in the March quarter.”
As compared to an year ago, Alibaba Group saw a 38 percent rise in revenue from 117.3 billion yuan to 161.5 billion yuan (US$23.3 billion) in its fiscal Q3. The core commerce and cloud computing businesses of the firm are a significant reason for its steady growth.
Analysts consider financial results of Alibaba Group as an important parameter to judge the economic health of China. Over the past few months, the food delivery orders of the firm have undergone major fall because of the shutdown of markets. Travel restrictions have affected the revenues of Alibaba’s travel arm – Fliggy. Relief packages, including loans, fee waivers and other financial assistance, which the company provides has also been hampered.
Besides Alibaba Group, firms like Apple and Tesla Inc, have also been shaken by the coronavirus outbreak. The producer of most iPhones of Apple in China – Foxconn has also announced a reduction in its manufacturing capacity this week. Sources claim that Apple would tentatively ship 5-10 percent less iPhones in this quarter.
In the annual 10-k filing that Tesla revealed recently, the electric car maker has acknowledged the presence of a new risk to its business: “health epidemics”. The company has stated that it is unknown how and whether global supply chains, specifically for automotive parts, might be affected in case the coronavirus epidemic persists for a long period of time.
Coping with losses in the long term can be a major issue for businesses who have been recently hit by the US-China trade war. It remains to be seen if Apple and Tesla will be able to handle the existing situation and handle their sinking ships before it gets too late!
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