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Alibaba reported profitability for its cloud computing business amid its ongoing regulatory scrutiny by China’s State Administration for Market Regulation (SAMR).
For the first time ever, Chinese technology company Alibaba Group Holdings Ltd (BABA: NYSE) recorded profits in its cloud computing business. At the same time, the multinational company is currently under regulatory scrutiny in China.
Alibaba Records Profits in Cloud Computing Business
In its reports for the fiscal third-quarter earnings, Alibaba noted that the company gained 24 million yuan ($3 million) in its adjusted EBITA (earnings before interest, tax, and amortization) for its cloud computing business. The profits recorded for the December quarters are significant as the company recorded losses in the previous year. For the same period in 2019, Alibaba reported a loss of 356 million yuan in adjusted EBITA.
In addition, Alibaba’s cloud computing business revenue for the fiscal third quarter pulled in a 50% increase year-on-year. In the quarter, Alibaba’s cloud computing revenue was 16.11 billion yuan.
Alibaba CEO Daniel Zhang said:
“Our cloud computing business continues to expand market leadership and show strong growth, reflecting the massive potential of China’s nascent cloud computing market as well as our years of investment in technology.”
In September, Alibaba finance chief Maggie Wu said that the company’s cloud business would record profits in the fiscal year.
Currently trading at $256.31 in after-hours trading, Alibaba is up 0.71% over its previous close of $254.50. The company has been reporting both loses and gains over the past months. BABA generated an increase of 14.19% over the past year and jumped over 9% in its year-to-date record. The Chinese multinational company also grew by 5.87% over the past month.
However, data by MarketWatch revealed that Alibaba has declined by nearly 11% in the last three months. In the last five days, the company also plunged by 4.29%.
Alibaba Faces Regulatory Scrutiny in China
Alibaba reported profitability for its cloud computing business amid its ongoing regulatory scrutiny by China’s State Administration for Market Regulation (SAMR). The SAMR started investigating Alibaba in December over monopolistic activities. The investigation was prompted by a practice that forces customers to go with either of two e-commerce platforms instead of being able to choose both.
In response, Alibaba said:
“We will continue to actively communicate with the SAMR on compliance with regulatory requirements.”
The company added that it had formed a “special task force with leaders from our relevant business units to conduct internal reviews.” Furthermore, Alibaba promised to give an update upon the conclusion of the investigation.
In the earnings statement, Alibaba also mentioned that Ant Group had completed its regulatory requirements for its rectification plan. Notably, Ant Group’s world record-high $34.5 billion initial public offering (IPO) was suspended in Shanghai and Hong Kong. Following the IPO suspension, Alibaba, which owns about 33% stake in Ant Group, lost over 7% in Asia trade.