Bon Voyage

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What's going on?

Alibaba posted better-than-expected results on Thursday, but the Chinese ecommerce giant doesn’t intend to rest on its laurels.

What does this mean?

Hopes weren’t exactly high for Alibaba’s update, given that Chinese retail sales have fallen for the last two months on the back of countrywide lockdowns. But trapping shoppers in their homes actually turned out to be a blessing in disguise, forcing them to turn to the company for their most basic needs. That pushed the number of Chinese customers who’ve bought something on the platform in the last 12 months past the 1 billion mark for the first time. Throw in a 12% uptick in cloud computing sales, and overall revenue grew by a better-than-expected 9%. And while the company opted not to give an outlook for the coming year, investors – who have watched its stock fall around 33% this year – took it as a win: they sent it up 10% after the news.

Why should I care?

Zooming in: Alibaba goes to Europe.
Still, this was the second-straight quarter of single-digit revenue growth for the company, which isn’t what investors expect from the high-flier. It’s partly down to competition from rivals like JD.com and Pinduoduo, partly down to the zero-Covid policy, and partly down to government tech crackdowns – all of which Alibaba is hoping to offset by boosting its presence abroad. Case in point: it’s reportedly planning to expand in Europe via its offshoot Lazada, in hopes of quintupling the value of transactions made on the platform to $100 billion a year.

The bigger picture: China loses its bravado.
Alibaba might be right to look beyond China: data shows that the country’s economy is in tatters, with small business confidence dropping to the second-lowest level on record this month. Things are so dire, in fact, that economists are now forecasting that the Chinese economy will miss its growth target by one percentage point this year, and even the government acknowledged this week that the country would struggle to grow at all this quarter.

Originally posted as part of the Finimize daily email.

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