Alibaba posted its first quarterly loss as a listed company, and said its Aliyun lost a major customer for ‘non-product reasons.’
The whole company announced a loss of RMB7.6 billion ($1.1 billion) due to a RMB 18.2 billion ($2.78 billion) fine levied by China’s State Administration for Market Regulation pursuant to China’s Anti-monopoly Law.
The company’s cloud unit announced its second profitable quarter in a row, and reduced its yearly losses significantly. Alibaba Cloud saw 37 percent year-on-year revenue growth for the March quarter to RMB 16.8 billion ($2.6 billion), and 50 percent total growth year-on-year in 2021 to RMB 60.1 billion ($9.2 billion).
For this quarter, the cloud unit achieved an adjusted EBITA of RMB 308 million ($47 million), but a loss of RMB 166 million ($25 million) for the fiscal year ending March 2021. The unit saw losses of RMB 1.4 billion ($217 million) in fiscal year 2020.
The company said it saw slower revenue growth during the March quarter primarily due to “revenue decline from a top cloud customer” in the Internet industry. The unnamed customer, which has a “sizeable presence outside of China” and previously used the company’s overseas cloud services, decided to terminate the relationship “due to non-product related requirements,” according to the company.
Neither the identity of the customer nor the reason for the contract termination were not given, but the reason would most likely be privacy and/or national security concerns from Western governments around state interference into Chinese digital infrastructure. The US 'Clean Network' initiative lists Alibaba as a potentially problematic vendor under its 'Clean Cloud' section.
Chinese outlet Caixin Global reports the customer may have been TikTok’s owner ByteDance. ByteDance had come under pressure from the previous Trump administration to sell its US unit, but those plans were reportedly shelved in February after Joe Biden was inaugurated.
Despite the loss of a customer and an overall loss for the year, Alibaba will likely see the last 12 months as a success on the Cloud front. In February the company announced the first profitable quarter for its cloud division after 11 years of operation. In Q4 2020 it achieved revenues of RMB 16.1 billion ($2.4 billion) for Q4 2020 with an adjusted EBITA of RMB 24 million ($3 million), though it reported operating losses at RMB 2 billion ($309 million).
Alibaba Chairman and CEO Daniel Zhang said the company plans to keep investing in core IAAS and PAAS products in order to “establish our core product competencies benchmarking against the global cloud leaders” as well as further expand the integration of artificial intelligence with cloud infrastructure to “provide our customers with more diversified industry intelligence solutions.”