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Just one day following a blunt exchange that came as a big surprise with a regulator in China that unnerved investors, Alibaba Group the e-commerce giant reported an increase of 40% in revenue in its final 2014 quarter, though the total ended weaker than was expected.
The company saw brisk sales on Singles Day the holiday on e-commerce in China during November but it faces a slowdown of the economy in the country. Sales were not able to match analysts’ high expectations.
Making matters worse for Alibaba, which received $25 billion in September in its IPO, was the flare up with the main regulator for corporations in China over the sale of fake goods prompting concerns from many investors.
On Thursday in trading before the opening bell, shares of Alibaba were down over 6%.
The Chinese e-commerce giant said that the quarter, ending December 31 recorded a $2.1 billion net profit, which was higher than analysts projected of $1.9 billion. Revenue at Alibaba was up, reaching $4.2 billion but missed the estimate of $4.5 billion by analysts.
Alibaba reported its net profit of $964 million, which was a drop of more than 28% from the same quarter one year ago.
Company officials cited costs that were related to taxes, fees and stock awards for the drop.
Alibaba will now face trouble with government regulators, which is a reminder to all investors that investing in Alibaba brings political risk attached to it.
Managing the risk involved while keeping the concerns of its investors under control will be one of the greatest challenges the company will have now that it is listed on Wall Street.
Recent years of great growth by Alibaba has created a double-edged sword. Its huge scale has given it the opportunity to earn billions but its size has attracted government scrutiny.
The expansion by Alibaba into finance dismayed the central bank in China and the securities regulator the past two years.