Dull tech earnings chalked up to increased spending

Q3 reports from China’s tech giants were a mixed bag, and even the few winners signaled rough times ahead:

The losers:

• Tencent and Alibaba’s revenue missed expectations, with Tencent’s growing at the slowest pace since its 2004 IPO. Alibaba warned of a similar trend: it expects slower-than-2014 growth in the next two quarters.
• Alibaba’s market value is still just half what it was last November, before Ant Group’s aborted IPO.
• Bilibili and iQiyi’s losses grew 145% at and 42%, respectively, compared to last year. The streaming companies gave different explanations: Bilibili’s high marketing spend outweighed its user growth, while iQiyi spent much more on content development and overseas growth.
• ByteDance’s ad revenue in China hasn’t grown in six months, the first time ever since it commercialized in 2013, it reportedly told its staff. Advertising accounted for 77% of the company’s total revenue last year, indicating that it could be in trouble across the board.

The winners — sort of:

• JD.com’s sales grew nearly 23% and revenue beat expectations — but the company warned of weakened consumer spending, rising raw material costs, COVID outbreaks, and extreme weather dampening growth in the next two quarters.
• Baidu also beat expectations, with revenue growing 13%, thanks to its cloud and AI businesses, though it swung from a 13.7 billion yuan ($2.14 billion) profit last year to a 16.6 billion yuan ($2.6 billion) loss last quarter. That was mainly because of a mark-to-market adjustment on its low-performing investment in Kuaishou.

The takeaway: Alibaba explained weaker growth by citing government crackdowns — without getting into specifics — which could mean tech giants will find the most success investing in next-generation technologies that Beijing is trumpeting: one bright spot in Alibaba’s quarterly report was that cloud computing revenue skyrocketed.