(Bloomberg) – Alibaba Group Holding Ltd. gave investors little indication of how government crackdown on Jack Ma’s tech empire will affect future growth after quarterly sales rose 37% faster than expected.

The e-commerce giant has set up a dedicated task force to conduct internal reviews and is actively communicating with antitrust authorities on compliance with their requirements as investigations continue, Alibaba said Tuesday. It is also not possible to make a complete assessment of how the ongoing “rectification” of the affiliate Ant Group Co. will affect its business.

The unexpectedly high result could be overshadowed by an ongoing antitrust investigation that has wiped more than $ 130 billion off the e-commerce giant’s worth since its October record. The uncertainty began in November when regulators first torpedoed Ant Group’s record IPO and then opened their investigation into the online retailer. Alibaba’s stock has fallen 13% since Ant’s abandoned debut. This is the worst performance on the Hang Seng Index in Hong Kong. New York stocks fell 3.9%.

“Ant Group’s business outlook and IPO plans are subject to significant uncertainty,” said Daniel Zhang, Alibaba’s chief executive officer, in a conference call on Tuesday. “We will continue to update the market when the investigation is complete.”

Separately, Alibaba said it would launch a potential $ 5 billion bond sale this week, picking up on a plan that went silent when its founder was out of sight.

Read more: Jack Ma shows up for the first time since Ant, Alibaba Crackdown

Alibaba’s shares made up some of their losses after Ma reappeared publicly during a live streaming video conference last month. This is an obvious signal that worst-case scenarios – like a government-led takeover or the liquidation of its companies – are likely now off the table. Few expect Beijing to completely withdraw its campaign to tighten regulation of Ant, Alibaba and the rest of China’s high-tech giants. However, the stock’s partial rebound suggests that investors are beginning to evaluate the risk of an action that would seriously jeopardize the country’s richest entrepreneurs and innovative companies.

The story goes on

Zhang spent a significant portion of Alibaba’s profit calls talking about corporate “social responsibility,” promoting small business owners, and promoting rural consumption, two of Xi Jinping’s priorities as Beijing sought to lift the country out of poverty .

What Bloomberg Intelligence Says

The full effects of the antimonopoly investigation by the Chinese State Administration for Market Regulation (SAMR) against Alibaba and the new fintech regulations for the Ant Group are likely to remain uncertain for some time to come. Alibaba announced with its 3Q results that it is fully working with SAMR but the investigation is still ongoing. The company is also unable to provide a complete and fair assessment of the impact any changes to the Ant Group will have on its business.

– Vey-sern Ling and Tiffany Tam, analysts

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Revenue rose to $ 221.1 billion ($ 34.2 billion) in December, beating the analyst forecast average of 215.3 billion yuan, while net income rose 52%.

Two of Alibaba’s largest and fastest growing businesses were in the black for the vacation quarter – a major milestone for the company. The cloud business posted positive adjusted earnings before interest, taxes, depreciation and amortization for the first time, while segment revenue increased 50% due to customers in the internet, retail and public sectors. Cainiao, its logistics unit, has also achieved positive cash flow, the company said.

Annual Active Consumers rose to 779 million in the December quarter, increasing core retail business by 38%. Alibaba had sales of $ 75 billion last November from its annual Singles’ Day promotions. The increase in spending was seen despite retail sales declining 3.9% overall over the past year, with consumption lagging behind industrial activity in the broader economic recovery.

However, investors are wondering whether Alibaba can sustain this growth as Beijing tightens control over Chinese tech giants, especially in online retail. Ma’s company, once the flag bearer for China’s fast-growing private enterprise and booming internet sphere, now faces fines of up to 10% of its sales, or around $ 7.8 billion, if found to violate rules against practices how violated enforced exclusive agreements with dealers known as “Pick One of Two” has predatory pricing or algorithms that new users prefer.

Any regulations requiring Alibaba to completely end its enforced exclusivity policy could impact Tmall’s revenue by nearly a tenth in 2021, before revenue to an annualized 2022 and beyond, according to San Francisco-based Octahedron Capital Management Growth of 18-20% and beyond is returning LP. Currently, it is estimated that less than 10% of the best-selling brands are exclusive. While Alibaba has exclusive flagship stores with some merchants, in most cases they can sell the same goods on other platforms, Zhang said.

The regulations can also affect the ability to fend off competitors of JD.com Inc. against Pinduoduo Inc., whose 730 million consumers per year are approaching Alibaba’s user base. In the meantime, short video platforms like ByteDance Ltd. and Tencent-supported Kuaishou Technology live streaming as a point of sale to secure a larger share of e-commerce. Beijing-based ByteDance announced its Singles’ Day earnings for the first time in 2020. Douyin, the Chinese version of global sensation TikTok, posted a gross value of 18.7 billion yuan.

Ant contributed 4.8 billion yuan to Alibaba’s earnings in the quarter, indicating the company made 14.5 billion yuan in the three months ended September – before the $ 35 billion initial public offering – as its profits lagged Alibaba by a quarter. As part of the process, Ant was directed to “fix” its credit, insurance and asset management services.

Read more: Jack Ma’s Ant made $ 2.3 billion in profits prior to going public

Tighter capital requirements can affect Ant’s ability to extend credit as freely as possible, creating challenges for the sister company’s trading activities. The fintech giant offers small unsecured loans to around 500 million people via its Huabei (Just Spend) and Jiebei (Just Lend) platforms. These are partially used to pay for clothes and makeup purchases in the Taobao marketplace or for trips booked on Fliggy, the group’s online travel site.

Payments made with Huabei on Alibaba’s Chinese marketplaces represent only a very small percentage of the total credit granted under the platform, Zhang told analysts on Tuesday. The “vast majority” of his customers have linked their payment accounts to multiple funding sources, he added.

Tighter government control over mergers could prevent the tech giant from attracting promising startups in emerging industries or acquiring oversized stakes in other companies to fend off competition. Alibaba, which has raised billions for shares in the hypermart operator Sun Art Retail Group Ltd. in recent years. and spent on NetEase Inc.’s Kaola e-commerce platform was fined 500,000 yuan in December for failing to apply for approval before increasing its stake in the division’s Intime Retail Group Co. Year 2017.

“Business is strong and many believe the stocks are undervalued compared to the roadmap and the history of some of their businesses,” said Andy Halliwell, an analyst at technology consultancy Publicis Sapient, in a research note following the results. “However, if the Chinese government tries to tackle downright entrepreneurs and take a more conservative stance on their larger tech companies, it will damage investor confidence in the brand and potentially create an opening for others to use.”

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(Updates on bond issuance in the fifth paragraph)

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