(Bloomberg) — Alibaba Group Holding Ltd. (NYSE:) reported an unexpected 9% increase in revenues after Chinese customers turned to online shopping during Covid lockdowns throughout the country.

The shares of the company rose by 4% during pre-market trades in New York. In the March quarter, revenue grew to 204.05 trillion yuan (or $30.3 billion). This was the second consecutive quarter of single-digit sales growth. However, it exceeded the expectations of analysts at 200.6 billion Yuan. Covid curbs caused uncertainty, so the company did not provide a projected revenue figure for next year.

Alibaba — a barometer for Chinese consumer sentiment because of its dominance of Asia’s largest retail arena — is grappling with intensifying competition and mounting economic uncertainty at home. Chinese retail sales dropped for two consecutive quarters due to tight Covid-19 lockdowns that tangle supply chains, and reduce spending between Beijing and Shanghai.

Chinese antitrust watchdogs have also chilled Alibaba’s expansion plans and helped JD (NASDAQ:).com Inc. overtake it on sales growth, while up-and-coming competitors from ByteDance Ltd. to Pinduoduo (NASDAQ:) Inc. is attracting users from traditional online-shopping giants. 

Alibaba, like its rival Tencent Holdings Ltd. (OTC:) Ltd. is adapting to a sharply reduced growth rate due to Beijing’s constant scrutiny. The e-commerce giant said in February it’ll focus on retaining users rather than pursuing the aggressive market-share grab of years past. That marks a major shift for a company that once fought rivals in arenas from media to the cloud and retailing, and follows more than a year of relentless curbs on every facet of China’s internet sector. After the decline in its investment value, the net loss increased to 16.2 billion Yuan. Alibaba’s annual active users in China surpassed the 1 billion mark.

You can click here to see the live blog of the results.

Bloomberg Intelligence:

“Due to weaker retail sales and logistics disruptions caused by Covid flare-ups in mainland China, the internet giant will likely further increase support to merchants in the form of lower marketing and transaction fees payable by them on the company’s platforms such as Taobao, Tmall and Ele.me.”

Analysts Catherine Lim and Tiffany Tam

For more information, click here

Alibaba was once China’s largest private company. However, its market value has declined since Beijing started its brutal crackdown on China’s private sector over a year back. The government forced Alibaba’s finance affiliate, Ant Group Co., to call off what would have been the world’s largest initial public offering in 2020, and then launched reforms that have undercut Alibaba’s business model.

The market has been lukewarm on the government’s repeated pledges to support the internet sector and boost the lagging Chinese economy. Tencent last week stated that it would take some time before regulators take any action.

More recently, China’s commitment to Covid Zero has hit the world’s second-largest economy, with production and logistics suffering from stringent anti-virus measures. Companies have been placing thousands of workers under quarantine, and making them sleep in factories. They also restrict their movement and are disrupting operations with repeated mass tests. In a rare show of frustration, Tencent’s billionaire co-founder Pony Ma shared a viral opinion piece on the economic costs of China’s strict Covid Zero measures this week.

Alibaba’s response to local challenges has been more outward-oriented. Lazada in Southeast Asia, Trendyol around Turkey, and Daraz around South Asia are all important parts of the company. Alibaba has outlined a long-term goal of quintupling Lazada’s gross merchandise value, the sum of transactions across its platforms, to $100 billion.

Updates starting at the second paragraph with shares action

©2022 Bloomberg L.P.