Jack Ma-backed Ant's profit fell 92% from higher investment loss

Lionel Ng/Bloomberg

Ant, the company that operates Alipay, saw its quarterly profit fell 92% as the fintech pioneer founded by Jack Ma struggles to revive a business wracked by an economic downturn and more than a year of regulatory scrutiny.

The Hangzhou-based company contributed 80 million yuan ($11 million) of profit to Alibaba Group Holding. Based on Alibaba's one-third stake in Ant, that translates to an estimated 240 million yuan in profit for the fintech company's September quarter, according to Bloomberg calculations off the listed company's disclosures. 

That compares with a 65% plunge in Ant's profit in the previous three months, when it swallowed a 7 billion yuan hit for fines effectively ending Beijing's clampdown on the finance conglomerate. Its earnings lag a quarter behind Alibaba's.

Alibaba attributed the decrease in Ant's profits to the "increase in Ant Group's net investment loss," while the operating profit was largely flat. A representative for Ant declined to comment further.

Beijing slapped more than $1 billion in fines on Ant and Tencent Holdings in July, reining in a pair of national champions that amassed data on hundreds of millions of people. Ant is awaiting a financial holding company license, which would pave the way for a revival of an initial public offering. Ma, who has largely remained out of public sight in recent years, ceded control of Ant last year amid a broader retreat. 

Ant proposed to buy back as much as 7.6% of its shares last year, giving investors a chance to reduce exposure to the firm. Under the repurchase plan, the company's valuation was trimmed to about $79 billion — well off its peak of $280 billion before regulators scrapped its IPO three years ago. 

Investors including Warburg Pincus, Canada Pension Plan Investment Board, Carlyle Group and GIC Pte are among the top foreign shareholders that aren't participating in the buyback, Bloomberg reported in August. Fidelity and T. Rowe Price Group Inc. have agreed to sell some shares, while Alibaba has decided not to sell any of its stake. 

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Ant is also preparing to break off its international business, along with blockchain and database management services, people familiar with the matter have said. 

To look for growth, Ant is leveraging the payments network it built for Alipay to collaborate with digital wallets around Asia for transactions outside of their home markets. 

Initially catering to Chinese tourists traveling outside the country, the company has expanded the service into a backbone for cross-border payments known as Alipay+ that can be used by different wallets. For example, when customers of GCash from the Philippines travel to South Korea, they can pay with GCash when they see the Alipay+ logo displayed at merchants.

Another budding source of revenue comes from Alipay+ D-store, which allows businesses to build digital shopfronts across platforms including Chope, AlipayHK and Touch 'n Go. The company plans to generate income from servicing brands like Burger King that want an online presence in various apps. 

Ant's Singapore digital wholesale bank also started offering loans to small and medium-sized businesses in November 2022. 

Ant received approval from the Chinese government to roll out products powered by its large language model Bailing to the public in November. 

Chinese tech firms from Alibaba to Tencent and Baidu have joined startups Baichuan and Zhipu to release ChatGPT-like products, joining a global race to capitalize on the potential of generative AI. Ant, the owner of Alipay, can leverage the popularity of the mobile payment service to gain more data and insight on user habits. 

In September, Ant unveiled two applications powered by its financial large language model. One is known as Zhixiaobao, which answers questions for customers; and the other, Zhixiaozhu, is an assistant for financial professionals.