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Alibaba mimics Amazon by slashing jobs after poor results

Covid lockdowns, Chinese regulations and SEC threats make Alibaba's job numbers worrying

Alibaba's woes continue, with the Chinese tech giant's latest financial reports indicating it cut nearly 10,000 jobs, or around 3.8 percent of its workforce, in the second quarter of 2022. 

Alibaba's revenue took its first-ever quarterly dive [PDF], though the loss was smaller than analysts expected, mostly buoyed by a 10 percent year-over-year increase in revenue from its cloud segment.

According to the South China Morning Post, which is owned by Alibaba, the tech giant's headcount reduction is its first since 2016. Citing reports from Alibaba insiders, the Post said many of the cuts began in May and came from ecommerce site Taobao Marketplace, Slack competitor DingTalk and, despite growth, Alibaba's cloud team. 

Toby Xu, Alibaba's chief financial officer, said during the company's Q2 earnings call that Alibaba is currently focused on "high quality growth, improving operating efficiency, optimizing cost structure and maintaining strong cash flow and net cash position." In other words, Alibaba is cutting back to stem its financial leaks. 

There are a lot of factors to consider in Alibaba's 2022 downturn: COVID lockdowns in China have hampered its ability to operate, Chinese authorities are cracking down on tech monopolies and the US government has threatened to delist it from the New York Stock Exchange this year.

Although it might sound counterintuitive, Alibaba continues to hire, CEO Daniel Zhang said during the earnings call. "Despite all of the macro uncertainties that we see out there, I'm pleased to tell you that we've hired 6,000 fresh university graduates from across China," zhang said. It's unclear what roles the new hires will fill.

While Alibaba cut a little less than 4 percent of its workforce in Q2, Amazon cut nearly 100,000, equivalent to approximately 6 percent of its total staff in the same three months, which Barrons said is the largest single quarter cut in the company's history. 

Like Alibaba, Amazon posted profits on the cloud side, but losses elsewhere as ecommerce sales have dipped while consumers return to brick-and-mortar stores and/or save money to handle the coming recession.

Amazon has been relatively transparent about the reasons for its staff cuts: It had to hire more people in warehouses to meet demand, which is subsiding along with COVID. Amazon even warned of such last quarter, so its cuts shouldn't come as a surprise. 

Amazon CFO Brian Olsavsky pointed to Q1 hiring as one of the key reasons for the historically large cuts. ​​"We had hired a lot of people in Q1 for the coverage of the Omicron variant. Luckily, that variant subsided, and we were left with a higher headcount position," Olsavsky said. 

"I would note that we're still up 188,000 year over year and nearly double the headcount of what we had heading into the pandemic in early 2020," Olsavsky added. 

If we take Amazon's statements at face value, its headcount reduction has been entirely due to pandemic overstaffing. Alibaba, on the other hand, is facing headwinds from regulators domestically and abroad. 

One of its plans for economic recovery involves becoming dual-primary listed on both the NYSE and Hong Kong Stock Exchange, over which CFO Xu expressed confidence; "By becoming primary listed on both Hong Kong and New York stock exchanges, we aim to further expand and diversify our investor base." 

But that diversification comes with one big "if." Without resolving its differences with the Securities and Exchange Commission, Alibaba could end up without a NYSE listing, which is unlikely to help it rebound. ®

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