Months after swallowing a $2.8 billion fine for violations such as forced exclusivity with merchants, Jack Ma’s flagship ecommerce firm is plowing money into areas like its bargains platform and community commerce to offset slowing growth, at a time when rivals like Pinduoduo Inc. and JD.com Inc. are eroding its dominance in China’s ecommerce sales.

(Bloomberg)—Alibaba Group Holding Ltd. reported revenue that missed estimates, suggesting plans to hike spending in pursuit of growth have yet to gain traction.

Revenue for the three months ended June climbed from a year earlier to 205.7 billion yuan ($31.8 billion), compared with the 209.4 billion yuan average of analyst estimates. Net income was 45.1 billion yuan, rebounding from a loss in the previous quarter following the firm’s record antitrust penalty. The company announced it was boosting its share buyback program by 50% to $15 billion. Alibaba shares were up slightly in pre-market trading.

Alibaba, among the first of China’s internet giants to feel the heat from Beijing, has been closely watched for clues to the real-world impact of the upheaval that’s ensued since regulators went after industries from online commerce to ride-hailing and edtech. Months after swallowing a $2.8 billion fine for violations such as forced exclusivity with merchants, Jack Ma’s flagship ecommerce firm is plowing money into areas like its bargains platform and community commerce to offset slowing growth, at a time when rivals like Pinduoduo Inc. and JD.com Inc. are eroding its dominance in China’s ecommerce sales.

Alibaba is “undergoing an investment phase,” Daiwa analysts led by John Choi wrote in a recent research report. “Investment in Taobao Deals and Community Marketplaces will likely drag down core-commerce EBITA. These are the key investment areas for Alibaba to add 100 million new consumers in China by FY22.”

Resurgent pandemic risks in China, which was the first major economy to recover last year, have clouded the outlook for companies like Alibaba. The country is currently facing its broadest coronavirus outbreak since the pathogen first emerged in late 2019. But even before the recent spike in infections, the rebound in consumer spending has been uneven. During the so-called June 18 shopping festival, total parcel delivery volume rose 24% across the country, half the year-earlier pace, according to data from the State Post Bureau.

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Along with slowing online retail sales, “both Douyin and Kuaishou actively joined the competition,” Blue Lotus Capital Advisor analyst Shawn Yang wrote in a July note. “Alibaba’s strategy for 6.18 of this year is more on user retention rather than GMV growth.”

Alibaba in May forecast revenue growth of at least 30% for the 12 months ending in March, a deceleration from the 41% seen a year earlier. That prediction suggests that Alibaba’s share of China’s ecommerce sales will fall below 50% for the first time ever in 2021, industry researcher eMarketer said in a July 30 report.

Annual active consumers across its China retail marketplaces grew a slower-than-expected pace to 828 million in the June quarter, driving a 35% increase in its commerce business. Across all business, the firm, which is targeting 1 billion users in its home market by the end of 2021, had 912 million users in China. Its bread-and-butter customer management revenue climbed just 14%, the weakest in at least three quarters, after Alibaba started combining commissions revenue with the figure.

Cloud revenue climbed 29%, slowing for a second consecutive quarter after a major customer withdrew. Bloomberg News has previously reported that the client is TikTok-owner ByteDance Ltd.

Executives last quarter had pledged to channel all incremental profit into investment to refocus on its business, as Beijing’s campaign to rein in its tech companies continues unabated. Alibaba has joined in a government-led bailout of Suning.com Co., boosting its stake in the troubled electronics seller. The corporation’s cloud division also pledged $1 billion to support startups in Asia, while opening new data centers and innovation centers in Southeast Asia. In July, it also announced it will become an anchor investor in a new HK$2 billion ($258 million) fund for startups located in the Guangdong-Hong Kong-Macau region.

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“The trajectories of Alibaba and China are inextricably linked,” Alibaba Chairman Daniel Zhang said in his annual letter to shareholders last month. “Alibaba owes its growth and development over the past 20 years to society and to the era that we belong.”

Alibaba last month combined its Ele.me food delivery app, Koubei local commerce platform as well as mapping and online travel business into a new lifestyle services division, a move that could help it better challenge Meituan’s dominance in those sectors. As part of the changes, the company also merged Tmall’s online grocery service with Alibaba’s cross-border commerce business.

Alibaba shares touched a 16-month low last month as the government’s crackdown spread to the online education sector and more regulators including the internet-industry overseer stepped up scrutiny over the sector. The company has lost more than $300 billion in market value from its October peak, just before Ant’s initial public offering was scrapped and the tech crackdown began in earnest.

Scrutiny on the tech sector has expanded since Alibaba’s penalty. The antitrust watchdog in April launched an investigation into Meituan and ordered 34 internet giants, including Alibaba and its units, to carry out internal reviews and rectify any excesses. In July, the cyberspace regulator stepped into the fray, announcing a probe in Didi Global Inc. and removing its services from Chinese app stores following its U.S. listing, expanding the crackdown into the realm of data security.

Rules proposed last month also require virtually all firms seeking to go public in a foreign country to seek approval from the watchdog, a move that could impact Alibaba’s investees. China’s harsh curbs on private tutoringincluding a ban on raising capital or going publicwill impact the likes of Zuoyebang, an edtech startup backed by Alibaba. Taobao, alongside other platforms such as Kuaishou Technology and Tencent Holdings Ltd.’s QQ service, was also orderedby regulators to remove accounts that spread sexually suggestive content involving children.

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In the wake of the crackdown, Alibaba has made tentative steps at opening up its ecosystem, applying to create a mini app for its Taobao Deals platform on Tencent’s WeChat service, Bloomberg News reported earlier this year. The Wall Street Journal also reported that Alibaba is considering letting customers use Tencent’s WeChat Pay to pay for purchases on Taobao and Tmall. The moves would represent a substantial concession to Beijing, as both companies have historically barred each others’ services on their own platforms.

Allowing WeChat Pay onto Alibaba’s ecommerce platforms will add to pressure on affiliate Ant Group Co., which has been ordered by regulators to restructure into a financial holding company. Ant’s profit fell to $2.1 billion in the March quarter after Chinese regulators thwarted its record initial public offering and told it to overhaul its sprawling operation.

Alibaba owns and operates Taobao and Tmall, which hold the No. 1 and No. 2 spots in the ranking for Digital Commerce 360 Online Marketplaces.

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