HONG KONG (BLOOMBERG) – For almost a decade, Alibaba Group Holding and Tencent Holdings embodied China’s economic miracle, sustaining a dizzying pace of growth and approaching trillion-dollar valuations with splashy forays into every corner of the internet.

That spectacular run could officially end on Thursday (Aug 4), when the e-commerce powerhouse that Mr Jack Ma founded is expected to record its first-ever decline in quarterly revenue – one of the few major Chinese Internet corporations to do so, ever.

Fellow billionaire Pony Ma’s Tencent, the social media powerhouse, could follow suit days later.

The milestones are a reminder for investors that, after a government crackdown that wiped more than US$1 trillion (S$1.38 trillion) off their combined market value last year, Alibaba and its long-time arch-rival are shadows of their former selves.

Like the rest of the country, they are grappling not just with an uncertain regime but also Covid Zero and a consumer crisis that is testing the stability of the world’s No. 2 economy.

“It should not be surprising that the second quarter of 2022 will be one of the worst quarters since the pandemic for China earnings given the lockdowns, and tech is no exception,” said Bloomberg Intelligence analyst Marvin Chen. “Tech has also faced additional regulatory headwinds on growth prospects, which is a more structural and longer-term trend.”

The speed and ferocity with which Beijing clamped down on online commerce, car-sharing, food delivery and gaming irrevocably reset growth expectations for the industry last year. But Alibaba has taken a harder hit than many of its peers.

There was the tax evasion probe into celebrity live-streamer Viya, who once single-handedly moved US$1.2 billion of goods during Alibaba’s Nov 11 online bonanza.

Then, the nation’s technology watchdog suspended ties with its cloud business for late disclosure of a major software vulnerability, spooking potential clients.

In June, “Lipstick King” Li Jiaqi became the second major personality to vanish from Alibaba’s Taobao after apparently offending censors. And, just last month, cyber-security experts linked Alicloud to China’s largest cyber-security breach – a leak of records on a billion residents from Shanghai’s police database.

All that transpired as China narrowly escaped economic contraction in the second quarter, when rolling Covid-19 lockdowns depressed spending on everything from online content to apparel and electronics.

Once candidates to join the likes of Apple and Amazon.com in a select club of companies with trillion-dollar valuations, China’s largest Internet companies are now struggling to keep up with even the most staid utilities.

Analysts from Susquehanna to Deutsche Bank have scrambled to slash their targets as Alibaba continued to plumb new lows.

“It used to be the case where investors bought Alibaba and Tencent shares hoping their dominant positions in e-commerce, social and gaming would create synergy with their newer businesses and vast swathes of portfolio firms,” said DZT Research analyst Ke Yan. “But that’s a long-lost cause since the government tightening.”

Alibaba’s revenue is projected to slip 1.2 per cent to 203.4 billion yuan (S$41.7 billion) for the three months ended June.

Prospects at Tencent are not much better. Although regulators resumed approving new games in April after a months-long hiatus intended to curb addiction, the country’s premier developer has yet to win a nod for a single title this year. That is one reason analysts predict Tencent’s revenue will fall 1.7 per cent in the April to June period.

Market sentiment towards Chinese tech stocks swung wildly in recent weeks, reflecting a persistent struggle to juggle a torrent of negative signals with expectations that Beijing is finally easing up on its crackdown.

Alibaba rose as much as 6.5 per cent on July 26 after announcing its decision to apply for a primary listing in Hong Kong that paves the way for millions of mainland investors to directly buy the stock.

It surrendered those gains within days as investors assessed the implications of co-founder Mr Ma ceding control of Ant.

Compounding matters, Alibaba became the latest to join a growing roster of Chinese firms that face removal from United States bourses because of Beijing’s refusal to permit American officials to review their auditors’ work.