ALIBABA Group Holding Ltd.’s shares Friday fell the most in 18 months and cut its market valuation by about US$30 billion after investments in brick-and-mortar assets and digital media squeezed profit margins in the December quarter.

The Chinese e-commerce giant reported revenue that topped analyst estimates and raised its growth forecast for the 12 months ending in March to 55 percent to 56 percent. But operating margin shrank to 31 percent in the last quarter from 39 percent a year earlier. Shares fell 5.9 percent in New York trading, the sharpest decline since June 2016.

Alibaba will also buy 33 percent of Ant Financial, helping to clear the way for an initial public offering (IPO) of the Chinese payments giant. While no cash is changing hands, Ant Financial will end royalty payments to Alibaba that were worth more than US$300 million last fiscal year.

Alibaba hasn’t held a stake in the owner of Alipay since founder Jack Ma controversially spun out the business in 2011. Ant Financial has had a string of recent setbacks, with its U.S. expansion thwarted by the collapse of a deal for MoneyGram International Inc. while its Chinese business faces greater scrutiny from regulators and increased competition from Tencent Holdings Ltd.

“This acquisition of Ant Financial’s stake could be a preparation for its potential IPO,” said Steven Zhu, a Shanghai-based analyst with Pacific Epoch.

Formally known as Zhejiang Ant Small & Micro Financial Services Group Co., Ant Financial operates Alipay as well as money market funds and credit scoring. It’s based in Hangzhou, the same hometown as Alibaba.

Once dominant in China, Alipay’s share of online payments in the country has slumped to 54 percent as of the end of September amid the rise of Tencent’s WeChat platform, according to research firm Analysys International.

Chief financial officer Maggie Wu said on a conference call that investors shouldn’t equate lower margins with lower profits, as the overall business is growing.

“We are making the pie much bigger,” she said. “60 percent of an apple compared with 40 percent of a watermelon, which one do you want?” (SD-Agencies)