Alibaba shares fall 6% after the Chinese tech giant posts 86% drop in profit

15.05.2024

Shares of Alibaba experienced a sharp decline on Tuesday following a substantial decrease in the Chinese tech giant’s net profit during the fiscal fourth quarter.

Here’s a breakdown of Alibaba’s performance in the March quarter compared to LSEG consensus estimates:

• Revenue: 221.9 billion yuan ($30.7 billion) versus the expected 219.66 billion yuan.
• Net income attributable to ordinary shareholders amounted to 3.3 billion yuan, marking an 86% year-on-year decline.

Alibaba’s shares closed 6% lower in the U.S. market, dropping as much as 8.1% in the first hour of trading.

The company faced significant challenges in 2023, undergoing its largest-ever corporate restructuring and experiencing several high-profile management changes, including Eddie Wu assuming the role of chief executive in September.

In an effort to reassure shareholders, Alibaba announced earlier this year that it expanded its share buyback program by $25 billion through March 2027.

Alibaba has been contending with cautious consumer spending in China but witnessed a slight recovery in its core e-commerce business in the March quarter.

Despite a domestic slowdown, the Hangzhou-based company has intensified its international expansion efforts, particularly amidst rising competition from low-cost players like PDD.

Revenue for the Taobao and Tmall division, which encompasses Alibaba’s China e-commerce operations, increased by 4% year-on-year to 93.2 billion yuan, outpacing the 2% growth from the previous quarter.

Customer management revenue, generated from services such as marketing sold to merchants on its Taobao and Tmall platforms, saw a 5% year-on-year rise, contrasting with flat growth in the preceding quarter. Additionally, Alibaba’s international commerce segment reported a 45% year-on-year revenue increase to 27.4 billion yuan.

CEO Wu pledged earlier this year to “reignite” growth within the e-commerce firm through further investments, and the results for the March quarter suggest initial signs of success.

Wu stated in the earnings release, “This quarter’s results demonstrate that our strategies are working, and we are returning to growth.”

However, the substantial profit decline casts a shadow over the earnings. Alibaba attributed the decrease primarily to a net loss from its investments in publicly-traded companies during the quarter, compared to a net gain in the same quarter last year, due to mark-to-market changes.