Alibaba Misses Revenue Expectation With A Drop in Sales

Alibaba - Ecommerce

Alibaba Group Holding, China’s e-commerce giant, surpassed analysts’ expectations for fourth-quarter revenue on Tuesday, driven by a focus on affordable goods amid cautious consumer spending, particularly within the domestic market.

Despite this positive revenue outcome, its U.S.-listed shares dipped aproximately 3% in premarket trading due to an 86% decline in fourth-quarter profit.

The past year has been eventful for Alibaba, marked by significant restructuring announced in March, involving the division into six units and a renewed emphasis on core businesses, notably domestic e-commerce.

In the wake of economic challenges stemming from the COVID-19 pandemic, consumers in China have exercised prudence in their spending habits, influenced by an economic slowdown and a decline in the property market.

Alibaba – Ecommerce

Alibaba’s domestic commerce arm, which includes Taobao and Tmall Group, experienced a 4% year-over-year growth, with a substantial increase in order volume.

Anticipating robust growth, analysts looked to Alibaba’s international digital commerce division, given its strategic investments in expanding global market share and the international demand for cost-effective products from China.

This segment exceeded expectations with a 45% revenue growth, despite nearly doubling losses to 4.1 billion yuan ($567 million) compared to the previous year.

The increased losses are attributed to substantial investments to maintain competitive pricing and expedite delivery times.

Alibaba – Ecommerce

Alibaba’s cloud division, another core aspect of its business, recently announced significant price reductions of up to 59% for products powered by offshore data centers, aiming to attract AI software developers amidst intensifying competition.

The earnings report revealed triple-digit year-on-year growth in AI-related revenue from external customers, indicating promising prospects in this emerging sector.

For the quarter ending March 31, the group reported revenue of 221.87 billion yuan, surpassing the consensus estimate of 219.66 billion yuan. However, net income for the March quarter was 3.27 billion yuan ($451.94 million), a notable decrease from 23.52 billion yuan reported a year earlier.

Olivia Murphy
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