Alibaba Group Holding Limited experienced a sharp 7.6% stock decline on Thursday following the release of its fiscal fourth-quarter earnings, which failed to meet analyst expectations on both revenue and profit metrics. The Chinese e-commerce giant reported revenues of 236.5 billion yuan ($32.6 billion) for the quarter ending in March, falling short of the anticipated 237.9 billion yuan. Despite achieving a 7% year-over-year revenue growth, the results disappointed investors who had hoped for stronger performance amid China’s economic recovery efforts.
The earnings miss represents a significant setback for Alibaba, which had been riding a remarkable rally with shares climbing nearly 60% year-to-date before the announcement. Investors had been optimistic about the company’s artificial intelligence investments and core e-commerce operations, expecting these initiatives to drive stronger financial performance. However, the results highlighted ongoing challenges facing China’s largest e-commerce platform, including persistent consumer sentiment weakness and intensifying competitive pressures from rivals like JD.com and PDD Holdings.
While Alibaba reported adjusted earnings of 12.52 yuan per American Depositary Share, representing a 23% increase from the previous year, net income figures told a more complex story. The company’s net income surged 279% year-over-year, but this dramatic increase was largely attributed to a low comparison base and gains from equity investments rather than core operational improvements. The mixed results underscore the challenges Alibaba faces in China’s evolving economy while maintaining its market leadership position in an increasingly competitive environment.
Core E-commerce Performance Shows Resilience
Despite the disappointment, Alibaba’s domestic e-commerce platforms demonstrated solid performance during the quarter. The Taobao and Tmall Group, which represents 42.9% of total revenues, recorded a 9% increase in revenue to 101.4 billion yuan. This growth rate exceeded the previous quarter’s performance, indicating some momentum in the company’s core business operations.
Customer management revenues, derived from marketing and services sold to merchants, rose by 12% year-over-year, reaching significant contribution levels to revenue. This improvement was driven by enhanced take rates and the introduction of software service fees, along with increasing adoption of Quanzhantui, Alibaba’s comprehensive marketing solution. The company’s premium 88VIP membership program continued expanding, with membership growing in double digits to reach 50 million during the quarter.
Cloud and AI Segments Drive Future Growth
Alibaba’s cloud division emerged as a bright spot in the quarterly results, with revenue climbing 18% year-over-year to 30.1 billion yuan. The growth was primarily attributed to AI product adoption and public cloud expansion, with CEO Eddie Wu noting that AI-related product revenue achieved triple-digit growth for the seventh consecutive quarter.
The company’s strategic focus on artificial intelligence continues to gain traction, with the recent launch of Qwen 3, the latest version of its open-source large language model. Management expressed confidence in the cloud AI services segment, anticipating significant growth in the coming quarters as businesses increasingly adopt AI-powered solutions.
Market Challenges
The earnings miss highlighted several macroeconomic headwinds affecting Alibaba’s performance. Weak consumer sentiment and economic volatility in China continue to impact the company’s growth trajectory. Although Beijing and Washington agreed to suspend most trade tariffs in April, the lingering effects of previous trade tensions continue to influence market confidence.
Competitive pressures remain intense, with rivals JD.com and PDD Holdings aggressively pursuing promotional strategies that have sparked industry-wide price wars. While JD.com reported better-than-expected results during the same period, Alibaba faces the challenge of maintaining market share while preserving profitability margins.