Alibaba shares fall as earnings show slowing e-commerce growth

Shares of Alibaba Group Ltd. were trading lower on Thursday after the company missed revenue expectations for its latest quarter amid slowing e-commerce activity in China.

The company saw its fiscal third-quarter revenue rise to RMB242.6 billion ($38.1 billion) from RMB221.1 billion a year earlier, though analysts tracked by FactSet expected 246, 3 billion RMB. BABA from Alibaba,
-1.95%
The 10% year-over-year revenue growth rate for the December quarter was significantly lower than the 29% rate recorded in the September quarter.

Deputy Chief Financial Officer Toby Xu acknowledged on Alibaba’s earnings call that the company’s “China commerce segment could be affected by the macroeconomic slowdown and increased competition”, although he stressed stronger revenue growth from the company’s cloud computing and international trade businesses. Commerce in China is by far Alibaba’s largest revenue segment and it increased revenue by 7% in the quarter, while cloud revenue grew by 20% and international commerce revenue grew by 18%.

Alibaba previously warned of negative impacts from competition and the macroeconomic landscape in its previous earnings report, when the company lowered its full-year guidance.

U.S.-listed shares of Alibaba fell 3.4% on Thursday afternoon after paring losses. They had fallen as low as 8.8% earlier in the session.

Xu further noted during Alibaba’s earnings call on Thursday morning that the company “has increased merchant support through incentives to encourage merchants to adopt new value-added services” and has made ” strategic reductions” in certain service fees to reduce operational expenses for merchants as consumption slows.

As such, Alibaba’s revenue grew more slowly than its gross merchandise volume in the last quarter.

“We believe that increased spending in the short term builds goodwill with our customers and supports sustainable growth of our China commerce business over the long term,” Xu continued.

Chief executive Daniel Zhang said the apparel and electronics categories have better online penetration in China, but he sees “very good opportunities to deepen online conversion” in areas like fresh food. and groceries, where e-commerce penetration has so far been less.

Although Alibaba faces short-term challenges, at least one analyst remained optimistic about the Chinese e-commerce company’s longer-term prospects.

“Despite [the] With the online shopping industry experiencing macro headwinds, we expect the company to continue to deepen mindshare and improve the consumer experience through segmentation strategies,” Thomas wrote. Jefferies analyst Chong following the report.

In the December quarter, Alibaba generated net profit of RMB20.4 billion, or RMB7.51 per U.S. Depositary Share, compared to RMB79.4 billion, or RMB28.85 per ADS, in the December quarter. the previous year. After adjustments, Alibaba earned RMB16.87 per ADS, down from RMB22.03 per ADS a year earlier, but above estimates of RMB15.93 per ADS that analysts tracked by FactSet had anticipated. .

The company reported 1.28 billion annual active consumers in the December quarter, including 979 million from China and 301 million overseas. The total was up about 43 million from Alibaba’s September quarter figure.

U.S.-listed Alibaba shares have recently stumbled, falling about 58% in the past 12 months as the S&P 500 SPX,
+0.64%
rose around 8% and as KraneShares CSI China Internet ETF KWEB,
-0.27%
fell 65%.

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