Alibaba, the Chinese e-commerce giant, experienced a significant drop in its net profit in the fiscal fourth quarter. The company reported revenue of 221.9 billion yuan ($30.7 billion), slightly beating LSEG consensus estimates. However, net income attributable to ordinary shareholders plummeted by 86% year on year to 3.3 billion yuan. As a result of these disappointing figures, shares of Alibaba tumbled by around 5% in premarket trading in the U.S.
In 2023, Alibaba underwent its largest-ever corporate structure overhaul, causing turbulence within the company. Additionally, there were several high-profile management changes, with Eddie Wu, a company veteran, taking over as chief executive in September. These changes were intended to signal confidence to shareholders amidst the challenging times faced by the Chinese tech giant.
Alibaba has been contending with cautious consumer spending in China, leading to a stagnation in its core e-commerce business. However, there were slight signs of recovery in the March quarter. The company’s revenue from the Taobao and Tmall division, which encompasses its China e-commerce business, grew by 4% year on year to 93.2 billion yuan, outpacing the previous quarter’s 2% growth. Additionally, customer management revenue increased by 5% year on year after remaining flat in the previous quarter.
Amid a domestic slowdown, Alibaba has been focusing on expanding its overseas presence. The company’s international commerce business saw a revenue surge of 45% year on year to 27.4 billion yuan. Earlier this year, CEO Wu announced plans to “reignite” growth through further investments. The March quarter results suggested that these strategies are beginning to yield positive outcomes, with Wu stating, “This quarter’s results demonstrate that our strategies are working, and we are returning to growth.”
Investors are closely monitoring Alibaba’s cloud computing division, which has been facing challenges in reigniting growth. The company had initially planned to spin off the cloud unit but decided against an IPO last year. Revenue from the cloud computing unit only grew by 3% year on year to 25.6 billion yuan, mirroring the growth rate from the previous quarter. Alibaba aims to offset the impact of low-margin contracts by focusing on AI-related products and public cloud services for enterprise customers. During the March quarter, AI-related revenue experienced triple-digit growth, signaling a positive trajectory for this segment.
Alibaba’s financial performance in the fourth quarter highlighted both successes and challenges for the company. While revenue exceeded expectations, the sharp decline in net profit raised concerns among investors. The ongoing efforts to drive growth in the e-commerce business and address issues in the cloud computing division will be critical for Alibaba’s future success in a competitive market environment.
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