Alibaba revenue edges up to US$33.5 billion but misses estimates in June quarter
Alibaba Group Holding saw revenue grow 4 per cent in the June quarter, missing estimates, as the tech giant navigates an economic slowdown after seeing e-commerce growth during the 618 shopping festival and rising demand for its cloud services.
Alibaba's revenue rose to 243.2 billion yuan (US$34 billion), slower than the previous quarter's 7 per cent growth. Revenue from the cloud computing business, which was the online broadcasting partner for the 2024 Paris Olympics, rose 6 per cent to 26.5 billion yuan. Alibaba owns the South China Morning Post.
Profits fell 29 per cent to 24.3 billion yuan, worse than the 30.4 billion yuan expected by analysts. The company's adjusted EBITA, a measure under non-generally accepted accounting principles, dropped 1 per cent year on year to 45 billion yuan in the quarter, beating the consensus estimate of 42.6 billion yuan.
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"Our results this quarter demonstrated our strategy at work. Our focus on enhancing user experience by offering quality products at attractive prices with great service led to stabilising market share of Taobao and Tmall Group, as we returned the business on the growth trajectory," Alibaba CEO Eddie Wu Yongming said in a statement on Thursday. "The cloud business achieved positive revenue growth momentum, driven by public cloud and AI-related product adoption, as we continue to invest to maintain our market leadership."
The logos of Alibaba's main domestic e-commerce apps, Taobao and Tmall, are displayed on smartphones. Photo: Reuters alt=The logos of Alibaba's main domestic e-commerce apps, Taobao and Tmall, are displayed on smartphones. Photo: Reuters>
In the earnings call with analysts, Alibaba chief financial officer Toby Xu said the company is on its way to complete the dual primary listing in Hong Kong before the end of this month, as previously announced in May, after obtaining shareholders' approval at its annual general meeting next Thursday.
Wu, in the same call, voiced confidence that Alibaba Cloud's overall revenue, excluding Alibaba-consolidated subsidiaries, will return to double-digit growth in the second half of the financial year, which ends next March. He said Alibaba will continue to improve profitability across businesses beyond e-commerce and cloud services.
"We expect most of these businesses to break even within one to two years and gradually contribute to profitability at scale," Wu said.
The past quarter included China's second-largest online shopping festival, which this year ran from May 20 to June 20. Amid flagging consumer spending, the festival was seen as a barometer for consumer confidence in the world's second-largest economy.
Alibaba claimed in the latest earnings report that it delivered "strong online gross merchandise value [GMV] growth year over year" for the festival, but it did not reveal overall numbers.
The 618 shopping festival promotion of Alibaba's Taobao is displayed on a smartphone in Beijing on June 3, 2024. Photo: Simon Song alt=The 618 shopping festival promotion of Alibaba's Taobao is displayed on a smartphone in Beijing on June 3, 2024. Photo: Simon Song>
China's economy grew by 4.7 per cent year on year in the second quarter, a slowdown from the 5.3 per cent growth in the first quarter. Retail sales growth also slowed from 3.7 per cent in May to 2 per cent in June.
Many brands have promoted trade-in campaigns instead of cutting prices directly, which may have a limited impact on driving consumer consumption, Kenneth Fong, head of China Internet Research at UBS Investment Research, said in a media briefing last week. "We have not seen any major or direct stimulus policies that could increase consumer confidence," he said.
Under the largest corporate restructuring in its 25-year history, Alibaba since last year has been seeking to refocus on its bread-and-butter e-commerce and cloud computing businesses, as the Hangzhou-based tech giant navigates the domestic economic slowdown and intensified e-commerce competition from newer players such as Pinduoduo and ByteDance's Douyin, the Chinese version of TikTok.
Wu, who took over as group chief executive last September, promised last year that the company will invest in revolutionary products, nurture new businesses and find new drivers of growth within a "three-year window".
Shares of Alibaba closed down 2.4 per cent at HK$76.4 on Thursday in Hong Kong, ahead of the earnings release. Its shares are up over 3 per cent since the beginning of the year.
The company's core e-commerce unit, Taobao and Tmall Group, saw revenue decline by 1 per cent to 113.4 billion yuan for the quarter. GMV and order volume saw high-single-digit and double-digit year-on-year growth, respectively, according to the company, which did not reveal the figures.
The logo of Alibaba's Tongyi Qianwen family of large language models seen on a smartphone screen. Photo: Shutterstock alt=The logo of Alibaba's Tongyi Qianwen family of large language models seen on a smartphone screen. Photo: Shutterstock>
Revenue of the Cloud Intelligence Group, one of the company's most important growth engines that includes Alibaba's artificial intelligence (AI) business, was fuelled by double-digit public cloud growth and increasing adoption of AI-related products. That marked the unit's fastest revenue growth since the September quarter of 2022.
"I would say that most of or probably more than half of our cloud unit's growth is driven by AI products," Wu said, adding AI budgets continue to grow despite a weak economy.
The company has been investing heavily in the development of large language models (LLMs) - the technology behind chatbots such as ChatGPT - including its Tongyi Qianwen family and open-source version Qwen2. The most advanced version of Qwen2 released this year ranked as the best-performing open source LLM on the developer platform Hugging Face in June.
Apart from in-house initiatives, Alibaba has also been pouring money into high-flying AI start-ups. It has emerged as one of the most active investors in the domestic industry, with stakes in all four of China's so-called AI tigers - Zhipu AI, Moonshot AI, Baichuan AI, all based in Beijing, as well as Shanghai-based MiniMax.
Revenue for Alibaba's international commerce unit surged 32 per cent to 29.3 billion yuan, shored up in part by growth in its overseas consumer-facing businesses Lazada and AliExpress.
Lazada, the Southeast Asia-focused online retailer of Alibaba International Digital Commerce (AIDC) Group, turned its first-ever monthly profit in July, the Singapore-based firm told employees at an all-hands meeting earlier this week. Alibaba has previously said that Lazada is working to improve operational efficiency and monetisation.
In the post-earnings call, Jiang Fang, head of AIDC, highlighted the international unit's growth in the international markets, driven in large part by ongoing business model and supply chain upgrades in the cross-border business.
"We effectively boosted [AliExpress] and Trendyol's brand awareness," Jiang said in the call. "Trendyol increased monetisation and profitability, solidifying its e-commerce leadership."
The unit's buoyant results come amid stiff competition in the global cross-border e-commerce segment, in which a number of Chinese players have been battling for a larger piece of the market.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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