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Alibaba stock drops amid earnings beat, cloud segment spin-off

Yahoo Finance Live discusses a drop in shares of Alibaba despite the company beating estimates on the top and bottom line.

Video transcript

JULIE HYMAN: Let's talk about some other movers as well. Chinese e-commerce giant Alibaba beating estimates on the top and bottom line. The company also announcing it's going to spin off its highly prized cloud computing division via stock dividends to shareholders. The shares are down about 2%.

We have been waiting for details of what these spin offs were going to look like. But at the same time, even though the company beat domestic commerce was down by 3%, its cloud division revenue was down by 2%. So that seems to be one of the things that's putting pressure on the shares this morning.

Even though the headline numbers look good, the domestic commerce business is huge, right? I mean, if you're looking at this as akin to the Amazon of China and the commerce business isn't doing well and the cloud business is seeing declines, then that is not great news. But it is interesting to hear about all the various separations that Alibaba is doing as well.

BRAD SMITH: Yeah, six different businesses. They had essentially kind of earmarked here and for the cloud unit, I think investors have a lot of focus on this specifically because of the margins that Amazon Web Services sees from their cloud business, or that a Microsoft sees from its own. All that said, for Alibaba, what some of their challenge has been is crossing hemispheres and making sure that, that cloud business sees even more of that potential client base grow out in different regions here. And so perhaps there's still a growth effect that this could go through. But at this point in time, I think for Alibaba and the six different units that they had already talked about splitting up, this was one of the most watched ones simply because of the profitability metric that a lot of investors would be looking for.