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Alibaba Shares Plummet 7% Amid Profit Plunge

Alibaba's took a nosedive following plunge in the Chinese tech giant's net profit during the fiscal fourth quarter
May 15, 2024

Alibaba, the Chinese tech giant, witnessed a sharp decline in its shares on Tuesday following a substantial drop in net profit during the fiscal fourth quarter. Here's a breakdown of Alibaba's performance in the March quarter compared to LSEG consensus estimates:

- Revenue: 221.9 billion yuan ($30.7 billion) versus 219.66 billion yuan expected.

- Net income attributable to ordinary shareholders: 3.3 billion yuan, down 86% year-on-year.

Shares of Alibaba plummeted approximately 7% in U.S. midday trading after falling as much as 8.1% earlier.

The company had a challenging year in 2023, marked by its largest-ever corporate structure overhaul and high-profile management changes. Alibaba veteran Eddie Wu took over as chief executive in September.

To boost shareholder confidence, Alibaba announced earlier this year that it had increased its share buyback program by $25 billion through the end of March 2027.

Although Alibaba has been grappling with cautious consumer spending in China, there are signs of a slight recovery in its core e-commerce business in the March quarter.

Revenue for Alibaba's Taobao and Tmall division, which houses its China e-commerce business, rose 4% year-on-year to 93.2 billion yuan, faster than the 2% growth in the previous quarter. Additionally, customer management revenue increased by 5% year-on-year, and Alibaba's international commerce business saw a revenue increase of 45% year-on-year to 27.4 billion yuan.

Alibaba's CEO, Eddie Wu, pledged earlier this year to "reignite" growth in the e-commerce firm with further investments. The results of these efforts are beginning to show, with Wu stating in the earnings release, "This quarter’s results demonstrate that our strategies are working and we are returning to growth."

However, the significant drop in profit has raised concerns. Alibaba attributed the decline to "a net loss from investments in publicly-traded companies during the quarter, compared to a net gain in the same quarter last year, due to the mark-to-market changes."

Investors are closely watching Alibaba's cloud computing division, which has struggled to reignite growth. Although the company had planned to spin off the cloud unit, it scrapped plans for an initial public offering last year.

Alibaba's cloud computing unit generated revenue of 25.6 billion yuan, up just 3% year-on-year, the same growth rate seen in the previous quarter. The company aims to offset the impact of low-margin project-based contracts in its cloud division by focusing on artificial intelligence-related products and public cloud services for enterprise customers. During the March quarter, AI-related revenue experienced "triple-digit growth year-over-year."

Alibaba remains one of the most influential tech companies globally, and despite recent challenges, it continues to innovate and adapt to changing market dynamics.

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