Alibaba June Quarter Revenue Slowdown Disappoints Despite Three-Digit AI-Powered Cloud Product Growth

TMTPost -- The American depositary receipts (ADRs) of Alibaba Group slid as much as 2.2% at the start of trading Thursday after the Chinese e-commerce giant posted deeper-than-expected slowdown in revenue. The shares closed less than 0.1% higher that day with a broad U.S. market rally, outperforming the market as the stock benchmark S&P 500 settled 1.6% higher.

Credit：Alibaba

Alibaba recorded revenue of RMB243.24 billion (US$33.47billion) for the first fiscal quarter ended June 30, missing Wall Street projection of RMB249.9 billion. The revenue grew 4% from a year earlier, slowing from a 7% year-over-year (YoY) increase in the preceding quarter. On Non-GAAP basis, Alibaa earned RMB16.44 diluted earnings per American depositary share (ADS) with a YoY decrease of 5%, beating analysts’expected adjusted earnings of RMB15.00.

Net income attributed to ordinary shareholders slumped 27% YoY to RMB24.27 billion, less than analysts’expectation of RMB26.91 billion following a 86% YoY decrease in the quarter ended March. Alibaba attributed most of profit plunge to a decrease in income from operations and the increase in impairment of its investments, partly offset by the mark-to-market changes from our equity investments. The non-GAAP adjusted EBITA, excluding share-based compensation expense, impairment of intangible assets and goodwill and certain other items, of RMB 45.04 billion also fell short of estimates with a 1% YoY decrease.

Alibaba’s bread and butter Taobao and Tmall Group, which includes two major online marketplaces, generated RMB113.37 billion in the June quarter, below the RMB121.70 billion that analysts estimated, surprisingly recorded a 1% YoY fall in revenue compared with a 4% YoY rise three months ago. The adjusted EBITA of the top business segment also fell 1% YoY to RMB48.81 billion, the same drop with the previous quarter. Alibaba said the decrease in EBITA was primarily due to the increase in investments in user experience and technology infrastructure, partly offset by the narrowing losses in certain businesses.

The results of Taobao and Tmall highlighted intensifying competition in China’s e-commerce arena in the June quarter when the annual 618 shopping festival fell on. Alibaba and its longtime foe JD.com as well as upstart rival PDD, owner of Pinduoduo in China and Temu overseas, axed prices and rolled out major promotions in the quarter, especially during the annual shopping event period, in bid to attract consumers who showed more price sensitivity amid China’s lackluster economic recovery. Investors have feared the competition could weigh on margins. Alibaba said it achieved high-single-digit online gross merchandise value (GMV) growth, in particular a strong online GMV YoY growth during 618, and double-digit YoY order growth, driven by increase in the number of purchasers and purchase frequency.

In spite of the sluggish e-commerce performance, Alibaba maintained stellar growth of cloud business. Cloud Intelligence Group, brought RMB26.55 billion in the April to June period, topping Wall Street forecast of RMB26.07 billion. The revenue represented a 6% YoY increase, the fastest growth rate since the June quarter of 2022. The adjusted EBITA surged 155% YoY to RMB2.34 billion, compared with a 45% YoY increase in the March quarter. The Hangzhou-based company said revenue exlcuding its consolidated subsidiaries gained over 6% YoY, driven by double-digit public cloud growth and increasing adoption of artificial intelligence (AI)-related products. AI-related product revenue continued to grow at triple-digits year-over-year.

Alibaba suggested upbeat outlook of its cloud technology since the technology enables remote video production and transmission through cloud infrastructure during the Paris 2024 Olympics this month, overtaking satellite as the primary means of broadcast for the first time in Olympics history. Two-thirds of national broadcasters used live signals transmitted by Alibaba Cloud in real-time around the world, reaching billions of viewers. Alibaba Cloud also hosted more than 11,000 hours of Olympic Broadcasting Services-produced games related video content used by the broadcasters. Additionally, this is the first Olympic Games to extensively use AI, with Alibaba Cloud’s AI tech deployed in 14 Olympic venues to generate high-fidelity 360-degree replays in real-time.

Alibaba hauled in RMB29.29 billion from its international division, Alibaba International Digital Commerce Group(ADIC) with a 32% YoY increase following a 45% rise in the preivous quarter. ADIC has become the second biggest segment by sales since it overtook the cloud business in the quarter ended last December. It remained a double-digit growth as the fastest-growing business segment. But it reported adjusted EBITA loss of RMB3.71 billion, widening 782% from a year ago. Analysts said losses from the segment will persist. Alibaba said revenue from ADIC was mainly supported by order growth from AliExpress’Choice as well as imporvements in monetization. The increase in investments in AliExpress and Trendyol’s cross-border businesses was the biggest drag for EBITA, which partially offest by Lazada’s significant reduction in operation loss from improvements in its monetization and operating efficiency.

“ Our focus on enhancing user experience byoffering quality products at attractive prices with great service led to stabilizing market share of Taobao andTmall Group as we returned the business on the growth trajectory. The cloud business achieved positiverevenue growth momentum, driven by public cloud and AI-related product adoption as we continue to investto maintain our market leadership,” said Alibaba CEO Eddie Wuat a press Thursday.