In the fiscal fourth quarter that ended in March, Alibaba surpassed revenue expectations but saw a sharp decline in net profit. Revenue for the quarter was reported at 221.9 billion Chinese yuan, higher than the 219.66 billion yuan expected, while net income attributable to ordinary shareholders dropped by 86% year-on-year. Shares of Alibaba fell by around 3% in pre-market trading in the U.S. The company had faced significant challenges in 2023, undergoing a major corporate restructuring and experiencing management changes. Eddie Wu took over as chief executive in September, and Alibaba recently announced an increase in its share buyback program.
Alibaba has been struggling with cautious consumer spending in China, but showed signs of improvement in its core e-commerce business during the March quarter. The company has been expanding its global presence amidst a slowdown in the domestic market as it faces increased competition from low-cost rivals like PDD. Revenue for the Taobao and Tmall division, which includes Alibaba’s China e-commerce operations, increased by 4% year-on-year to 93.2 billion yuan. Additionally, customer management revenue, derived from services like marketing on Taobao and Tmall, rose by 5% year-on-year, after remaining flat in the previous quarter. Alibaba’s international commerce business also saw a revenue increase of 45% year-on-year.
Alibaba CEO Eddie Wu expressed optimism about the growth prospects of the company, noting that strategies are showing positive results. Despite the overall positive performance, the substantial decline in profit was attributed to a net loss from investments in publicly-traded companies during the quarter, compared to a net gain in the same period the previous year due to mark-to-market changes. Alibaba has been under scrutiny over its cloud computing division, which has struggled to regain momentum. Although the company had planned to spin off the cloud unit, an initial public offering was called off last year. In the March quarter, Alibaba’s cloud computing unit generated 25.6 billion yuan in revenue, marking a 3% year-on-year growth rate.
The Chinese tech giant is working on reducing low-margin project-based contracts within its cloud division and anticipates that revenue from AI-related products and public cloud services to enterprise clients will offset the impact of decreasing project-based revenues. AI-related revenue experienced triple-digit growth year-over-year in the March quarter, derived from various sectors such as foundational model companies, internet firms, financial services, and automotive industries. Alibaba is focusing on enhancing its AI capabilities to drive growth in its cloud computing business and remain competitive in the market.
Overall, Alibaba’s fiscal fourth-quarter results indicated a mix of positive and challenging outcomes. The company exceeded revenue expectations, particularly in its e-commerce division, but faced a significant decline in net profit due to investment losses. Despite struggles in the cloud computing sector, Alibaba is optimistic about the potential for growth, particularly with AI-related products. The company continues to seek strategies to drive revenue growth, expand its global reach, and navigate the competitive landscape in both the e-commerce and cloud computing sectors.
