By
Darya Rudz
November 1st, 2023
Figures show that Alibaba shares earnings fell below analysts’ expectations for its latest quarterly report as China continues to recover.
Chinese e-commerce giant Alibaba (NYSE: BABA) shares dropped after it posted fiscal second-quarter earnings on Thursday, which fell short of revenue and earnings expectations for the September quarter. The multinational tech company raked in a revenue of 200.69 billion yuan (or $31.4 billion) versus Refinitiv’s estimation of 204.93 billion yuan. Although this is a 29% year-on-year rise for Alibaba, it was still some way off the consensus estimate. In addition, Alibaba also posted earnings per share of 11.20 yuan. This paled in comparison to analysts’ expectations of 12.36 yuan. Furthermore, the new figure represents a 38% year-on-year decline.
Regardless, Alibaba chief executive officer Daniel Zhang said in an official statement that the company still has long-term plans for growth:
“This quarter, Alibaba continued to firmly invest into our three strategic pillars of domestic consumption, globalization, and cloud computing to establish solid foundations for our long-term goal of sustainable growth in the future.”
Alibaba Shares Earnings Performance Adversely Impacted by China’s Economy
Alibaba’s underperformance is partly attributable to the slow and ponderous economic growth in China. In fact, the company even had to drastically reduce its revenue guidance for its current fiscal year. Before, Alibaba had a revenue projection of around 930 billion yuan which would put its year-on-year growth at 29.5%. However, it is currently looking at the 20% to 23% growth range instead. In pre-market trade, Alibaba’s US-listed shares dropped by 5%.
The Chinese economy hit a slow pace in the third quarter of this year, which also affected the country’s consumption rate. Furthermore, Beijing also recently cracked down on the Eastern Asian nation’s domestic tech industry. This has seen the emergence of new legislation – for antitrust and data protection. The legislation has impacted several resident tech giants who are dominating the space. They include Huawei, Tencent, JD.com, China Mobile, and Alibaba – which was slapped with a $2.8 billion fine in an anti-monopoly probe.
The Chinese government now seems to be going after its most prominent tech corporations for what it considers unsavory practices. Up until the point where Beijing decided to play hardball, several of these corporations existed in the country largely undisturbed.
As a result of this, expectations coming into the fiscal second-quarter earnings report were particularly low. As a matter of fact, the general consensus was that the recently-ended fiscal quarter was going to be one of Alibaba’s most challenging.
Alibaba Still Has Key Role to Play
According to Alibaba, it had about 1.24 billion active customers in the twelve months that ended on September 30th. This number represents an increase of approximately 62 million people from June. Furthermore, out of the 1.24 billion active customer base, 953 million are from China, while 285 million others were abroad.
Alibaba has been tussling for market share with rival JD.com for some time now. However, fresh competition recently began to emerge. Examples include internet tech company ByteDance and China’s largest agric-centric tech platform, Pinduoduo.