Alibaba's earnings in China plunge by 86%, while revenues surpass predictions.
Alibaba, the biggest e-commerce company in China, revealed plans to enhance its secondary listing in Hong Kong into a primary listing while maintaining its primary listing in New York. They're hoping to achieve this dual primary status by August.
Since announcing a major business restructuring in 2023, which included splitting the business into six units, Alibaba has gone through a rocky year. The focus has been to concentrate on its core operations, such as domestic e-commerce.
Chinese consumers have been more careful with their spending habits during the ongoing pandemic, along with a slow economy and lengthy property market downturn.
Alibaba's decision to emphasize low-cost goods in response to cautious consumer behavior has led to a 7% increase in overall revenue from April to March 31st.
With a net income of 3.27 billion yuan ($452 million), they saw a decrease from 23.52 billion yuan the previous year.
Amid this, Alibaba's shares dropped 5.6% in early trading in New York.
During a post-earnings call, Chairman Joe Tsai mentioned seeing "early signs" of renewed confidence from Chinese shoppers.
"We've observed positive trends in discretionary items like clothing and electronics," he said. "We know Chinese consumers are capable of spending, but their willingness to do so indicates their optimism about the future."
Focus on discounts
Revenue for their domestic commerce arm (Taobao and Tmall Group) expanded 4% year-over-year, with order volume rising significantly.
Alibaba's domestic commerce revenue has faced stiff competition and challenging market conditions, with discount-centric platforms like PDD Holdings' Pinduoduo and ByteDance-owned Douyin dominating the low-price market.
Jacob Cooke, CEO of e-commerce consultancy WPIC Marketing + Technologies, spoke highly of Taobao and Tmall's impressive growth under these circumstances:
"Their strong GMV (gross merchandise value) and order growth is even more remarkable considering the challenges from competitors and market conditions."
The company reported a total revenue of 221.87 billion yuan in the quarter ending March 31, slightly higher than the estimated 219.66 billion yuan.
Investors were expecting substantial growth from Alibaba's international digital commerce segment due to its expanding global market share and rising demand for cheap goods from China.
The segment lived up to expectations with a 45% revenue hike, outperforming the forecasted 39% increase, according to LSEG data. However, losses nearly doubled to 4.1 billion yuan ($567 million) from 2.2 billion a year ago as they focused on staying price competitive and shrinking delivery times.
Their cloud division, another major operational arm, reported a massive increase in AI-related revenue from external customers - a relatively new business area.
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In response to the cautious spending habits of Chinese consumers, Alibaba has strategically focused on offering discounts, leading to a 7% increase in overall revenue. This tech-driven business strategy has allowed Alibaba to maintain its competitive edge in the challenging domestic market, despite facing stiff competition from discount-centric platforms.
Source: edition.cnn.com
