Alibaba’s profit and revenue fall short of expectations despite growth

By Tracy Qu

Alibaba Group reported weaker-than-expected profit and revenue in the latest quarter, despite the e-commerce giant’s efforts to restore economic growth in the face of fierce domestic competition, a weakening Chinese economy and changing consumer behavior.

The Chinese company said Thursday that net profit for the three months ended in June fell 29% from a year earlier to 24.27 billion yuan, or $3.40 billion. The result missed FactSet analysts’ expectations of 28.175 billion yuan.

The bottom line was hurt by higher marketing, product development and general and administrative expenses, as well as tax increases. Alibaba said the higher marketing expenses were mainly due to increased investment in its e-commerce business.

First-quarter revenue rose 3.9% to 243.24 billion yuan, but fell short of analysts’ estimates of 246.36 billion yuan. Revenue growth also slowed from a 6.6% expansion in the previous quarter.

“Our focus on improving user experience by offering high-quality products at attractive prices while maintaining excellent service has led to stabilization of the market shares of (domestic e-commerce unit) Taobao and Tmall Group as we return to a growth path,” said CEO Eddie Wu.

The Hangzhou-based company has been struggling with slow growth as it faces a cooling Chinese economy and growing competition from companies like PDD’s e-commerce platform Pinduoduo and ByteDance’s short-video app Douyin. It has shifted its strategy to prioritize long-term growth over big short-term gains in a bid to regain its previous market dominance.

Adjusted net profit, which excludes the impact of share-based compensation expenses, investment gains and losses, certain asset write-downs and other items, fell 9.4 percent to 40.69 billion yuan, beating analysts’ expectations of 37.88 billion yuan.

Sales at Alibaba’s main domestic e-commerce businesses, Taobao and Tmall Group, fell 0.9% from a year earlier to 113.37 billion yuan. Alibaba said it achieved high-single-digit growth in online gross merchandise value, driven by growth in customer numbers and shopping frequency.

Its cloud computing unit posted sales growth of 5.9% to 26.55 billion yuan. Its fast-growing overseas e-commerce unit saw revenue rise 32% to 29.29 billion yuan, slower than the 45% increase in the previous quarter.

Write to Tracy Qu at [email protected]

(END) Dow Jones Newswires

August 15, 2024, 07:59 ET (11:59 GMT)