Chinese e-commerce giant Alibaba misses first-quarter revenue estimates

Authors: Deborah Mary Sophia and Casey Hall

(Reuters) – Alibaba Group Holding Co. missed market expectations for first-quarter revenue on Thursday, as its domestic online sales came under pressure from cautious spending by Chinese consumers amid a weakening economy.

The company’s U.S.-listed shares fell about 4% in pre-market trading.

A slowdown in China’s economic recovery, combined with continued weakness in the housing market and high levels of job insecurity, have undermined consumer confidence and purchasing power in the world’s second-largest economy, hurting global companies around the world.

Alibaba also faces stiff competition from rivals including JD.com and discount-focused retail platforms such as PDD Holdings’ Pinduoduo and ByteDance’s Douyin.

Alibaba posted revenue of 243.24 billion yuan ($33.98 billion) for the quarter ended June 30, according to LSEG data, compared with analysts’ average forecast of 249.05 billion yuan.

Revenue at the company’s domestic e-commerce arm fell 1%, even as the number of buyers and the frequency of their purchases boosted order growth by double digits.

Chinese e-commerce giants have had to resort to heavy discounts and promotions to attract customers, putting pressure on margins across the retail sector, from big players like Alibaba and JD.com to small businesses.

Sales at China’s e-commerce festival fell for the first time in history in June, according to independent estimates, even as major platforms sought to offer customers deals for a longer period.

Alibaba executives have maintained in recent quarters that growth in shopping and the introduction of new seller tools will boost the platform’s future revenue from advertising and customer management.

In March 2023, Alibaba announced the largest reorganization in the company’s history, splitting into six divisions and increasing focus on its core businesses, including domestic e-commerce.

Alibaba’s international e-commerce unit saw revenue jump 32 percent to 29.3 billion yuan, buoyed by investments by the company to expand its global presence and growing global demand for cheaper goods from China.

Alibaba’s cloud computing revenue rose 6% to 26.55 billion yuan, up from 3% growth in the previous quarter, driven by stronger interest in the public cloud and strong demand for artificial intelligence products.

The company has taken steps to reduce low-margin project contracts and said that expanding its cloud infrastructure has helped it lower prices across all cloud products.

Net income attributable to ordinary shareholders in the quarter was 24.27 billion yuan, compared with 34.33 billion yuan a year earlier.

(1 dollar = 7.1584 Chinese yuan)

(Reporting by Deborah Sophia in Bengaluru and Casey Hall in Shanghai; Editing by Sriraj Kalluvila, Kirsten Donovan)