Alibaba shares fell 4% in premarket after earnings beat expectations despite cloud acceleration

alibaba It missed the top and bottom line forecasts for the June quarter of 2024 as it continues to face headwinds in its core e-commerce business amid rising competition and a cautious Chinese consumer.

Alibaba shares were down about 3.99% at 07:14 a.m. in U.S. premarket trading.

Here’s Alibaba’s performance in the June quarter versus LSEG estimates:

• Revenue: RMB 243.24 billion (US$34.01 billion) vs. RMB 249.05 billion expected.
• Net income: 24.27 billion yuan vs. 26.91 billion yuan expected.

Revenue rose 4% year-on-year, while net income fell 29% year-on-year. Alibaba said the net income decline was “primarily due to lower operating income” and “increased impairments” from its investments.

Alibaba is looking to revive growth after a turbulent 2023, when it implemented its biggest-ever corporate structure overhaul. That was followed by high-profile management changes, with Eddie Wu taking over as CEO in September.

The e-commerce giant faces a wary Chinese consumer, along with increasing competition from rivals such as JD.com And Timo’s owner PDD.

Since taking the reins, Wu has been trying to turn Alibaba’s core e-commerce business in China back on a more stable footing. It is currently in a transition phase as the company plans to focus more on third-party merchants who sell through its platforms — Taobao and Tmall — in China, while reducing its reliance on direct sales.

Wu previously said the company plans to launch new monetization features for its e-commerce platforms that would return Taobao and Tmall’s businesses to growth in the latter half of 2025.

In the June quarter, sales of Taobao and Tmall, Alibaba’s e-commerce businesses in China, fell 1% year-on-year to 113.37 billion yuan.

Alibaba said it saw “double-digit” growth in gross merchandise value across its Taobao and Tmall businesses — a figure that represents the value of transactions across its platforms. Alibaba was keen to highlight that even as overall revenues remain weak, shoppers are using its sites.

Meanwhile, Alibaba’s online shopping businesses, such as Lazada and AliExpress, remain a bright spot, with sales in the international e-commerce division up 32% year-on-year.

Investors are closely watching Alibaba’s cloud computing division, which is seen as the company’s future growth engine.

Alibaba said quarterly revenue from the cloud group reached 26.5 billion yuan, up 6% year-on-year in the fastest growth rate since the June quarter of 2022.

Like its Chinese and U.S. counterparts, the Hangzhou-based company is investing heavily in AI and selling AI products through its cloud unit. “AI-related product revenue continued to grow at a triple-digit rate year-on-year,” Alibaba said.

The company The company changed the management of its cloud division last year and is trying to focus on higher-margin contracts, as well as improving operating efficiency. Adjusted earnings before interest, taxes and amortization — or EBITA, a measure of profitability — rose 155% year over year at the cloud division in the June quarter, the company said.