Alibaba Surpasses Quarterly Revenue Estimates but Also Sees Profit Decline

The Chinese e-commerce giant Alibaba has exceeded analysts’ revenue estimates for the fourth quarter, as its focus on cheap goods in response to cautious consumers helped boost domestic e-commerce. However, its shares listed on the U.S. stock exchange fell about three percent in pre-market trading, as the company’s profit dropped by about 86 percent in the fourth quarter, Reuters reported.

Alibaba has had a tumultuous year since announcing the largest overhaul in its 25-year history last March, splitting into six units and refocusing on its core businesses, including domestic e-commerce. The changes resulted in the company reporting revenue of 221.9 billion yuan in the March quarter compared to consensus estimates from LSEG of 219.66 billion yuan.

E-commerce Growth

In the largest corporate restructuring ever, several significant changes were implemented in the management structure, with company veteran Eddie Wu taking over as CEO. In an attempt to signal confidence to shareholders, Alibaba announced earlier this year that it had increased its share buyback program by $25 billion by the end of March 2027.

The Chinese giant is grappling with cautious spending in China but noted signs of a slight recovery in its core e-commerce business in the March quarter and is ramping up its overseas expansion amid a domestic slowdown, where it faces increasing competition from low-budget players like PDD.

Revenue from the Taobao and Tmall divisions, which encompass Alibaba’s Chinese e-commerce business, rose four percent year-on-year to 93.2 billion yuan. This was faster than the two percent growth in the previous quarter.

Customer management revenues, which represent sales generated from services like marketing that Alibaba sells to merchants on its Taobao and Tmall e-commerce platforms, increased five percent year-on-year after stagnating in the previous quarter. Alibaba’s international commerce business also recorded a 45 percent year-on-year revenue increase to 27.4 billion yuan.

Earlier this year, CEO Wu promised to ‘restart’ the company’s e-commerce growth with further investments. There appear to be early signs that this will take hold in the March quarter.

– The results of this quarter show that our strategies are working and that we are returning to growth – Wu said in the company’s earnings announcement.

However, the profit decline undermines that growth statement. The company stated that the reason for the decline ‘can primarily be attributed to a net loss from our investments in publicly traded companies during the quarter, compared to a net gain in the same quarter last year, due to changes in market prices.’

Boasting AI Growth

Investors are focused on Alibaba’s cloud computing division, which is also struggling to reignite growth. The company had planned to spin off the unit for that sector but abandoned its initial public offering plans last year.

Alibaba announced that its cloud computing unit generated revenue of 25.6 billion yuan, which is only three percent higher than last year and records the same growth rate as in the previous quarter.

The Chinese giant stated that it is in the process of reducing ‘low-margin project-based contracts’ in its cloud division and expects that AI-related products and ‘public cloud’, which refers to business clients, will ‘offset the impact of declining project-based revenue.’

During the March quarter, AI-related revenues experienced ‘triple-digit growth compared to the previous year.’

– AI-related revenue was generated from various sectors, including foundational model companies (which focus on the development and application of foundational AI models), internet companies, as well as clients from industries such as financial services and the automotive industry – the company stated in a release.