Chinese e-commerce leader Alibaba delivered better-than-expected profits in its September quarter, driven by gains from equity investments, despite falling short on sales projections. The company’s net income rose 58% year-on-year to 43.9 billion yuan ($6.07 billion), significantly surpassing an analyst forecast of 25.83 billion yuan provided by LSEG. Revenue reached 236.5 billion yuan, marking a 5% annual increase but trailing the 238.9 billion yuan predicted by analysts.
The rise in profits stemmed largely from equity investment gains and lower impairment costs, according to Alibaba’s earnings statement. The company’s shares, which have risen over 13% this year, dropped more than 2% in early Friday trading following the results.
Retail Under Pressure
Alibaba’s core retail units, Taobao and Tmall Group, reported a modest 1% revenue increase to 98.99 billion yuan. This performance reflects challenges in China’s sluggish retail environment. Peer company JD.com also fell short of revenue expectations earlier this week, further highlighting the impact of weak consumer sentiment.
China’s government has introduced stimulus measures, including a five-year 1.4 trillion yuan package, to revive its economy and address long-standing issues such as the real estate slump. Retail sales saw a year-on-year increase of 4.8% in October, surpassing expectations. The Singles’ Day shopping event provided a glimpse of recovery, with Alibaba reporting strong gross merchandise volume growth and a record number of active buyers.
Global and Cloud Gains
International business offered a bright spot for Alibaba, with platforms like Lazada and Aliexpress posting a 29% increase in sales to 31.67 billion yuan. Meanwhile, its Cloud Intelligence Group recorded 7% year-on-year revenue growth to 29.6 billion yuan, up from 6% in the previous quarter. Public cloud products drove double-digit growth, while AI-related revenue soared by triple digits.
“Growth in our Cloud business accelerated from prior quarters,” Alibaba CEO Eddie Wu noted. The company continues to invest heavily in cloud infrastructure and artificial intelligence, positioning itself as a global leader. Recent milestones include launching AI-powered search tools for small businesses in Europe and the Americas and securing a five-year cloud services partnership with Indonesia’s GoTo.
AI Initiatives and Future Outlook
Alibaba’s cloud division has been central to its strategic pivot after regulatory challenges in 2022. With the rollout of its ChatGPT-style product Tongyi Qianwen and intensified R&D efforts, Alibaba has sharpened its focus on AI. CEO Wu emphasized the transformative potential of AI, stating that the company’s investments in the field are “only beginning.”
Alibaba’s trajectory remains intertwined with China’s economic recovery and regulatory environment. Analysts at ING remarked that the company’s results offer critical insights into the broader growth momentum of China’s economy.
