China's Alibaba misses quarterly revenue estimates, beats on profit
Alibaba misses revenue estimates, weighed down by Chinese consumption slump
Revenue up strongly at cloud and international businesses
China e-commerce competition “remains intense”- CEO Eddie Wu says
Updates shares in paragraph 2, analyst comment in paragraphs 6, 14, 15, WeChat Pay integration in paragraph 13
By Deborah Mary Sophia and Casey Hall
Nov 15 (Reuters) -Alibaba Group Holding 9988.HK missed analysts' estimates for second-quarter sales on Friday, as persistent economic uncertainty sapped consumer spending in China and weighed on the e-commerce group's domestic business.
The company reported an adjusted profit of 15.06 yuan per American Depository Share, beating estimates of 14.88 yuan.
Its U.S.-listed shares BABA.N were down 0.3% at the opening.
Chinese consumers have cut back on spending, especially on discretionary items, as the world's second largest economy struggles to pick up pace amid a property sector crisis and heightened youth job insecurity.
That has knocked retail sales, which are under pressure even as major vendors like Alibaba and JD.com 9618.HK dole out promotions and discounts. JD.com on Thursday also missed estimates for quarterly revenue.
"Traditionally Alibaba is very dominant in apparel sportswear and cosmetics and skincare, all of these are highly discretionary in nature I do think that these categories are impacted," said M Science analyst Vinci Zhang.
Alibaba is facing stiff competition from discount-based retailers such as PDD Holdings' PDD.O Pinduoduo and ByteDance-owned Douyin, which have wooed cost-conscious shoppers with rock-bottom prices on everything from headphones to sweaters.
Alibaba reported revenue of 236.50 billion yuan ($32.72 billion) for the second quarter ended Sept. 30, compared with analysts' average estimate of 240.17 billion yuan, according to data compiled by LSEG.
Revenue from Alibaba's Cloud Intelligence division jumped 7% to 29.61 billion yuan, with revenues from public cloud products growing in double digits and AI-related product revenue delivering triple-digit growth.
"This Gen AI opportunity is the kind of opportunity that only comes along every 20 years," Chief Executive Officer Eddie Wu said, highlighting Alibaba's extensive investments in the space.
Another bright spot was the growth in Alibaba's international e-commerce business, where revenue rose 29% to 31.67 billion yuan, thanks to growing demand around the world for lower-priced goods from China.
Alibaba has focused on improving the user experience on its Taobao and Tmall Chinese e-commerce platforms and has been investing in its 88VIP loyalty program, which offers special promotions to its 46 million members.
In the past few months Alibaba's platforms have also begun allowing users to pay with rival Tencent's WeChat Pay, a move executives told analysts in a post-earnings call would help reach new customers.
Zhang said a majority of the revenue growth seen in the quarter was driven by a "much better than expected take-rate, so it has nothing to do with actual business growth."
The higher take-rate on domestic platforms implied a "much more tepid growth" in gross merchandise volume (GMV), a commonly used e-commerce metric for measuring sales, Zhang added.
Take-rate refers to fees online marketplaces charge vendors for selling on their platform.
"While e-commerce competition remains intense, we will continue to invest in core user groups and product categories, increase investment in new users, and improve user retention ... (to) drive the sustainable growth of our platform," Wu said.
China's Singles' Day sales period, a nationwide sales promotion event typically seen as a gauge of consumer sentiment, ran from Oct. 14 to Nov. 11 this year, 10 days longer than last year. That resulted in a 26.6% rise in sales across all major e-commerce platforms, according to data provider Syntun.
Alibaba did not release total sales revenue for the period but said 45 brands - including Apple AAPL.O, Haier 600690.SS, Midea 000333.SZ, and Xiaomi 1810.HK - each surpassed 1 billion yuan <$138.62 million> in GMV.
In August, China's market regulator issued a statement saying Alibaba had completed three years "rectification" following a record $2.75 billion fine levied in 2021 for monopolistic behaviour, drawing a line under the company's regulatory troubles.
($1 = 7.2275 Chinese yuan renminbi)
Reporting by Deborah Sophia in Bengaluru and Casey Hall in Shanghai; Editing by Sriraj Kalluvila, Kirsten Donovan and Jane Merriman
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
