Chinese e-commerce giant Alibaba group holding brought a disappointing wave with its second quarter results announced on Friday. The company missed analyst’s estimates of 14.88 yuan weighted under domestic issues and reported an adjusted profit of 15.06 yuan per American Depository Share.
Its US listed shares opened 0.3 percent lower.
Chinese consumers are refraining from spending more, particularly on discretionary items, as the world’s second-largest economy faces challenges in gaining momentum amid a property sector crisis and rising job insecurity among the youth. JD.com on Thursday also missed estimates for quarterly revenue.
Alibaba reported revenue of 236.5 billion yuan ($32.72 billion) for the second quarter ending September 30, falling short of analysts’ average estimate of 240.17 billion yuan, according to data compiled by LSEG.
Revenue from Alibaba’s Cloud Intelligence division surged 7 per cent to 29.61 billion yuan, with revenues from public cloud products growing in double digits and AI-related product revenue delivering triple-digit growth.
M Science analyst Vinci Zhang, “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.”
Alibaba is undergoing intense competition from discount-focused retailers like PDD Holdings’ Pinduoduo and ByteDance-owned Douyin, which have attracted price-sensitive consumers with extremely low prices on a wide range of products, from headphones to sweaters.
“This generative AI opportunity is the kind of chance that only comes once every 20 years,” said CEO Eddie Wu, emphasizing Alibaba’s significant investments in the sector. Another positive development was the growth of Alibaba’s international e-commerce business, which saw a 29 per cent rise in revenue to 31.67 billion yuan, driven by increasing global demand for affordable 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, in a bid to reach new customers.
Zhang said a majority of the revenue growth seen in the quarter was fueled by a “much better than expected take-rate, so it has nothing to do with actual business growth.”
Zhang added that 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.
The shopping giant did not release total sales revenue for the period but said 45 brands – including Apple, Haier , Midea, and Xiaomi – each surpassed 1 billion yuan $138.62 million in GMV.
