Signage on the Alibaba Group Holding Ltd. booth on the Smart China Expo in Chongqing, China, on Monday, Sept. 4, 2023.
Qilai Shen | Bloomberg | Getty Images
Chinese e-commerce giant Alibaba on Thursday reported quarterly profit that missed market expectations and said it could not proceed with the complete spin-off of its cloud group.
Its U.S. shares fell over 5% in pre-market trading following the news.
Here’s how Alibaba did within the September quarter, compared with Refinitiv consensus estimates:
- Net income attributable to odd shareholders: 27.7 billion yuan ($3.8 billion) versus 29.7 billion yuan expected.
- Revenue: 224.79 billion yuan ($31 billion) versus 224.3 billion yuan expected.
In its earnings release Thursday, Alibaba said that it could not proceed with a spin-off of its Cloud Intelligence Group — the cloud computing arm of Alibaba that competes with Amazon Web Services and Microsoft Azure. Alibaba had planned to list the division publicly.
Alibaba said that it had curbed the spin-off as a consequence of U.S. chip exports, which have made it harder for Chinese firms to get critical chip supplies from U.S. corporations. The U.S. barred sales of Nvidia’s advanced artificial intelligence-focused H800 and A800 chips in October.
On Thursday, Alibaba said that the U.S. chip restrictions have “created uncertainties for the prospects of Cloud Intelligence Group.”
“We consider that a full spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement,” the corporate said, adding that it could as an alternative concentrate on developing a sustainable growth model for the unit Cloud Intelligence Group “under the fluid circumstances.”
The Thursday results mark the primary set of Alibaba earnings since veteran executive Eddie Wu succeeded former boss Daniel Zhang as CEO. As a part of a broader management reshuffle, the corporate’s co-founder Joe Tsai also took over as chairman, Alibaba said in June.
Investors can be waiting for key signs of the corporate’s progress following the reorganization of Alibaba into six individual business units — one of the vital radical shake-ups in the corporate’s history. Alibaba is searching for initial public offerings for its cloud computing division and logistics division Cainiao.
The outcomes also function a sign of the health of the Chinese consumer. Economists were expecting a boom in China’s economy following its emergence from Covid-19 lockdowns last yr, however the rebound has proven more tepid, with a property crisis and other structural challenges posing risks to the country’s recovery.
— This can be a developing story and can be updated shortly.