Alibaba said it’s working on a rival to ChatGPT, the synthetic intelligence chatbot that has caused excitement internationally. Alibaba said its own product is currently undergoing internal testing.
Kuang Da | Visual China Group | Getty Images
Alibaba reported earnings for its fiscal third quarter that smashed expectations, sending the tech giant’s U.S.-listed shares 6% higher.
Here’s how Alibaba did in its fiscal third quarter, which ran from Oct. to Dec. 2022, versus Refinitiv consensus estimates:
- Revenue: 247.76 billion Chinese yuan ($35.92 billion) vs. 245.18 billion Chinese yuan expected, up 2% year-on-year;
- Earnings per American depositary share: 19.26 yuan vs. 16.26 yuan expected, up 14% year-on-year;
- Net income: 46.82 billion yuan vs. 34.02 billion yuan, up 69% year-on-year.
Around $600 billion has been wiped off the worth of Alibaba since its peak in Oct. 2020, as a tightening regulatory environment on tech firms in China together with strict Covid-19 control policies — and subsequent economic slowdown — hit the e-commerce giant.
Alibaba shares in Hong Kong closed higher Thursday ahead of earnings, as investors bet that China’s economic reopening will help boost consumer sentiment and spending, which can ultimately help the e-commerce giant. In the course of the December quarter, China abruptly ended its strict Covid controls comparable to lockdowns, although this shouldn’t be prone to be fully reflected within the quarter.
Meanwhile, China’s regulatory tightening of the past two years is starting to ease, as enforcement of the foundations becomes more predictable.
Revenue from Alibaba’s biggest business, the China commerce division, which incorporates its popular marketplace Taobao, totaled 169.99 billion yuan, down by 1% year-on-year. The drop was driven by a 9% year-on-year decline in customer management revenue, obtained from services comparable to marketing that Alibaba sells to merchants on its Taobao and Tmall e-commerce platforms.
Alibaba said that gross merchandise volume — or the worth of transactions across the corporate’s online shopping platforms — “declined mid-single-digit year-over-year, mainly attributable to soft consumption demand and ongoing competition in addition to a surge in COVID-19 cases in China that resulted in supply chain and logistics disruptions in December.”
The corporate said that it sees a rebound in China’s economy and consumption.
“Looking ahead, we expect continued recovery in consumer sentiment and economic activity,” Daniel Zhange, CEO of Alibaba, said in a press release.
Amid a slowdown in its China activity, Alibaba has sought growth in overseas markets through its South East Asia business Lazada and thru global e-commerce site AliExpress. International commerce revenue grew 18% year-on-year to 19.47 billion Chinese yuan.
Analysts expect Alibaba to see faster revenue growth over the approaching quarters as the total effect of the Chinese economic re-opening is felt. Morgan Stanley named Alibaba its “top pick” within the Chinese tech sector for the primary time in three years, in a recent note.
Profitability boost
Last yr, Alibaba launched into measures to control costs as a way to improve profitability. The corporate is trying to seek out a balance between costs and continuing to make necessary investments for long-term growth.
Those efforts look to be paying off with a 69% year-on-year jump in net income. The corporate’s operating margin stood at 14% within the December quarter, higher than the three% reported in the identical period of last yr.
Alibaba managed to scale back losses across all of its business within the December quarter, including in its logistics arm Cainiao and its cloud division.
“In the course of the past quarter, we continued to enhance operating efficiency and price optimization that resulted in robust profit growth,” Toby Xu, chief financial officer of Alibaba, said in a press release.
Alibaba’s worker headcount at the top of the December quarter stood at 239,740, a discount of greater than 4,000 from the quarter before.
Cloud slowdown persists
Alibaba reported cloud revenue of 20.18 billion Chinese yuan within the fiscal third quarter, up 3% year-on-year. This marked a slowdown from the 4% revenue rise seen within the previous quarter and stays far off the more-than 30% growth rates seen previously.
Cloud computing accounts for just 8% of the corporate’s revenue but is seen by analysts as a future growth driver of the corporate.
Alibaba said it also saw growth from non-internet industries comparable to financial services, education and automobile firms using its cloud services. Nevertheless, it saw a decline in revenue from the general public services industry.
Alibaba buybacks proceed
The corporate can be attempting to boost the arrogance of shareholders amid a slump in its stock price. In November, Alibaba said its board had approved an extra $15 billion as a part of its existing $25 billion share buyback program which will likely be prolonged to the top of its 2025 fiscal yr.
For the December quarter, Alibaba said it repurchased 45.4 million American depositary shares for roughly $3.3 billion under its share buyback program.
