Alibaba Group Holding, China’s e-commerce giant, reported third-quarter revenue that missed analysts’ estimates due to a weak retail environment and a sluggish economic recovery in China. The company’s U.S.-listed shares fell by 4% in early trading following the announcement.
In response to the challenges, Alibaba announced a significant increase of $25 billion to its share repurchase program, extending it through the end of March 2027. The move aims to boost shareholder confidence amid concerns about the impact of reduced consumer spending and competition from lower-cost domestic e-commerce players.
The weak retail environment and economic challenges in China have led to increased pressure on Alibaba, with consumers cutting spending and favoring domestic rivals such as PDD Holdings. To address these issues, Alibaba is reorganizing its business into six units, with a focus on reigniting the growth of its core businesses in e-commerce and cloud computing.
For the third quarter, Alibaba reported net income attributable to ordinary shareholders of 14.4 billion yuan ($2 billion), while net income was 10.7 billion yuan ($1.51 billion), marking a 77% decrease. The decline was attributed to valuation changes from equity investments and impairments related to hypermarket operator Sun Art and online video streaming service Youku.
Revenue growth for Taobao and Tmall Group, Alibaba’s online shopping sites, was modest at 2% for the quarter, including year-end sales events like Singles Day. Executives noted early signs of recovery in Taobao and Tmall Group’s gross merchandise volume, emphasizing a strategy focused on increasing purchasing frequency.
Alibaba faces competition from PDD, which overtook it to become the most valuable Chinese e-commerce company. The company has also faced challenges with its cloud business and has scrapped plans to spin it off due to uncertainties related to U.S. restrictions on chip exports to China.
In addition, Alibaba is considering selling several consumer sector assets, including its grocery business Freshippo, which has been engaged in a price war with Walmart’s Sam’s Club. The company denies reports of a potential sale, but Alibaba chairman Joe Tsai acknowledged the need to exit some traditional physical retail businesses over time.
Despite challenges in the domestic market, Alibaba’s International Digital Commerce segment, including AliExpress and Alibaba.com, performed strongly, with AliExpress orders rising by 60% year-on-year. The segment’s CEO highlighted the significant potential for increasing penetration in many markets.
Alibaba’s strategic focus is on revitalizing core businesses and navigating market challenges while addressing the evolving dynamics of the Chinese retail landscape.