Alibaba’s June 2024 earnings report reveals challenges in its core e-commerce business, while its cloud division shows promising growth.
Alibaba’s latest earnings report for the June 2024 quarter has left investors with mixed feelings. Despite impressive growth in its cloud computing division, the Chinese tech giant missed both top- and bottom-line expectations, highlighting ongoing struggles in its core e-commerce business.
Disappointing Earnings:
Alibaba reported revenue of 243.24 billion Chinese yuan ($34.01 billion), falling short of the 249.05 billion yuan expected by analysts. Net income also missed expectations, coming in at 24.27 billion yuan compared to the anticipated 26.91 billion yuan. While revenue saw a modest 4% increase year-on-year, net income plummeted by 29%, a drop the company attributed to a decrease in operational income and increased impairment from investments.
Struggles in Core E-Commerce:
Alibaba has been navigating through a challenging environment, with competition intensifying from rivals like JD.com and PDD’s Temu, and a Chinese consumer base that remains cautious. In response, Alibaba has undergone significant restructuring, including a major corporate overhaul in 2023 and leadership changes, with Eddie Wu stepping in as CEO in September.
Under Wu’s leadership, Alibaba has been working to stabilize its core China e-commerce business, which includes its flagship platforms, Taobao and Tmall. However, the June quarter saw a 1% decline in sales from the Taobao and Tmall Group, amounting to 113.37 billion yuan. Despite this, Alibaba pointed to double-digit growth in gross merchandise value, suggesting that while revenue may be under pressure, consumer engagement on its platforms remains strong.
Bright Spots in International E-Commerce:
While Alibaba’s domestic e-commerce performance faltered, its international ventures provided a glimmer of hope. Sales from its overseas online shopping businesses, including Lazada and Aliexpress, soared by 32% year-on-year, underscoring the company’s potential for growth outside China.
A Beacon of Growth:
Investors have been closely watching Alibaba’s cloud computing division, seen as a critical driver of future growth. In the June quarter, the cloud group posted revenue of 26.5 billion yuan, marking a 6% year-on-year increase — its fastest growth rate since the June quarter of 2022.
Alibaba’s cloud business has been bolstered by its investments in artificial intelligence, with AI-related product revenue growing at triple-digit rates. The company has also focused on securing higher-margin contracts and improving operational efficiency within its cloud division. As a result, adjusted earnings before interest, taxes, and amortization (EBITA) for the cloud unit surged by 155% year-on-year.
Looking Ahead:
Alibaba is clearly in a period of transition, striving to balance the challenges in its core e-commerce sector with the opportunities presented by its cloud computing and international e-commerce divisions. CEO Eddie Wu has expressed confidence that new monetization features and a stronger focus on third-party merchants will help the company regain momentum in its China e-commerce business by late 2025.
For now, Alibaba’s earnings report serves as a reminder of the hurdles it faces in a rapidly evolving market, even as it continues to innovate and expand in other areas. Investors will be watching closely to see if the company can turn its ambitious strategies into tangible results.
