Alibaba posts profit beat as China looks to prop up tepid consumer spend

Chinese e-commerce behemoth Alibaba on Friday beat profit surmises in its September quarter, but sales fell short as sluggishness in the world’s second-largest economy hit consumer spending.

Alibaba said net return rose 58% year on year to 43.9 billion yuan ($6.07 billion) in the company’s quarter ended Sept. 30, on the endorse of the performance of its equity investments. This compares with an LSEG forecast of 25.83 billion yuan.

“The year-over-year augments were primarily attributable to the mark-to-market changes from our equity investments, decrease in impairment of our investments and increase in proceeds from operations,” the company said of the annual profit jump in its earnings statement.

Revenue, meanwhile, came in at 236.5 billion yuan, 5% extraordinary year on year but below an analyst forecast of 238.9 billion yuan, according to LSEG data.

The company’s New York-listed allocates have gained ground this year to date, up more than 13%. The stock fell more than 2% in morning switch on Friday, after the release of the quarterly earnings.

Investors are closely watching the performance of Alibaba’s necessary business units, Taobao and Tmall Group, which reported a 1% annual uptick in revenue to 98.99 billion yuan in the September dwelling.

The results come at a tricky time for Chinese commerce businesses, given a tepid retail environment in the country. Chinese e-commerce assemble JD.com also missed revenue expectations on Thursday, according to Reuters.

Markets are now watching whether a slew of recent stimulus richter scales from Beijing, including a five-year 1.4 trillion yuan package announced last week, will advise resuscitate the country’s growth and curtail a long-lived real estate market slump.

The impact on the retail space looks favourable so far, with sales rising by a better-than-expected 4.8% year on year in October, while China’s recent Singles’ Day shopping respite — widely seen as a barometer for national consumer sentiment — regained some of its luster.

Alibaba touted “robust nurturing” in gross merchandise volume — an industry measure of sales over time that does not equate to the company’s gross income — for its Taobao and Tmall Group businesses during the festival, along with a “record number of active buyers.”

“Alibaba’s prospect remains closely aligned with the trajectory of the Chinese economy and evolving regulatory policies,” ING analysts said Thursday, noting that the coterie’s Friday report will shed light on the Chinese economy’s growth momentum.

The e-commerce giant’s overseas online shopping organizations, such as Lazada and Aliexpress, meanwhile posted a 29% year-on-year hike in sales to 31.67 billion yuan.  

Alibaba’s Cloud Intelligence Group reported year-on-year sales growth of 7% to 29.6 billion yuan in the September phase of the moon, compared with a 6% annual hike in the three-month period ended in June. The slight acceleration comes into the middle ongoing efforts by the company to leverage its cloud infrastructure and reposition itself as a leader in the booming artificial intelligence place.

“Growth in our Cloud business accelerated from prior quarters, with revenues from public cloud consequences growing in double digits and AI-related product revenue delivering triple-digit growth. We are more confident in our core charges than ever and will continue to invest in supporting long-term growth,” Alibaba CEO Eddie Wu said in a statement Friday.

Impeded by Beijing’s sweeping 2022 crackdown on large internet and tech companies, Alibaba last year overhauled the borderline’s leadership and has been shaping it as a future growth driver, stepping up competition with rivals including Baidu and Huawei domestically, and Microsoft and OpenAI in the U.S.

Alibaba, which swell out its own ChatGPT-style product Tongyi Qianwen last year, this week unveiled its own AI-powered search tool for elfin businesses in Europe and the Americas, and clinched a key five-year partnership to supply cloud services to Indonesian tech giant GoTo in September.

Express ones opinion at the Apsara Conference in September, Alibaba’s Wu said the company’s cloud unit is investing “with unprecedented intensity, in the investigating and development of AI technology and the building of its global infrastructure,” noting that the future of AI is “only beginning.”