Alibaba Group Quarterly Revenue Beats Despite China’s Sputtering Economy
China’s Alibaba Group Holding has reported its most robust quarterly revenue growth in nearly two years, with its domestic e-commerce division strategically focusing on affordable products to attract consumers amidst a challenging economic landscape.
The Chinese e-commerce titan unveiled first-quarter revenue of 234.16 billion yuan (€29.4 billion), marking a 14% increase compared to the same period last year, which was impacted by stringent pandemic lockdowns.
This performance outpaced analysts’ predictions of 224.92 billion yuan (€28.3 billion), according to data from Refinitiv.
Alicia Yap, an analyst at Citi Bank, noted, “Most investors had anticipated a satisfactory quarter, but the magnitude of the surpassing performance, particularly in terms of profits, likely exceeded most expectations.” Alibaba’s net profit soared by 51% year-on-year.
This latest revenue figure marks an improvement from flat to 3% growth over the past four quarters.
However, concerns have risen regarding China’s economy, which slowed down following an initial robust recovery after the easing of COVID-19 restrictions in late the previous year.
China reported slipping into deflation at the consumer price level in July, an occurrence expected to further dampen consumer spending enthusiasm.
Alibaba Group CEO and Chairman Daniel Zhang addressed these concerns, stating, “The most recent macroeconomic data indicates some uncertainties in the pace of post-COVID recovery, but as economic and consumer activities continue to regain momentum, our businesses have demonstrated encouraging trends.”
Highlights of the First Quarter
The revenue surge in the first quarter ending in June was propelled by a resurgence in consumer spending on Alibaba’s Taobao and Tmall platforms. This was partly driven by the 618 shopping festival, China’s second-largest online shopping event, which took place in June.
Alibaba is facing increased competition from rivals renowned for their budget-friendly products, such as Pinduoduo and Douyin (the Chinese version of TikTok), both of which present substantial challenges to Alibaba.
In response, Trudy Dai, CEO of Taobao and Tmall Group, conveyed that Alibaba plans to invest more in attracting price-conscious consumers, particularly younger and older individuals as well as shoppers from lower-tier cities in China.
One promising indicator of improvement was a 6.5% rise in daily active users for the Taobao app in June, known for selling more budget-friendly merchandise compared to the brand-focused Tmall.
Alibaba’s Cloud Intelligence Group, a major growth driver beyond e-commerce, reported the smallest revenue increase among the company’s six business units at 4%. However, the division’s underlying profit more than doubled, boosted by its workplace collaboration tool, Dingtalk, which helped to curtail costs.
Leadership Transition and Regulatory Outlook
This earnings report marked the last under CEO Daniel Zhang, who will step down from his roles in September to concentrate on leading Alibaba’s cloud division.
Alibaba’s cloud unit is anticipated to seek an IPO soon, as the company revealed its plans to spin off the division for an IPO within the next year.
Eddie Yongming Wu, chairman of Alibaba’s Taobao and Tmall Group, will take over the CEO role, while executive vice chair Joseph Tsai will assume the position of chairman.
Regulatory concerns have eased for China’s tech giants, including Alibaba, this year, with Chinese authorities aiming to bolster private sector confidence.
This was Alibaba’s first quarterly report since it divided its business into six units, a move that many experts speculate could mitigate scrutiny over the tech conglomerate.