Alibaba struggles with disappointing profits despite strong revenue growth
- Alibaba missed earnings expectations for its fiscal fourth quarter, despite a 7% year-on-year revenue increase.
- The company's core e-commerce division saw a 9% revenue rise, while cloud revenue grew by 18%.
- With increased investment in instant commerce and ongoing competition, Alibaba continues to adapt to the challenging market environment.
In China, Alibaba recently reported disappointing earnings for its fiscal fourth quarter, missing analysts' expectations both in revenue and profits. The announcement occurred on Thursday, after the company faced various external pressures including macroeconomic volatility that has influenced consumer sentiment negatively in the region. Yet, despite the missed targets, Alibaba's revenue did reflect an increase of 7% year-on-year, which indicates some resilience in its operational performance despite the challenges it has been encountering. The revenue from Alibaba's core e-commerce segments, specifically Taobao and Tmall, also rose by 9%, totaling 101.4 billion yuan. Customer management revenue, which stems from the sale of marketing services to merchants using Alibaba's platform, saw an impressive year-on-year growth of 12%. These services are vital to the company’s business model and underscore the engagement levels between Alibaba and its sellers. On the same earnings call, management shared plans to invest heavily in an innovative concept known as 'instant commerce', which is designed to support product deliveries within an hour through the Taobao app. This strategic investment is aimed at fostering greater engagement with the app's users and distilling a competitive edge amid the prevailing fierce market competition. The increased competition includes aggressive pricing strategies implemented by rivals such as PDD and JD.com, intensifying the pricing war within China's e-commerce arena. In addressing such challenges, Alibaba extended its partnership with Rednote, a content and engagement platform that resembles Instagram, as a proactive measure to boost purchases on its platform. On top of that, Alibaba’s cloud segment reported a growth rate of 18%, generating 30.1 billion yuan in revenue, outpacing last quarter’s growth. This growth can be attributed to faster public cloud revenue growth and heightened adoption of AI-centric offerings. In light of the ongoing AI race in China spurred by competitors like DeepSeek, Alibaba's CEO Eddie Wu emphasized the consistent triple-digit growth experienced in AI-related product revenues for seven consecutive quarters. He articulated a robust outlook for Alibaba's cloud business, stating the company holds strong confidence in a significant growth trajectory for the upcoming periods, which reflects a long-term vision amid immediate earnings pressures. The challenges presented by external factors, such as trade relations with Washington leading to economic uncertainty, highlight the precarious environment in which Alibaba currently operates, yet the investments and strategic direction indicate the company's resilience and adaptability in face of such hurdles.