Alibaba reports better-than-expected quarterly revenue, profit rises on cost-cutting

February 24, 2023 0:33 am

Chinese e-commerce giant Alibaba on Thursday reported better-than-expected financial results for its fiscal third quarter.

For the quarter ended December 31, revenue reached 247.76 billion yuan ($35.92 billion), beating estimates of 245.18 billion yuan and up 2% from a year earlier.

Earnings per share were $19.26, compared to expectations of $16.26, representing a 14% increase year-over-year.

Net income was 46.82 billion yuan versus expectations of 34.02 billion yuan, an increase of 69% year-over-year.

The profit gain partly reflected the company's aggressive cost-cutting in the December quarter. Toby Xu, Alibaba's chief financial officer, said in today's press release, “During the past quarter, we continued to improve operating efficiency and cost optimization that resulted in robust profit growth.”

Revenue from Alibaba's core business, its China Commerce division, which includes marketplaces Taobao and Tmall, totaled 169.99 billion yuan, down 1% year-over-year. The revenue decline was driven by a 9% year-over-year drop in customer management revenue, which comes from services such as marketing that Alibaba sells to merchants on its Taobao and Tmall e-commerce platforms.

Gross merchandise for China Commerce fell in the mid-single digits year-over-year during the period, which the company attributed primarily to soft consumer demand and continued competition, as well as a surge in COVID-19 cases in China that resulted in supply chain and logistics disruptions in December. The company added that it sees a rebound in China’s economy and consumption.

International e-commerce revenue, including Lazada, AliExpress, Trendyol, and Daraz, grew 18% year-over-year to 19.465 million yuan. Combined order volume increased 3% year-over-year, driven by solid growth at Trendyol. In the quarter ended September 30, combined order volume declined 3% year-over-year.

The company's logistic arm, Cainiao, reported revenues of 16.553 billion yuan, an increase of 27% compared to the same period last year.

Revenue from the cloud computing segment, which consists of Alibaba Cloud and DingTalk, reached 20.179 billion yuan, up 3% year-over-year. According to the company, revenue from customers in the Internet industry declined by 4% year-over-year, mainly driven by declining revenue from top Internet customers that have gradually stopped using its overseas cloud services for their international businesses.

During the quarter ended December 31, 2022, the company repurchased 45.4 million ADSs, or equivalent to 363.3 million ordinary shares, for approximately $3.3 billion.

During Thursday's earnings call, Alibaba CEO Daniel Zhang responded to inquiries about the company's ChatGPT-like product. Amidst a flurry of tech firms jumping on the chatbot bandwagon, Alibaba announced on February 8 that it was developing a competitor to ChatGPT.

Without disclosing specific details, Zhang said that Alibaba would integrate the chatbot “into business around consumption, around user experience, content generation to drive higher advertising effectiveness.”

With generative artificial intelligence leading the way, Alibaba expects demand for computing power to grow exponentially. The Chinese cloud computing giant said it is looking to “capture the market opportunities” to provide the computing power required, via its cloud division, to generative AI applications.