Despite cloud acceleration, Alibaba experiences a 4% premarket dip in stock price after missing earnings expectations.

• In the June quarter of 2024, Alibaba fell short of expectations due to ongoing challenges in its core e-commerce business, including increasing competition and a hesitant Chinese consumer.
• Eddie Wu, who took over as CEO, has been working to stabilize Alibaba's core China e-commerce business.
• The e-commerce giant has been facing a hesitant Chinese consumer and intensified competition from rivals such as JD.com and Temu owner PDD.

The company missed its top and bottom line expectations for the June quarter of 2024 due to ongoing challenges in its core e-commerce business, including increasing competition and a hesitant Chinese consumer.

In premarket trade in the U.S., Alibaba's shares dropped approximately 3.99% at 07:14 a.m.

Here's how Alibaba did in the June quarter versus LSEG estimates:

• The expected revenue of 249.05 billion yuan ($34.01 billion) is higher than the actual revenue of 243.24 billion yuan.
• Net income: 24.27 billion yuan versus 26.91 billion yuan expected.

Alibaba reported a 4% increase in revenue year-on-year, but its net income decreased by 29% year-on-year. The company attributed the net income decline to a decrease in income from operations and an increase in impairment from its investments.

After undergoing its largest-ever corporate restructuring in 2023 and experiencing high-profile management changes, including the appointment of Eddie Wu as CEO in September, Alibaba has been seeking to reignite growth.

The e-commerce giant has been facing a hesitant Chinese consumer and intensified competition from rivals such as JD.com and Temu's owner.

Wu has been working to stabilize Alibaba's core China e-commerce business since taking over. Currently, the company is in a transition phase, shifting its focus to third-party merchants selling via its platforms, Taobao and Tmall, while reducing its direct sales business in China.

The company plans to introduce new monetization strategies for its e-commerce platforms to revive its Taobao and Tmall businesses by the latter half of 2025, as previously stated by Wu.

In the June quarter, Alibaba's China e-commerce business, represented by the Taobao and Tmall group, experienced a 1% year-on-year decline in sales, totaling 113.37 billion yuan.

Alibaba reported a "double-digit" increase in gross merchandise value for its Taobao and Tmall businesses, despite a decline in overall revenue. Despite the revenue decline, shoppers continue to use Alibaba's platforms.

Despite the challenges faced by Alibaba's domestic online shopping businesses, its overseas operations, including Lazada and Aliexpress, remain a source of growth, with international e-commerce sales increasing by 32% year-on-year.

Cloud accelerates

The company's cloud computing division is viewed as a potential source of growth, and investors are closely monitoring its progress.

In the fastest growth rate since the June quarter of 2022, Alibaba's quarterly revenue from the cloud group reached 26.5 billion yuan, up 6% year-on-year.

Alibaba, headquartered in Hangzhou, has been heavily investing in artificial intelligence and sells AI products through its cloud unit. The company reported that its AI-related product revenue grew at a triple-digit rate year-over-year.

The company's cloud computing division management underwent a shakeup last year, with a focus on securing higher margin contracts and enhancing operating efficiency. In the June quarter, the division's adjusted earnings before interest, taxes, and amortization (EBITA) increased by 155% compared to the previous year, indicating improved profitability.