Alibaba misses revenue estimate, approves cloud unit spinoff

(Source: Reuters/Dado Ruvic)

China’s Alibaba Group Holding Ltd posted a 2 per cent rise in quarterly revenue that missed expectations on Thursday and said it would list its cloud computing business in the next year.

The company has been struggling to attract new users as China’s e-commerce sector matures and it grapples with inroads made by new competitors such as PDD Holdings and Douyin, the Chinese version of TikTok that is also owned by ByteDance.

Earlier this year, Alibaba announced plans to restructure into six units following a two-year regulatory crackdown on China’s tech sector. It expects all of the units except for its China-facing e-commerce division to seek outside funding and go public.

On Thursday it approved a full spinoff of the Cloud Intelligence Group via a stock dividend distribution to shareholders, aiming to complete the public listing within the next 12 months.

Finance chief Toby Xu said Alibaba’s board has also approved the process to start external financing for Alibaba International Digital Commerce Business Group. Freshippo, its grocery arm, will kick off the IPO process and logistics unit Cainiao will explore an IPO in the next 12-18 months, he added.

“We would love nothing more than to see one of these little Alibabas…becoming another big Alibaba, as big as the group company is right now,” said Alibaba Group chairman Daniel Zhang on an earnings call.

Alibaba’s US-listed shares were up 0.5 per cent in premarket trading.

Chinese consumer spending has gained some momentum since the country abandoned draconian zero-Covid policies late last year, but it still remains relatively muted amid a wobbly economic recovery.

Alibaba logged revenue of US$30.12 billion for the three months ended in March, compared with a Refinitiv consensus estimate of $29.8 billion. Full-year revenue climbed 2 per cent to $123.3 billion, the slowest rate of growth since the company went public in 2014.

Net income attributable to ordinary shareholders was $3.3 billion for the quarter, reversing a year earlier loss of $2.3 billion.

Amid soft corporate demand and excess capacity, both Alibaba and rival Tencent Holdings Ltd have recently announced drastic price cuts for their cloud computing services, plunging the sector into a price war.

Revenue for Alibaba’s cloud division in the recent quarter was $2.6 billion, down 2 per cent year-on-year.

Last month Alibaba showed off Tongyi Qianwen, a generative artificial intelligence model which is similar to the model that powers OpenAI’s ChatGPT. The company has opened up registration to test the technology to enterprise customers of Alibaba Cloud.

A number of other Chinese companies, including search giant Baidu have released similar AI models.

  • Reporting by Chavi Mehta in Bengaluru and Josh Horwitz in Shanghai; Editing by Edwina Gibbs and Devika Syamnath, Kirsten Donovan, of Reuters.

You have 7 articles remaining. Unlock 15 free articles a month, it’s free.