A Profit Miss Sends Alibaba's Stock Lower Despite Ai Traction

Alibaba Group Holding Ltd. slightly surpassed revenue expectations for its latest quarter but fell short on profit, leading to a decline in its stock during Tuesday’s premarket trading.

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The Chinese e-commerce giant reported a fiscal fourth-quarter net income of 3.3 billion renminbi ($453 million), or 1.30 renminbi per American depositary share (ADS). This is a notable increase from the 23.5 million renminbi, or 9.00 renminbi per ADS, reported in the same period last year.

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On an adjusted basis, Alibaba earned 10.14 renminbi per ADS, down from 10.71 renminbi per ADS a year ago. Analysts had anticipated adjusted earnings of 10.27 renminbi per ADS. As a result, Alibaba’s shares dropped by 2% in Tuesday’s premarket trading.

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Revenue for the quarter rose to 221.9 billion renminbi from 208.2 billion renminbi, surpassing the FactSet consensus estimate of 220.3 billion renminbi.

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The company reported a 4% increase in sales from its Taobao and Tmall Group, reaching 93.2 billion renminbi. Additionally, revenue from its Cloud Intelligence division grew by 3% year-over-year to 25.6 billion renminbi.

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“During the quarter, our core public cloud offerings, including products such as elastic compute, database, and AI products, recorded double-digit year-over-year growth in revenue,” Alibaba stated in its earnings release. “Overall revenue, excluding contributions from Alibaba-consolidated subsidiaries, decreased slightly year-over-year as we shift away from low-margin project-based revenues.”

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Alibaba’s board of directors has approved a two-part dividend. This includes an annual cash dividend of $1.00 per ADS and a “one-time extraordinary cash dividend” of 66 cents per ADS. The latter reflects “a distribution of proceeds from the disposition of certain financial investments,” according to the company.

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The total dividend payout is expected to be around $4 billion, based on the company’s release.

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This quarter's performance highlights Alibaba’s mixed financial results. While the company achieved a modest increase in revenue, driven largely by its e-commerce and cloud businesses, it struggled to meet profit expectations, reflecting the challenges it faces in balancing growth and profitability. The approved dividends signal an effort to return value to shareholders amid these financial dynamics.

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