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Alibaba’s Stock Falls After Earnings Miss, but Company Plans Large Buyback Boost

February 7, 2024
minute read

Alibaba Group Holding Ltd. is significantly bolstering its stock-buyback initiative, signaling confidence in the business by injecting billions of additional dollars into the program. The Chinese e-commerce giant declared on Wednesday its decision to augment the buyback program by $25 billion, resulting in an expanded authorization of over $35 billion throughout the upcoming three fiscal years.

In recent months, Alibaba has demonstrated a stronger commitment to capital returns. Approximately three months ago, the company's board approved an annual cash dividend of $1 per American depositary share. This move reflects the company's dedication to providing returns to shareholders and maintaining financial stability.

The announcement of Alibaba's reinforced buyback program coincided with the release of the company's fiscal-third quarter results, which revealed a slight deviation from the expected bottom-line figures.

For the quarter, Alibaba reported net income of 10.7 billion renminbi ($1.5 billion), equivalent to 5.65 renminbi per American depositary share. This marked a decline from the year-ago period, where the net income was 46.8 billion renminbi, or 17.91 renminbi per ADS. On an adjusted basis, Alibaba earned 18.97 renminbi per share, a decrease from 19.26 renminbi per share in the preceding year, slightly missing analysts' projections of 19.12 renminbi.

Despite the revenue for the December quarter reaching 260.3 billion renminbi, an increase from the previous year's 247.8 billion renminbi, Alibaba's stock experienced a 3% dip in premarket trading on Wednesday.

In terms of segment performance, cloud revenue witnessed a 3% rise year-over-year, and revenue from the Taobao and Tmall e-commerce platforms experienced a 2% increase. Alibaba highlighted robust growth in order volume and the number of transacting buyers, although it acknowledged a decline in average order value.

Within the cloud division, Alibaba emphasized its ongoing efforts to enhance revenue quality by reducing income derived from low-margin project-based contracts. Simultaneously, the company reported commendable growth in revenue from public-cloud products and services, contributing to improved profits for the unit.

Alibaba's decision to reinforce its stock-buyback program comes at a time when the company is navigating the dynamic landscape of the e-commerce and cloud industries. The additional investment in the buyback program serves as a strategic move to instill confidence among investors and underscores Alibaba's optimistic outlook for the future.

While the slight miss on the bottom line and the subsequent decline in stock value indicate short-term challenges, Alibaba's overarching commitment to shareholder value, evident through dividend approvals and buyback enhancements, positions the company for sustained long-term growth. The evolution of revenue streams within specific segments, such as cloud services, further demonstrates Alibaba's adaptability and strategic focus on maximizing profitability. Investors will likely closely monitor how these strategic initiatives unfold and contribute to Alibaba's continued success in the global marketplace.

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Adan Harris
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Eric Ng
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John Liu
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Bryan Curtis
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Adan Harris
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Cathy Hills
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