Mixed Bag for Alibaba: Sales Disappoint, But Record Buyback Signals Confidence

Alibaba Group Holding of China fell short of analysts’ third-quarter revenue estimates, primarily impacted by subdued conditions in the retail market and a sluggish economic recovery in the world’s second-largest economy. But the tech conglomerate also boosted its share buyback program, a sign that the company believes its stock remains undervalued after it fell 40% in the last 12 months.

Alibaba, which is also an online retailer, reported total revenues of 27.7 billion yuan for the September quarter, below the average estimate of 29.7 billion yuan, according to Refinitiv data. Revenue from its core e-commerce business was flat from the same period last year. The company said it had seen a “continuing improvement in consumer spending in the fourth quarter.”

But China’s sagging economic recovery has weighed on consumers, boosting low-cost domestic e-commerce players such as PDD Holdings, which operates Pinduoduo and overseas-focused Temu, and pushing Alibaba to focus on discounts and lower-priced goods. In a move that may be seen as a concession to shareholders, Alibaba upsized its share repurchase program to $25 billion through the end of March 2027, compared with $15 billion in September.

The company said the extra capital will strengthen its investment in technology and improve operating efficiency. It also plans to continue investing in AI, a key growth driver that will require massive computing power to develop deep-learning systems and help it compete with big peers in the field in both China with companies such as Tencent and Baidu, as well as U.S. technology giants like Google and Microsoft.

Alibaba’s decision to postpone the spinoff of its cloud unit marks a hitch in a major management shakeup. In June, veteran executive Eddie Wu replaced Daniel Zhang as CEO. The company still intends to list its Cainiao smart logistics division in Hong Kong and expand its global footprint.

In the fourth quarter, Alibaba’s Digital Media and Entertainment Group saw a 4% revenue increase from the same period a year ago, thanks to revenue growth from the offline entertainment businesses of Damai and Alibaba Pictures and growth of Youku’s subscription revenue, partially offset by a decrease in gaming business revenue.

Alibaba could soon begin to deliver on its promise of higher profitability as it starts to scale back investments in new projects and reduce its reliance on e-commerce sales. He said this should create a more robust and sustainable growth engine in the long run. But there’s a lot of work to be done before that can happen. “We’re only at the start of this journey,” he said. “The next ten years will be a marathon, not a sprint.”

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