Alibaba shares rebound 6% after massive earnings beat

Alibaba said it was working on a rival to ChatGPT, the artificial intelligence chatbot that has garnered worldwide acclaim. Alibaba said its own product is currently undergoing internal testing.

Kuang Da | Visual Group China | Getty Images

Alibaba reported earnings for its fiscal third quarter that beat expectations, pushing the tech giant’s U.S.-listed shares up 6%.

here’s how Ali Baba did in its third fiscal quarter, which ran from October to December 2022, compared to Refinitiv consensus estimates:

  • Revenue: 247.76 billion Chinese yuan ($35.92 billion) vs. 245.18 billion Chinese yuan expected, up 2% year-on-year;
  • US Depository Earnings per share: 19.26 yuan vs. 16.26 yuan expected, up 14% YoY;
  • Net income: 46.82 billion yuan against 34.02 billion yuan, up 69% year on year.

About $600 billion has been wiped from Alibaba’s value since its peak in October 2020, as a tougher regulatory environment on tech companies in China along with strict Covid-19 control policies – and the ensuing economic downturn – hit the e-commerce giant.

Shares of Alibaba in Hong Kong closed higher on Thursday ahead of earnings, as investors bet China’s economic reopening will help boost consumer sentiment and spending, which will ultimately help the e-commerce giant. In the December quarter, China abruptly ended its strict Covid controls such as lockdowns, although this is unlikely to be fully reflected in the quarter.

Meanwhile, China’s regulatory tightening of the past two years is beginning to ease, as enforcement becomes more predictable.

Revenue from Alibaba’s biggest business, the China trading division, which includes its popular marketplace Taobao, totaled 169.99 billion yuan, down 1% year-on-year. The drop was driven by a 9% year-on-year drop in customer management revenue, earned from services such as marketing that Alibaba sells to merchants on its Taobao e-commerce platforms and T mall.

Alibaba said gross merchandise volume — or the value of transactions on the company’s online shopping platforms — “decline in single digits year-over-year, primarily due to the weak consumer demand and continued competition as well as an increase in COVID-19 cases in China that led to supply chain and logistics disruptions in December.”

The company said it saw a rebound in China’s economy and consumption.

“Looking ahead, we expect a continued recovery in consumer confidence and economic activity,” Alibaba CEO Daniel Zhange said in a press release.

Amid slowing business in China, Alibaba has sought to expand into overseas markets through its Lazada subsidiary in Southeast Asia and via global e-commerce site AliExpress. International trade revenue rose 18% year-on-year to 19.47 billion Chinese yuan.

Analysts expect Alibaba to see faster revenue growth in the coming quarters as the full effect of the reopening of the Chinese economy is felt. Morgan Stanley named Alibaba its “top pick” in China’s tech sector for the first time in three years, in a recent note.

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