Why Alibaba Stock Was Slipping Today

Shares of Alibaba Group (BABA -6.02%) were pulling back today after the Chinese tech giant delivered another disappointing earnings report. Profits came in below expectations even while it delivered moderate revenue growth.

As a result, the stock was down 6.7% as of 3:25 p.m. ET.

The Alibaba sign on a lawn.

Image source: Alibaba.

Alibaba whiffs on earnings

The owner of Taobao and Tmall said revenue in the quarter jumped 7% to $30.7 billion, which topped estimates at $30.4 billion.

Revenue from Taobao and Tmall increased 4% to $12.9 billion, and cloud computing revenue rose 3% to $3.5 billion.

The Alibaba International Digital Commerce Group delivered strong results in part due to AliExpress’s Choice, its competitor to Temu; and revenue from Cainiao, its logistics company, jumped 30% to $3.4 billion.

Despite increasing revenue, operating income in the quarter fell 3% to $2.05 billion, and adjusted earnings per share fell 5% to $1.40, which missed estimates by a penny.

Alibaba’s results were notably weaker than those of Tencent, its fellow Chinese tech giant, showing that Tencent has done a better job of adjusting to more stringent regulations in China than Alibaba has.

CEO Eddie Wu touted the business‘s underlying performance, saying: “This quarter’s results demonstrate that our strategies are working and we are returning to growth. Our China and international commerce business realized double-digit year-over-year GMV growth through our focus on the customer experience.”

What’s next for Alibaba

Alibaba stock has been struggling for years as the company has faced a series of challenges that started with disrespectful remarks from founder Jack Ma about Chinese finance ministers.

Since then, Alibaba has endured the blocking of the initial public offering (IPO) of financial arm Ant Group, a multibillion-dollar fine, and forced divestitures.

It’s also struggled with broader weakness in the Chinese economy and intensifying price competition from the likes of PDD Holdings‘ Pinduoduo. It abandoned its plan to spin off its cloud business late last year after the U.S. restricted chip exports to China.

Against that backdrop, investors need a better earnings report than this in order to restore confidence in the stock.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tencent. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

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