Alibaba fell early Friday, after the Chinese e-commerce giant reported mixed fiscal second quarter results. Earnings beat estimates but sales came in light, despite strong performances from the company's international retail division and its AI cloud business.
Alibaba said that it earned an adjusted 15.06 yuan per American depositary share (ADS) on sales of 236.5 billion yuan, or $32.7 billion, for the September-ended quarter. Analysts polled by FactSet projected Alibaba would post adjusted earnings of 14.82 yuan per ADS on sales of 239.45 billion yuan.
Sales grew 5% year-over-year in local currency while adjusted earnings per ADS decreased 4%.
"Growth in our Cloud business accelerated from prior quarters, with revenues from public cloud products growing in double digits and AI-related product revenue delivering triple-digit growth," Chief Executive Eddie Wu said in a news release. "We are more confident in our core businesses than ever and will continue to invest in supporting long-term growth. Our other businesses continued to improve their operating efficiency, with most of them continuing to increase their profitability or reduce losses."
On the stock market today, Alibaba stock shed more than 3% to 87.59 in morning trades. Shares were ahead as much as 4% in premarket trading immediately following the report before reversing lower.
Alibaba International Business Grows
Overall revenue from Alibaba's cloud business grew 7%, to 29.6 billion yuan, an acceleration from 6% growth in the previous quarter. It was a fifth consecutive quarter where AI-related revenue grew at a triple digit pace for the cloud division, the company said in a news releases. Alibaba called off a plan to spin off its cloud business roughly a year ago, sending shares tumbling at the time. Now it is focused on reaccelerating sales for the cloud division.
"We will continue to invest in anticipation of customer growth and in technology, particularly in AI infrastructure, to capture the increasing trend of cloud adoption for AI and to maintain our market leadership," the earnings release said.
Meanwhile, Alibaba international retail sales surged 35% to 25.6 billion yuan. With consumer spending slowing in China, Alibaba has looked to grow its internationally-focused Lazada and AliExpress businesses.
Sales for Alibaba's massive China-focused retail division – the Taobao and Tmall Group – were essentially flat from a year earlier, at 212.4 billion yuan. Along with competing against longtime rival JD.com, Alibaba has been defending its market share in China against upstarts such as PDD Holdings' Pinduoduo and the ByteDance-owned Douyin.
JD.com also missed revenue estimates for its September-quarter earnings report, which the company posted early Thursday. PDD Holdings reports earnings on Nov. 21.
Alibaba Stock: Technical Ratings
Alibaba stock is down 6.5% this week, dipping further below its 50-day and 10-week lines. Shares have gained 17% year-to-date, with a recent run of volatility. The stock surged in September as the Chinese government said it would take steps to stimulate economic growth. But enthusiasm about the efforts has waned. Investors are also weighing the impact of Donald Trump's U.S. presidential victory, with Trump pledging to place further tariffs on China during his second term.
After surging 27.3% in September, Alibaba retreated 7.7% in October and nearly 10% so far this month.
Coming into the report, Alibaba stock had an IBD Composite Rating of 55 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Alibaba's IBD Relative Strength Rating was 70 out of 99. The RS Rating means that BABA stock has outperformed 70% of all stocks in IBD's database over the past year.
