- Chinese e-commerce giant Alibaba is likely to report a slight decline in adjusted earnings per share to 16.55 yuan from 16.87 yuan for the quarter ended in December.
- Revenue is expected to grow the slowest in the company’s history.
- A slowing economy, Chinese government regulations and the lingering impact of the COVID lockdown are expected to be headwinds.
- Revenue from Alibaba’s domestic business, which accounts for two-thirds of its sales, could decline for a third straight quarter.
Alibaba Group Holdings Ltd. (BABA), the Chinese e-commerce and cloud computing giant, could only report a modest increase in revenue in the last three months of the year due to concerns about China’s economy, even as the country emerged from severe COVID restrictions.
Alibaba is likely to say net income for the quarter ended December rose 63% to 33.6 billion yuan ($4.9 billion), with adjusted profit of 16.55 yuan ($2.41), down up from 16.87 yuan a year earlier, according to estimates compiled by Visible Alpha. . The company’s revenue likely rose 1.8%, its slowest growth rate on record, to 246.9 billion yuan ($36 billion). Alibaba reports results before the US market opens on February 23.
A weakening global economy and tight regulation hit Chinese tech companies in 2022, leading Alibaba to post its first decline in sales in more than a decade in the three months ended September. The severe COVID-19 restrictions that ended at the end of the year were also a headwind. All of this could cause Alibaba’s core domestic business revenue, which accounts for more than two-thirds of the company’s total sales, to decline for the third straight quarter.
Still, cost control measures, including a nearly 33% reduction in operating expenses, could help improve gross margin.
The Chinese government eased some technical regulations late in the year, issuing more video game licenses and opening up more fundraising opportunities. Hurst Lin of Chinese venture capital firm DCM China said the regulatory environment appeared to be “encouraging rather than discouraging” private sector technology firms. Guo Shuqing, China’s top banking regulator, said in January that the government had ended its crackdown on big tech firms.
Like other tech companies around the world, Alibaba is facing increasing pressure to launch its own AI-powered service in response to OpenAI’s ChatGPT, which has dominated the news industry since its release a few months ago. Alibaba has announced plans to roll out its own chatbot, but has yet to provide details on a launch or timeline.
Alibaba shares fell this month after rising more than 75% between October and January as investors warmed to risk assets and China eased its COVID-19 restrictions. The stock is down 19.6% over the past year, compared with an 18% decline for the S&P 500 consumer discretionary index.
|Alibaba Key Statistics|
|Estimate for Q3 FY2023||Current for Q3 FY2022||Current for Q3 FY2021|
|Adjusted profit per ADS (Yuan)||4:55 p.m||16.87||22.03|
|Revenue (billion yuan)||246.9||242.6||221.1|
Source: Visible Alpha