Alibaba May Report Slowest-Ever Quarterly Revenue Growth

Key Takeaways

  • Chinese e-commerce giant Alibaba will likely report a slight decrease in adjusted earnings per share to 16.55 yuan from 16.87 yuan for the quarter ending in December.
  • Revenue is expected to increase at the slowest rate in the company’s history.
  • A slowing economy, Chinese government regulations, and the lingering impact of COVID lockdowns are expected to be headwinds.
  • Alibaba’s domestic commerce revenue, representing two-thirds of its sales, could fall for a third consecutive quarter.

Alibaba Group Holdings Ltd. (BABA), the Chinese e-commerce and cloud computing giant, could report only a modest increase in revenue in the last three months of the year amid concern about China’s economy even as the country emerged from strict COVID lockdowns.

Alibaba is likely to say net income for the quarter ended in December rose 63% to 33.6 billion yuan ($4.9 billion), for adjusted earnings of 16.55 yuan ($2.41), down from 16.87 yuan the year prior, according to estimates compiled by Visible Alpha. The company’s revenue probably climbed 1.8%, its slowest pace of growth ever, to 246.9 billion yuan ($36 billion). Alibaba reports results before the U.S. market opens on Feb. 23.

The weakening global economy and tight regulation weighed on Chinese tech companies in 2022, leading Alibaba to record its first revenue decline in more than a decade in the three months ended in September. Strict COVID-19 restrictions, which ended late in the year, were also a headwind. All of this could cause Alibaba’s core domestic commerce revenue, which accounts for more than two-thirds of the company’s total sales, to shrink for the third consecutive quarter.

Still, cost-control measures, including an almost 33% reduction in operating expenses, could help improve gross margin.

The Chinese government eased some tech regulations late in the year by issuing more video game licenses and opening additional fundraising opportunities. Hurst Lin of Chinese venture capital firm DCM China said the regulatory environment seems “encouraging rather than discouraging” of private sector tech firms. Guo Shuqing, China’s top bank regulator, said in January that the government had ended its crackdown on big tech firms.

Like other tech companies worldwide, Alibaba faces increasing pressure to launch its own AI-based service in response to OpenAI’s ChatGPT, which has dominated news sector-wide since its release several months ago. Alibaba has announced plans to introduce its own chatbot but has yet to provide specifics regarding a launch or timeline.

Alibaba shares have fallen this month after surging over 75% between October and January as investors warmed up to risk assets and China relaxed COVID-19 restrictions. Shares are down by 19.6% in the last year, compared with an 18% drop for the S&P 500 Consumer Discretionary Index.

Source: TradingView.
Alibaba Key Stats
 Estimate for Q3 FY 2023Actual for Q3 FY 2022Actual for Q3 FY 2021
Adjusted Earnings Per ADS (Yuan)16.5516.8722.03
Revenue (Yuan Billion)246.9242.6221.1

Source: Visible Alpha