Alibaba Group Holding fell short of market expectations for first-quarter revenue on Thursday, as the company's domestic e-commerce sales faced pressure due to cautious consumer spending in China's slowing economy. US-listed shares of Alibaba dropped about four percent in premarket trading. The halting economic recovery in China, along with a persistently weak property market and high job insecurity, has weakened consumer confidence and spending power in the world's second-largest economy, affecting global firms across various sectors. Alibaba is also facing intense competition from rivals such as JD.com and discount-focused retail platforms like PDD Holdings' Pinduoduo and ByteDance-owned Douyin.
Alibaba reported revenue of 243.24 billion yuan ($33.98 billion) for the quarter ended June 30, which was below analysts' average estimate of 249.05 billion yuan, according to LSEG data. Revenue at the firm's domestic e-commerce division declined by one percent, despite an increase in the number of purchasers and their purchase frequency, leading to double-digit order growth. Chinese e-commerce giants have resorted to heavy discounting and promotions to attract shoppers, which is putting pressure on margins across the retail sector, from large players like Alibaba and JD.com to small businesses. In June, sales at China's mid-year e-commerce sales festival dropped for the first time, according to third-party estimates, despite major platforms' efforts to offer deals for an extended period to attract consumers.
Alibaba executives have consistently argued in recent quarters that increased purchasing and the introduction of new tools for merchants will boost advertising and customer management revenue on the platform in the future. In March 2023, Alibaba announced the most significant restructuring in its history, splitting into six units and focusing more on its core businesses, including domestic e-commerce. Supported by the company's investments to expand its global presence and increasing demand worldwide for lower-priced goods from China, Alibaba's international e-commerce unit experienced a 32 percent rise in revenue to 29.3 billion yuan. Revenue from Alibaba's cloud segment grew by six percent to 26.55 billion yuan, accelerating from the three percent growth in the previous quarter, due to increased adoption of public cloud and strong demand for AI-related products. The company has shifted away from low-margin project-based contracts and has stated that scaling up its cloud infrastructure has helped reduce prices across its cloud products. Net income attributable to ordinary shareholders in the quarter was 24.27 billion yuan, compared with 34.33 billion yuan a year earlier.
