In its latest financial report following a change in leadership at the helm of the Chinese e-commerce giant in September, Alibaba Group Holding revealed its decision not to pursue a complete spin-off of its cloud computing division, which recorded a 9% increase in revenue in the third quarter.
Citing uncertainties stemming from recent expanded US import restrictions on advanced technology chips, the Hangzhou-based company expressed reservations about the potential shareholder value benefits of a full spin-off of the Cloud Intelligence Group.
As part of its significant restructuring efforts to reorganize its business empire into six primary units alongside smaller ventures, Alibaba disclosed a temporary halt to Freshippo’s listing plans to evaluate market conditions and other factors impacting shareholder value enhancement.
Furthermore, the company announced the distribution of its inaugural quarterly dividend totaling approximately US$2.5 billion.
In a surprising development coinciding with Daniel Zhang’s departure, Alibaba appointed co-founder Joe Tsai as president.
Alibaba reported quarterly profits of 224.79 billion yuan (US$38.8 billion), surpassing the consensus estimate of 224.1 billion yuan. Despite experiencing growth across all business sectors following the post-COVID-19 economic downturn, the pace of expansion was slower than the 14% recorded in the previous quarter.
Gross revenue for the three months ending on September 30 stood at 27.7 billion yuan, falling short of analysts’ expectations of 30.7 billion yuan, as per a Bloomberg poll.
According to filings with the US Securities and Exchange Commission released on Wednesday, JC Properties and JSP Investment, the family trusts of Alibaba founder Jack Ma, plan to sell shares worth a total of US$870 million on November 21.
Prior to the share sale, Alibaba’s stock closed down 2.22% on Thursday in Hong Kong at HK$81.35.
The Singles Day shopping extravaganza, prominently promoted by Alibaba, is showcased at a Beijing bus stop. Reuters image
During a conference call with analysts on Thursday, Alibaba CEO Eddie Wu Yongming assured that the company’s cloud business would maintain operational independence under its CEO’s leadership while benefiting from long-term support from Alibaba.
Wu also outlined the group’s expansion strategy and the evolution of its core business units, including initiatives to establish the “most comprehensive cloud in the AI era” and to transform Taobao, its online retail platform, into “universal consumer apps” within the next three years.
In the September quarter, revenue from the Cloud Intelligence Group, a key growth driver for the company, rose by 2% to 27.6 billion yuan, compared to a 4% increase in the previous quarter.
Revenue from Alibaba’s primary e-commerce entities, Taobao and Tmall Group, increased by 4% year-on-year, while international commerce sales surged by 53%.
The Cainiao logistics division witnessed a 25% year-over-year revenue growth, primarily attributed to cross-border fulfillment solutions.
Amid escalating political tensions between the US and China, Alibaba opted to cancel the complete spin-off of Alibaba Cloud. Image: Bloomberg
Following the appointments of Joe Tsai and Wu as chairman and CEO, respectively, succeeding Daniel Zhang Yong in September, this revenue report marked Alibaba’s first under the new leadership, which also oversees the South China Morning Post.
The leadership transition was part of a broader restructuring initiative announced by the e-commerce giant in March, aiming to segment its extensive operations into six units, each potentially exploring charitable opportunities through IPOs.
In a September internal memo, Wu emphasized Alibaba’s increased focus on artificial intelligence (AI) and customer-centric approaches. Amidst fierce competition among Chinese tech firms in the realm of relational AI applications, Alibaba intensified its investments in software and the advancement of its large-scale language model, Tongyi Qianwen, introduced by the cloud unit in April.
Alibaba’s CEO is committed to transforming the company into an “open technology system” with a strong emphasis on AI.
Recent retail sales data indicates an improvement in the consumer market, with retail sales rising by 7.6% year-on-year in October, exceeding market projections due to robust spending during the extended “golden week” holiday.
Mainland China witnessed a 5.5% increase in retail sales in the third quarter, up from 4.6% in August.
Alibaba and JD.com reported positive year-on-year growth in sales and transaction volume during the recent Singles Day event, the world’s largest online shopping extravaganza, to conclude this year’s festivities, although specific sales figures were not disclosed.
