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Alibaba Misses Revenue Estimate, Approves Cloud Unit Spinoff

Alibaba shifts its focus to the estimated 930 million shoppers in lower tier cities in an effort to amp up growth.
China’s Alibaba Group Holding Ltd posted a 2 percent rise in quarterly revenue. (Shutterstock)

China’s Alibaba Group Holding Ltd posted a 2 percent rise in quarterly revenue that missed expectations on Thursday and said it would list its cloud computing business in the next year.

The company has been struggling to attract new users as China’s e-commerce sector matures and it grapples with inroads made by new competitors such as PDD Holdings and Douyin, the Chinese version of TikTok that is also owned by ByteDance.

US-listed shares of the Chinese tech giant fell 4.9 percent to $86.20 in early trading.

Earlier this year, Alibaba announced plans to restructure into six units following a two-year regulatory crackdown on China’s tech sector. It expects all of the units except for its China-facing e-commerce division to seek outside funding and go public.

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On Thursday, it approved a full spinoff of the Cloud Intelligence Group via a stock dividend distribution to shareholders, aiming to complete the public listing within the next 12 months.

Finance chief Toby Xu said Alibaba’s board has also approved the process to start external financing for Alibaba International Digital Commerce Business Group. Freshippo, its grocery arm, will kick off the IPO process and logistics unit Cainiao will explore an IPO in the next 12-18 months, he added.

“We would love nothing more than to see one of these little Alibabas ... becoming another big Alibaba, as big as the group company is right now,” said Alibaba Group chairman Daniel Zhang on an earnings call.

Chinese consumer spending has gained some momentum since the country abandoned draconian zero-Covid policies late last year, but it still remains relatively muted amid a wobbly economic recovery.

Alibaba logged revenue of 208.20 billion yuan ($30.12 billion) for the three months ended in March, compared with a Refinitiv consensus estimate of 210.3 billion yuan. Full-year revenue climbed 2 percent to 868.69 billion yuan, the slowest rate of growth since the company went public in 2014.

Net income attributable to ordinary shareholders was 23.52 billion yuan for the quarter, reversing a year-earlier loss of 16.24 billion yuan.

Amid soft corporate demand and excess capacity, both Alibaba and rival Tencent Holdings Ltd have recently announced drastic price cuts for their cloud computing services, plunging the sector into a price war.

Revenue for Alibaba’s cloud division in the recent quarter was 18.6 billion yuan, down 2 percent year-on-year.

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Last month Alibaba showed off Tongyi Qianwen, a generative artificial intelligence model which is similar to the model that powers OpenAI’s ChatGPT. The company has opened up registration to test the technology to enterprise customers of Alibaba Cloud.

A number of other Chinese companies, including search giant Baidu have released similar AI models.

By Chavi Mehta and Josh Horwitz; Editors Edwina Gibbs, Devika Syamnath and Kirsten Donovan

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