Alibaba Group Holding Registers Significant Profit Decline and Disappointing Revenue Growth in October-December Quarter Due to Write-Downs Associated with Sun Art and Youku.
The Chinese E-Commerce Giant Has Recorded a Total of Over $3 Billion in Write-Downs on its Retail Business Sun Art and its Video Platform Youku. Simultaneously, the Company Approved an Increase of Its Share Buyback Program by $25 Billion Through March 2027.
This means that Alibaba will have a total of 35.3 billion US dollars available for buybacks over the next three fiscal years. Chief Financial Officer Toby Xu stressed that this decision underscores the group's confidence in its business model and cash flow.
In the third quarter of the current fiscal year, revenue increased by 5% to the equivalent of 36.67 billion US dollars. Revenues in Alibaba's core business, the digital retail and online trading via the platforms Taobao and Tmall, grew by 2% to 18.18 billion US dollars.
The company did state, however, that while the number of orders had increased significantly, the average order value had decreased. Net profit for shareholders fell by 69% to 2.03 billion US dollars.
Overall, Alibaba recorded depreciation of about 3.25 billion US dollars for the quarter. Adjusted for depreciation, stock-based compensation costs, and other items, profit fell by 4% to 6.75 billion US dollars. Revenue in Alibaba's international digital commerce business increased by 44% to 4.02 billion US dollars.
The company cited strong global demand for products at relatively low prices as the reason. However, the conglomerate's cloud intelligence division reported only a 3% increase in revenue to $3.95 billion. Alibaba is trying to reduce its reliance on low-margin projects.
"Our top priority is to reinvigorate the growth of our core businesses, e-commerce and cloud computing," explained CEO Eddie Wu. "We will increase our investments to enhance the core user experience and thereby promote growth at Taobao and Tmall Group, and to strengthen our market leadership in the coming year."
China's economy grew by 5.2% last year after it had only increased by 3% in 2022. Before the pandemic, growth was 6% or more. The country's economy is suffering from a prolonged downturn in the real estate sector, as well as weak demand for exports and consumer goods since the outbreak of the Covid-19 pandemic at the beginning of 2023.
