Shares in Alibaba were rising Thursday after earnings beat estimates.
AFP via Getty Images
Alibaba was rising Thursday as a slow spring weighed down by a grim macro environment blossomed into a stronger summer, resulting in earnings that beat Wall Street’s expectations.
Alibaba (ticker: BABA) reported a profit of 22 cents a share on sales of $30.7 billion in the three months to the end of June, narrowly topping the consensus forecast among analysts of 20 cents in per-share profit on sales of $30.3 billion.
The stock jumped 4.5% in U.S. premarket trading. The stock had already risen 2% in the premarket before earnings were released amid news that Japanese tech investor SoftBank
(9984.Japan)—which owns 24% of Alibaba—was positioning to sharply reduce its stake in the group.
While the results outpaced expectations, Alibaba’s latest quarterly report was far from rosy. They just weren’t as bad as expected. Remember, the company forecast to report its first quarterly sales decline on record. Instead, investors got revenue that was dead flat year over year, weighed down by a 1% decline in the core Chinese commerce segment.
That’s still a massive drop from one year ago, when Alibaba’s revenue grew at a 34% clip during the June quarter of 2021. So the latest numbers cement the narrative of slowing growth that has dragged on the stock price in the last nine months. The most closely watched profit figure, adjusted earnings before interest, taxes, and amortization, or EBITA, fell 18% year-over-year to $5.1 billion.
More downbeat news lies in the unit of Alibaba focused on cloud computing that analysts see as critical to the future of the company. Cloud revenue grew by 10% annually to $2.6 billion, which is the segment’s slowest pace on record.
Covid-19 lockdowns that racked China this spring, and an associated economic downturn in the world’s second-largest economy, have done little to help Alibaba of late. Shares in the company lost almost 50% of their value in 2021 and are down a further 20% in 2022. The performance is in line with much of the rest of the Chinese tech sector amid a regulatory crackdown in both Beijing and Washington as well as slowing growth in the e-commerce sector.
Nevertheless, signs that trading has improved moving into the summer are, genuinely, good news—so the market isn’t rallying only on a whisper of optimism.
“During the past quarter, we actively adapted to changes in the macro environment and remained focused on our long-term strategy,” Daniel Zhang, the group’s chair and CEO, said in a statement.
“Following a relatively slow April and May, we saw signs of recovery across our businesses in June,” Zhang added. “We are confident in our growth opportunities in the long term given our high-quality consumer base and the resilience of our diversified business model catering to different demands of our customers.”
The company did not provide outlook when it reported its full-year results in May, and the release on Thursday similarly offered no guidance.
Write to Jack Denton at jack.denton@dowjones.com
Source: finance.yahoo.com