Alibaba Group Holding, the Chinese e-commerce giant, reported a significant decline in profit for the fourth quarter due to its equity investments, which caused its stock price to plummet in New York. The company’s net income for the quarter ending in March was 3.3 billion yuan ($453 million), down 86% compared to the same period last year, falling short of analyst expectations. This decrease was primarily attributed to a decrease in the market value of Alibaba’s equity investments. However, the company’s revenue exceeded estimates, increasing by 7% to 221.8 billion yuan ($30.73 billion), as Alibaba refocused its efforts on growing its e-commerce business amidst stiff competition from rivals like Pinduoduo and Douyin, as well as a slowing Chinese economy. Alibaba’s CEO, Eddie Wu, expressed confidence in the company’s strategies, stating that the results indicate a return to growth. Revenue for Alibaba’s e-commerce platforms Taobao and Tmall grew by 4% compared to the same period last year, while its cloud unit saw double-digit revenue growth, with triple-digit growth in artificial intelligence-related revenue from external customers. Additionally, Alibaba announced its intention to convert its secondary listing in Hong Kong to a primary listing by the end of August. Following the release of these results, the company’s shares in New York fell by over 7%.
Since reaching its peak in October 2020, Alibaba’s stock price has experienced a staggering decline of over 70%. This drop can be attributed to a combination of factors, including a regulatory crackdown in the technology industry and increased competition in the e-commerce sector, which have both undermined investor confidence in the Hangzhou-based e-commerce giant.
In an effort to enhance shareholder value, Alibaba underwent a significant restructuring last year, dividing its operations into six separate units. The goal was for each unit to have the autonomy to raise its own capital and eventually go public.
However, Alibaba faced obstacles in executing its plan to take its logistics arm and cloud business public. The company cited challenging conditions in the initial public offering (IPO) market as the reason for scrapping these particular IPOs.