Ali Baba rose on Thursday as a sluggish spring weighed down by a gloomy macro environment turned into a stronger summer, leading to earnings that beat Wall Street expectations.
(ticker: BABA ) reported earnings of 22 cents per share on sales of $30.7 billion in the three months to the end of June, narrowly beating the consensus estimate among analysts of earnings of 20 cents per share on sales of $30.3 billion.
Shares jumped 4.5 percent in premarket U.S. trading. Shares were already up 2% in premarket trading before earnings were released amid news that the Japanese technology investor
(9984.Japan) – which owns 24% of Alibaba – is positioned to sharply reduces its share in the group.
Although the results beat expectations, Alibaba’s latest quarterly report was far from rosy. They just weren’t as bad as expected. Recall that the company is forecast to report its first quarterly sales decline on record. Instead, investors got earnings that were flat for the year, weighed down by a 1% decline in the core Chinese trade segment.
That’s still a huge drop from a year ago, when Alibaba’s revenue grew 34% in the June 2021 quarter. So the latest numbers cement the slowdown narrative which has been dragging down the share price for the past nine months. The most closely related profit figure, adjusted earnings before interest, taxes and depreciation, or EBITA, fell 18% year over year to $5.1 billion.
Less favorable news lies in Alibaba’s cloud-focused division, which analysts see as crucial to the future of the company. Cloud revenue grew 10% annually to $2.6 billion, the segment’s slowest pace on record.
The Covid-19 lockdown that rocked China this spring and the associated economic downturn in the world’s second-largest economy haven’t helped Alibaba much lately. Shares in the company have lost nearly 50% of their value in 2021 and are down another 20% in 2022. The performance is in line with much of the rest of China’s tech sector amid regulatory crackdowns both in Beijing and Washington slowing growth in the e-commerce sector.
However, signs that trading has improved as the summer approaches are really good news – so the market isn’t just recovering from whispers of optimism.
“During the last quarter, we actively adapted to changes in the macro environment and remained focused on our long-term strategy,” Daniel Zhang, Group Chairman and CEO, it said in a statement.
“After a relatively slow April and May, we saw signs of recovery in our businesses in June,” Zhang added. “We are confident in our long-term growth opportunities given our high-quality customer base and the sustainability of our diversified business model that meets the diverse demands of our customers.”
The company did not provide an outlook when it reported its full-year results in May, and Thursday’s announcement similarly offered no guidance.
Write to Jack Denton at [email protected]