Why Alibaba Stock Was Sliding Today
Key Points
Alibaba is seeing promising growth in AI with more than 300 million monthly users on its Qwen app.
Its cloud business is growing briskly.
Profits fell in part due to a price war in e-commerce.
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Shares of Alibaba (NYSE: BABA) were moving lower today as the Chinese tech giant reported just modest growth in its December quarter and a sharp decline in profits as it engages in a price war with rivals like JD.com and Meituan in areas like food delivery.
As a result, the stock was down 7.3% as of 11:39 a.m. ET.
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Image source: Alibaba.
Alibaba's profits tumble
Alibaba said revenue in its December quarter rose 2%, or 9% when excluding the impact of businesses it sold, to $40.7 billion.
Management noted that Qwen, its AI chatbot, reached 300 million monthly active users, showing its AI strategy is paying off. Its cloud intelligence group, which contains its AI investments, reported 36% revenue growth to $6.2 billion. However, its e-commerce division was weaker, up 6% to $22.8 billion, and its core e-commerce business lines were flat. Its quick commerce business, which includes food delivery, was a bright spot.
Adjusted earnings before interest, taxes, and amortization (EBITA) were down 57% to $3.35 billion, and adjusted earnings per share fell 67% to $0.13.
What's next for Alibaba
Alibaba doesn't give quarterly guidance, but AI is a clear focus for the company, as CEO Eddie Wu said that the company is targeting more than $100 billion in cloud and AI revenue over the next five years.
The challenges in its e-commerce business, on the other hand, aren't new, as fierce consumption and weak consumer demand have plagued the Chinese e-commerce sector for years now.
After soaring last year, the stock has fallen in recent months on broader AI fatigue and weakness in the e-commerce segment. Today's report shows that the pullback is justified.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.
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