Alibaba Earnings Preview: Slowing E-commerce Growth and Potential Profit Decline

Insights — On November 15, Alibaba (BABA) will report its fiscal Q2 2025 earnings for the period ending September 30, 2024.

The market expects Alibaba to post quarterly revenue of $34.11 billion (approximately RMB 245 billion), representing a year-over-year increase of 10.8%. Non-GAAP EPS are projected to be $2.11, down 1.4% year-over-year.

Year-to-date, Alibaba's stock has risen 23%, peaking at $117.8 in October before pulling back. Investors are keen to see if this earnings report can trigger a stock rebound.

Earnings Focus: Core E-commerce, Cloud Business, and Outlook

Last quarter, Alibaba's core business saw steady growth, with Taotian Group reporting increases in both gross merchandise volume (GMV) and order numbers, while its cloud business returned to growth.

Morgan Stanley forecasts Alibaba’s GMV to grow 4-5% year-over-year this quarter, lagging behind its peers, with customer management revenue (CMR) expected to grow 2-3%.

Breaking down by segment, Taotian Group is expected to post revenue of RMB 98.685 billion (compared to RMB 113.373 billion last quarter), reflecting a year-over-year increase of 1.1%. Meanwhile, Alibaba's Cloud Intelligence Group is projected to report revenue of RMB 29.86 billion (compared to RMB 26.549 billion last quarter), up 8% year-over-year. 

Jefferies expects Alibaba's year-over-year GMV growth to narrow this fiscal quarter, with the same anticipated for CMR. Additionally, Alibaba's International Digital Commerce Group is expected to improve in efficiency, while strong AI demand will likely benefit its cloud business. Jefferies maintains a "Buy" rating on Alibaba, with a price target of $142.

Analysts point out that, in addition to monitoring core e-commerce and cloud business performance, investors should pay attention to Alibaba’s forward guidance and updates on its share buyback program.

What’s Next for Alibaba Stock?

According to TipRanks data, in the past 12 quarters, Alibaba's stock has a 58% chance of declining on earnings release day.

Source: TipRanks; Alibaba Stock Price Performance on Earnings Day

Alibaba reported strong GMV growth during the "Singles’ Day" shopping festival. However, they anticipate that core adjusted EBITDA for Q3 will be under pressure, with a 5% year-over-year decline.

While Alibaba faces challenges ahead, its outlook remains positive. According to TipRanks, 18 Wall Street analysts have set an average price target of $124.40 for Alibaba, indicating a potential 35.5% upside from its current share price.