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Alibaba, the Chinese giant, faced a significant setback in the fiscal fourth quarter as its net profit plummeted, causing a drop in its shares. The company reported revenue of 221.9 billion yuan, slightly surpassing LSEG consensus estimates of 219.66 billion yuan. However, the net income attributable to ordinary shareholders saw a drastic decline of 86% year-on-year, amounting to 3.3 billion yuan. This disappointing performance led to a 5% decrease in Alibaba’s shares in premarket trading in the U.S.

In 2023, Alibaba underwent its largest-ever corporate structure overhaul, which was followed by a series of high-profile management changes. Eddie Wu, a company veteran, took over as the chief executive in September, signaling a new era for the tech giant. Moreover, in an effort to instill confidence in shareholders, Alibaba announced an increase in its share buyback program by $25 billion until March 2027.

Alibaba has been facing challenges in the Chinese market, particularly due to cautious consumer spending. Despite this, the company witnessed a slight recovery in its core e-commerce business during the March quarter. The revenue from the Taobao and Tmall division, which represents Alibaba’s China e-commerce business, grew by 4% year-on-year to 93.2 billion yuan, outpacing the 2% growth in the previous quarter. Additionally, customer management revenue increased by 5% year-on-year, after remaining flat in the previous quarter.

Amid a domestic slowdown and increasing competition in China, Alibaba has been focusing on expanding its international reach. The company’s international commerce business recorded a significant revenue increase of 45% year-on-year, totaling 27.4 billion yuan. CEO Eddie Wu has pledged to reignite growth by making further investments in the e-commerce firm, a strategy that already showed promising signs in the March quarter.

One of the key areas of concern for investors is Alibaba’s cloud computing division, which has been struggling to achieve growth. Despite plans to spin off the cloud unit, the company abandoned the idea of an initial public offering last year. The cloud computing unit reported a mere 3% year-on-year revenue growth of 25.6 billion yuan, mirroring the growth rate from the previous quarter. Alibaba aims to mitigate the impact of low-margin project-based contracts by focusing on AI-related products and public cloud services for enterprise customers.

Alibaba remains optimistic about its future prospects, with CEO Eddie Wu emphasizing the effectiveness of the company’s strategies and its return to growth. The recent profit decline, attributed to losses from investments in publicly-traded companies, casts a shadow on the overall earnings. However, Alibaba’s focus on AI-related revenue, which experienced triple-digit growth year-over-year in various sectors, provides a glimmer of hope for sustained growth and profitability in the long run.

Overall, Alibaba’s recent performance highlights a mix of challenges and opportunities in the ever-evolving Chinese tech market, underscoring the need for strategic foresight and adaptability to navigate turbulent times and emerge stronger in the competitive landscape.

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