Chinese e-commerce giant Alibaba reported a solid quarterly performance on Thursday, attributed to improvements across all of its operations. Notably, its logistics unit Cainiao and digital media arm both achieved profitability for the first time. Total revenue reached RMB 234.16 billion ($32.3 billion), marking a 14% year-on-year increase and a 12.5% rise from the previous quarter.
Why it matters: Alibaba has successfully returned to double-digit growth after a year of relatively stable performance. This achievement comes despite a number of China’s economic indicators suggesting a gloomier overall picture.
- Revenue growth in the June quarter was primarily driven by Taobao and Tmall, Alibaba’s most profitable businesses, with a significant surge in both the volume and value of orders. China’s second-largest online shopping event, the month-long 618 festival, was also included in this period.
Details: The results of the quarter to June mark the conclusion of Daniel Zhang’s leadership, as he prepares to fully focus on leading the company’s cloud business starting in September. The cloud and computer division experienced the slowest revenue growth (of 4%) among Alibaba’s six independent businesses, while the firm’s international commerce division saw the most rapid expansion with a robust growth rate of 41%.
- Zhang, who is also the CEO of Alibaba Cloud, stated that the 4% growth rate was partly influenced by a “revenue decline from a top customer,” during an earnings call. Nevertheless, he said he believes that the opportunity for AI-driven growth has “just begun.” Alibaba is among the first batch of Chinese companies to launch its own large model and ChatGPT-like tool.
- Despite the robust demand for AI cloud services, the supply of GPUs in the Chinese market fell short, according to Zhang. He added that the cloud and computing unit “only partially met” the demand for AI-related services received.
- Alibaba’s overall net profit experienced a significant 51% year-on-year increase between April and June, while the cloud division more than doubled its profits during the same period.
- Cainiao, which has initiated the process of going public, posted a profit for the first time, making RMB 877 million. This comes after the unit recorded a RMB 185 million loss in the same period last year. The logistics arm’s expansion efforts, both internationally and domestically, contributed to quarterly revenues of RMB 23.2 billion, up 34% year-on-year.
- Alibaba’s digital media and entertainment division also posted its first-ever quarterly profit, spurred by a post-pandemic resurgence in offline shows and cinema screenings. Coupled with an increase in subscription revenue from the streaming site Youku, these incomes helped to boost the unit’s balance sheet.
Context: These are the first quarterly results from Alibaba since the Hangzhou-based powerhouse split its business into six divisions in March. Daniel Zhang will step down as CEO and chairman of the group on Sept. 10, to be succeeded by Eddie Wu and Joe Tsai, who will assume the positions of CEO and chairman, respectively.