Alibaba, Profit Improvement Expectations Continue... Share Buyback Also Positive

[Asia Economy Reporter Minji Lee] Alibaba recorded stronger-than-expected third-quarter results, raising expectations for a rebound in performance.

On the 20th at the New York Stock Exchange, Alibaba Group Holdings ADR was priced at $80.48. It has risen 22% over the past month, reflecting optimism about improved earnings.

In the third quarter, Alibaba's revenue was 207.1 billion yuan, a 3.2% increase year-over-year, in line with the market expectation of 208.4 billion yuan. EBITDA rose 29% to 36.2 billion yuan during the same period, and net profit increased 12.6% to 34.4 billion yuan, marking a return to growth for the first time since the third quarter of last year.

Within the commerce business, revenue from the China segment was 135.4 billion yuan, down 0.5% compared to the same period last year. Taobao & Tmall transaction volume declined in the single digits, continuing a sluggish trend. CMR (commission revenue) sales fell more sharply by about 7%. Researcher Park Chohwa from Daishin Securities explained, “Consumer sentiment was dampened by COVID-19 restrictions, and partial lockdowns caused logistics disruptions and increased return rates.” Global commerce revenue was 15.7 billion yuan, up 4% year-over-year. Factors such as EU tariffs, weak consumption, and foreign exchange losses contributed to slower growth, along with weak online sales in Southeast Asia after reopening.

Cloud segment revenue grew 4% year-over-year to 20.8 billion yuan. The proportion of revenue from non-internet industries increased by 5 percentage points to 58%, driving growth. Digital media and entertainment revenue was 8.4 billion yuan, a 4% increase compared to a year ago.

With growth in this year’s Singles’ Day GMV (Gross Merchandise Volume) stagnating, the fourth-quarter growth rate is expected to be lower than that of the third quarter. The company mentioned that the transaction amount during the Singles’ Day event was similar to the previous year, with over 600 million participants. Researcher Lee Dong-yeon from Korea Investment & Securities said, “However, these concerns have largely been priced into the stock, and due to a low base this year and recovery in consumer sentiment following the easing of zero-COVID policies, growth rates are expected to return to double digits in 2024.” He added, “Based on the outlook for improved earnings, this is a time when expectations for Alibaba are rising rather than concerns.” The market’s forecast for fourth-quarter revenue is 256.4 billion yuan, with net profit at 46.7 billion yuan.

Alibaba’s proactive approach to shareholder returns is also positive. Of the $25 billion share buyback target, $18 billion had been completed by November 16, and the company announced plans for an additional $15 billion share buyback by 2025. Researcher Lee explained, “Alibaba’s total share buyback amount has expanded to $40 billion by 2025, which corresponds to 39% of Alibaba’s free cash flow,” adding, “There is still room for further expansion of share buybacks.”

However, there are factors to keep in mind. The dual “major listing” plan in the U.S. and Hong Kong, scheduled to be pursued by the end of this year, has been postponed, and the triple challenges of government regulation, U.S.-China tensions, and economic slowdown continue.

This content was produced with the assistance of AI translation services.