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Alibaba (NYSE: BABA) reported a mixed financial performance for its second quarter, beating revenue expectations but grappling with sharp declines in profitability. The Chinese tech giant posted total revenue of RMB 247.8 billion (≈ US $34.81 billion), marking a 3.3% year-over-year increase. While this modest growth surpassed analyst forecasts, it masks a deeper story of strategic transformation and margin compression.
Adjusted Growth Signals Strength Beneath the Surface
Excluding the impact of divested assets such as Sun Art Retail Group and Intime Retail, Alibaba’s underlying revenue growth would have reached approximately 15%, underscoring the resilience of its core operations. This adjusted figure reflects the company’s ability to maintain momentum despite macroeconomic headwinds and a cooling consumer environment in China.
Profitability Under Pressure
Despite the top-line beat, Alibaba’s bottom line took a hit. GAAP net income plunged 53% to RMB 20.6 billion, while adjusted EBITDA dropped 78%, largely due to aggressive investments in Quick Commerce, which saw revenue surge 60% year-over-year. Operating cash flow also declined sharply to RMB 10.1 billion, down RMB 21.3 billion from the previous year, signaling elevated spending on infrastructure and innovation.
Earnings per share disappointed: Non-GAAP diluted EPS fell to $0.61, missing estimates by $0.20, and marking a 71% year-over-year decline. The steep drop reflects rising costs and thinner margins across several business units.
Cloud Intelligence: A Bright Spot
Alibaba’s Cloud Intelligence Group emerged as the standout performer. The segment generated RMB 39.8 billion (≈ US $5.6 billion) in revenue, up 34% year-over-year. Notably, external customer revenue rose 29%, even after excluding internal workloads, signaling a robust recovery and growing demand for Alibaba’s cloud services. This performance positions the cloud division as a potential stabilizer for future earnings.
E-Commerce Resilience Amid Consumer Softness
The China e-commerce segment delivered RMB 132.6 billion in revenue, a 16% increase year-over-year, driven by strong performance in online marketplaces, logistics, and digital engagement platforms. However, the “All Other” segment, which includes divested units, declined 25%, reflecting the impact of Alibaba’s ongoing portfolio reshaping.
Market Sentiment: Bearish But Watchful
Despite the revenue beat, market sentiment remains cautious. A bearish chart from Investing.com reflects investor unease over Alibaba’s shrinking margins and missed profit targets. The company’s strategic pivot toward cloud computing and AI-driven services is promising, but investors are watching closely to see if these bets will pay off in the second half of the fiscal year.
Outlook: At Crossroads
Alibaba stands at a strategic crossroads. The challenge ahead lies in balancing growth with profitability, especially as it doubles down on cloud infrastructure, AI innovation, and quick commerce expansion. With core segments showing resilience and cloud services gaining traction, the company is positioning itself for long-term digital dominance, even as short-term margin pressures persist.
This quarter’s results paint a picture of a company in transition—leaning into its ecosystem strengths while recalibrating for a future shaped by technology, data, and platform-driven commerce.
