Alibaba, the Chinese e-commerce giant, struggled to meet both revenue and net income expectations in the June quarter of 2024. The company reported revenue of 243.24 billion Chinese yuan, falling short of the expected 249.05 billion yuan. Similarly, net income came in at 24.27 billion yuan, below the anticipated 26.91 billion yuan. This disappointing performance caused a 3.49% drop in Alibaba’s shares during premarket trading in the U.S.
The decline in net income was primarily attributed to a decrease in income from operations and an increase in impairment related to the company’s investments. Alibaba has been facing challenges in its core e-commerce business, partly due to the cautious behavior of Chinese consumers and the growing competition in the market. The overall revenue increased by only 4% year-on-year, while net income suffered a significant 29% decline compared to the previous year.
Strategic Shift
In response to the setbacks, Alibaba underwent a major corporate restructuring in 2023, followed by significant changes in its management team. Eddie Wu took over as the chief executive in September, aiming to reignite growth and stabilize the company’s operations. One of the key strategies implemented by Wu is to shift the focus towards third-party merchants on Alibaba’s platforms, Taobao and Tmall, in China. This move is intended to reduce the company’s reliance on direct sales and improve the overall performance of its core e-commerce business.
Despite the current challenges, Alibaba remains optimistic about its future prospects. The company plans to introduce new monetization features for its e-commerce platforms, with the goal of returning Taobao and Tmall to growth by the second half of 2025. In the June quarter, sales from the Taobao and Tmall group, representing Alibaba’s China e-commerce business, declined by 1% year-on-year. However, the company’s international e-commerce division, including platforms like Lazada and Aliexpress, witnessed a strong performance with a 32% increase in sales compared to the previous year.
Alibaba’s struggle to meet financial expectations in the June quarter of 2024 highlights the challenges faced by the company in a competitive market environment. With a new leadership team and a strategic shift towards third-party merchants, Alibaba is working towards overcoming these hurdles and returning to a path of growth and profitability.