Alibaba's Quarterly Results: Weathering Economic Slowdown

When Alibaba reports its quarterly results on Thursday, investors will be closely monitoring its ability to withstand a slowdown in the world’s second-largest economy. This scrutiny comes after peer company JD.com surprised everyone with strong earnings the day before.

Analyst Expectations

According to analysts tracked by FactSet, the consensus estimate for Alibaba (ticker: BABA) is earnings of 15.28 yuan ($2.11) per share from revenue of 224.5 billion yuan ($31 billion) for the three months ending in September. If these results are in line with expectations, it would signify a profit growth of 18% compared to the previous year, with revenue up 8% from 2022 levels.

Encouraging Context for Alibaba

Considering the current context, this would be a noteworthy achievement for Alibaba. The company's growth in the e-commerce and cloud-computing sectors has slowed due to China's economic weakness. However, Alibaba managed to deliver better-than-expected results in the first quarter by focusing on efficiency improvements and cost-cutting.

Investors are optimistic and hoping for a similar outcome in the September quarter. This sentiment has been bolstered by JD.com's impressive performance, surpassing Wall Street's expectations for both earnings and revenue. Consequently, Alibaba's American depositary receipts experienced a 3.8% increase in U.S. trading on Wednesday, while JD.com's ADRs recorded a 7% gain.

JD.com and Alibaba: A Focus on Results

JD.com, one of China's leading e-commerce companies, has attributed its strong results to its focus on operating efficiency and attracting consumers with lower prices. This strategy has proven effective in the current economic climate, where consumer spending has been impacted, posing a threat to the e-commerce sector. In light of these achievements, investors will undoubtedly be keen to see if Alibaba, another major player in the industry, has also adopted a similar approach.

While Alibaba's core e-commerce business will be closely scrutinized, attention will also be directed towards its cloud-computing arm. This division serves as the launchpad for Alibaba's initiatives in artificial intelligence and is poised to be spun off to shareholders as part of a broader corporate restructuring plan announced earlier this year.

Alibaba intends to undergo transformation, transitioning from a conglomerate into a holding company in order to enhance shareholder value. While progress in this regard has been limited due to China's economic slowdown adversely impacting capital markets, Alibaba did indicate in September that it had submitted an application to spin off its Cainiao logistics arm. This upcoming update on the restructuring efforts will surely attract significant attention.

In terms of stock performance, Alibaba's shares have experienced a modest decline of 1.2% in 2023, while the Nasdaq Golden Dragon China Index has witnessed a larger drop of 3.5%. Conversely, JD.com's stock has plummeted by 49%.

Overall, both JD.com and Alibaba are highly anticipating the release of their respective results. As investors eagerly await further information, it remains to be seen how these companies will navigate the challenges posed by the current economic landscape.