Alibaba initiates $25 billion share buyback after revenue upset market but fails to impress investors

Alibaba has announced a $25 billion share buyback program after it failed to meet market expectations for revenue in the December quarter. To hold the stock free fall that dropped 5% after the e-commerce company announced its earnings report company's aiming to instill confidence in its business outlook and cash flow with the buyback offer. The expanded repurchase program, now totaling $35.3 billion, is set to run through the end of March 2027.

U.S.-listed shares in the Chinese e-commerce giant were at one point more than 5% higher in pre-market trade, but reversed course. The company said in a statement that the increased buyback shows the “confidence in the outlook of our business and cash flow.”

Alibaba had a tough 2023, when the company carried out its largest-ever corporate structure overhaul. It decided to it will split its company into six business groups, each with the ability to raise outside funding and go public. It also separately implemented several high-profile management changes, with company veteran Eddie Wu taking over the reins as chief executive in September.

Alibaba earnings report from fiscal third quarter

Alibaba's financial results for the December quarter revealed a revenue of 260.35 billion Chinese yuan ($36.6 billion), slightly below the expected 262.07 billion yuan. The 5% year-over-year growth in revenue reflected a slowdown compared to previous quarters, with China's e-commerce business and cloud computing division experiencing sluggish growth.

The December quarter also saw Alibaba's net income drop by 69% year on year to 14.4 billion yuan, attributed to mark-to-market changes in equity investments and reduced income from operations. It's being primarily related to impairments in its video streaming service Youku and supermarket chain Sun Art.

Alibaba facing tough times due to challenging macroeconomic environment

The challenging macroeconomic environment in China, coupled with consumer weakness, has posed difficulties for Alibaba. The Taobao and Tmall e-commerce platforms, major revenue sources, recorded a modest 2% year-on-year growth, reaching 129.1 billion yuan. Alibaba's cloud computing business, crucial for future growth, saw a 3% year-on-year rise in sales, totaling 28.1 billion yuan.

Despite the hurdles, Alibaba's international commerce business, encompassing platforms like AliExpress and Lazada, emerged as a bright spot, posting a revenue of 28.5 billion yuan, a 44% year-on-year increase.

The company's CEO, Eddie Wu, highlighted a focus on growth in e-commerce and cloud, expressing a commitment to improving user experiences and reinforcing market leadership in the coming year. While Alibaba remains open to exploring separate financing for its business units, it is not in a hurry to proceed, considering the current market conditions.

Alibaba's recent corporate restructuring and the unexpected departure of key figures like Daniel Zhang have added to the challenges the company faces. The emphasis on generating synergies within Alibaba's business units is seen as a strategy to reflect the overall value of the group, with plans for potential spinoffs and outside financing subject to market conditions and careful timing considerations.

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