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Alibaba shares drop 5% after revenue miss, $25 billion boost to buyback plan

Alibaba faced a setback on Wednesday as its shares experienced a decline, stemming from the company's failure to meet market revenue expectations for the December quarter.

Alibaba shares drop 5% after revenue miss, $25 billion boost to buyback plan

Despite this, Alibaba unveiled plans to augment its share buyback program by an additional $25 billion, initially sparking a more than 5% surge in its U.S.-listed shares during premarket trading. However, sentiment reversed course, resulting in a more than 5% decrease in closing.

This increase in the buyback program, extending until March 2027, brings the total allocation under the plan to a substantial $35.3 billion. Alibaba's decision to bolster its share repurchase initiative reflects its confidence in the future trajectory of its business and cash flow, as articulated in a statement by the company.

The announcement comes amid a tumultuous period for Alibaba in 2023, marked by significant corporate restructuring efforts and notable changes in management, including the appointment of Eddie Wu as CEO in September.

In its financial report for the December quarter, Alibaba's revenue of 260.35 billion Chinese yuan fell short of expectations, growing by a modest 5% year-over-year. This sluggish growth was attributed to challenges faced by its China e-commerce and cloud computing divisions amidst a persistently weak consumer landscape in the region.

Notably, Alibaba's net income for the December quarter plummeted by 69% year-on-year to 14.4 billion yuan, primarily influenced by mark-to-market adjustments to equity investments and operational impairments related to Youku and Sun Art.

The company's core e-commerce platforms, Taobao and Tmall, recorded a marginal 2% increase in revenue, reflecting subdued consumer spending trends in China. Similarly, Alibaba's cloud computing business witnessed a modest 3% year-on-year revenue growth.

Alibaba's CEO Wu emphasized the strategic imperative of revitalizing growth in e-commerce and cloud computing, outlining plans to intensify investments to enhance user experiences and fortify market leadership.

Despite challenges in its domestic market, Alibaba's international commerce segment exhibited robust growth, with revenue surging by 44% year-on-year, buoyed by platforms like AliExpress and Lazada.

Alibaba's restructuring efforts, initiated last year, aimed at fostering business agility and exploring potential avenues for public offerings and external financing for select business units. However, the anticipated spinoff of its cloud computing division was scrapped, with Chairman Joe Tsai citing unfavorable market conditions.

While Alibaba remains open to exploring separate financing opportunities for its business units, the company emphasizes a cautious approach, prioritizing the realization of synergies within its ecosystem to maximize overall value.