The Yahoo Finance Live team discusses Alibaba's latest earnings report.
- Today, I'm watching Alibaba. Its profits surge 69%, mainly because the e-commerce giant could keep costs down. Last year, it reduced its staff by more than 4,000. CEO, Daniel Zhang, saying that it was a solid quarter, despite softer demand. Cloud computing revenue, normally its fastest-growing division, ticked up just 3%. Its Chinese e-commerce business down 1% in the quarter.
Now, Baba is an important company to look at because it really is a barometer when it comes to the consumer demand in China. And Zhang said that even though there's been weakness in 2023, he does see momentum in consumption as China continues to recover from the pandemic.
It's also important to note that Alibaba competes with jd.com and Pinduoduo. And a recent report signals jd.com is going to launch a subsidy plan. Now Zhang pretty much shrugged that off during the earnings call, saying you can't do a turnaround on subsidies. You need innovation. He also said Alibaba will focus on profitability and long term growth. And the Street liked that. The Street likes to hear profitability. You're not going to spend a ton of money.
- Well, especially for e-commerce platforms where even when we think about Amazon, even as we think about the number of SKUs that make their way onto some of these sites, it's the profitability that becomes a little bit harder to operate. So what do they do? They dovetail out into some of the other businesses, like cloud services.
Alibaba, no different there. Also fintech where they can get some of that incremental pay on the pay per transaction as well. And so the profitability can come. It's just a matter of where they're drumming up even more demand, either on some of those fintech plays that they've been known to make in the past with Alipay, and then additionally what they can do in terms of drumming up even more demand on the cloud services front, and moving more of those solutions out the door to be paid for.
- And they certainly said that cloud will continue to be a core business, and will benefit from AI.