TMTPOST -- The American depositary receipts (ADRs) of Alibaba Group shed as much as 4% at midday and settled 2.2% lower at US$88.59 on Friday. Shares hit their lowest close since September 20 after China’s top e-commerce company posted mixed quarterly financial results.

Credit：Alibaba

Alibaba’s top line fell short of Wall Street expectation for a second straight quarter. Revenue for the second quarter of the company’s fiscal year 2025 ended September 30, 2024 recorded RMB236.5 billion (US$32.7 billion), missing analysts’ estimate of RMB239.4 billion. The revenue delivered an increase of 5.2% year-over-year (YoY), accelerating from a 4% YoY increase three months ago.

The bottom line comfortably beat estimates. On Non-GAAP basis, Alibaba earned RMB15.06 diluted earnings per American depositary share (ADS) with a YoY decrease of 4%, still better than analysts' projection of RMB14.93. Non-GAAP adjusted net income dropped 9% YoY to RMB36.52 billion, versus estimated RMB35.62 billion. The non-GAAP adjusted EBITA, excluding share-based compensation expense, impairment of intangible assets and goodwill and certain other items, came in RMB47.33 billion with a 5% YoY decline, topping expected RMB46.89 billion.

Alibaba’s bread and butter Taobao and Tmall Group, which includes two major online marketplaces, brought RMB99.00 billion for the September quarter. That represented a 1% YoY increase, reversing a surprisingly 1% YoY fall from April to June. The adjusted EBITA of the top business segment dropped 5% YoY to RMB 44.6 billion, compared with a 1% YoY decrease. Alibaba said the decline was primarily due to the increase in investment in user experience, partly offset by the increase in revenue from customer management service.

While the quarter ended September is a traditional lull in Chinese consumption between major shopping festivals in June and November, the Chinese government in August rolled out an expansive trade-in policy across multiple sectors, ranging from automobiles and home appliances to real estate, to boost consumption. Alibaba’s e-commerce performance in the quarter echoed the sluggish growth as its domestic rival JD.com showcased earlier this week. JD also missed revenue projection, according to FactSet.

During the September quarter, online gross merchandise value (GMV) of the Taobao and Tmall was supported by double-digit order growth year-over-year, mainly driven by the increase in purchase frequency, partly offset by the decline in average order value, Alibaba said. It underscored a “successful” 11.11 Global Shopping Festival this month, during which Taobao and Tmall achieved robust growth in GMV and a record number of purchasers.

Alibaba’s cloud and international divisions helped offset the drag from e-commerce. As a bright spot for the September quarter, Cloud Intelligence Group, generated RMB29.61 billion. The revenue growth accelerated to 7%, compared from a YoY 6% increase three months earlier. That suggested the unit began to claw back market share lost to domestic competitors. The adjusted EBITA jumped 89% YoY to RMB26.61 billion, slowing from a 155% YoY surge for the June quarter.

Alibaba said the cloud revenue was buoyed by double-digit public cloud growth, including increasing adoption of AI-related products. AI-related product revenue grew at triple-digit YoY for the fifth consecutive quarter, Alibaba noted. The Hangzhou-based company vowed to continue investment in anticipation of customer growth and in technology, particularly in AI infrastructure, to capture the increasing trend of cloud adoption for AI and to maintain our market leadership.

Alibaba hauled in RMB31.67 billion from its international division, which encompasses Lazada and the Temu-like AliExpress. Revenue from Alibaba International Digital Commerce Group (ADIC) rose 29% YoY following a 32% rise in the previous quarter. ADIC has become the second biggest segment by sales since it overtook the cloud business in the quarter ended last December. It remained a double-digit growth as the fastest-growing business segment. But the adjusted EBITA swung to a loss of RMB2.905 billion, widening 657% from a year ago.

Alibaba said revenue from ADIC was mainly supported by the increase in revenue from AliExpress’ Choice and Trendyol. The increase in investments in AliExpress and Trendyol’s cross-border businesses remained the biggest drag for EBITA,  partially offest by Lazada’s significant reduction in operation loss from improvements in its monetization and operating efficiency.

“This quarter we continued to invest in the user experience and strengthen product offerings to serve our consumers. We entered into long-term collaborations with industry peers to broaden payment and logistics services on Taobao and Tmall platforms, which we expect will accelerate our overall growth. Growth in our Cloud business accelerated from prior quarters, with revenues from public cloud products growing in doubledigits and AI-related product revenue delivering triple-digit growth,” said Alibaba CEO Eddie Wu at a statement Friday.