Alibaba stock heads for worst day in 11 months after earnings fall short, company cuts forecast

The shares are on track to post their largest single-day percentage decline since Dec. 24, 2020, when shares dropped 13.3%. They are also on pace for their second-worst percentage drop on record.

The company reported fiscal second-quarter net income of RMB5.4 billion ($833 million), or RMB1.97 per American depositary share, down from RMB28.8 billion, or RMB10.48 per ADS, in the year-earlier quarter. On an adjusted basis, Alibaba 9988, -5.34% BABA, -10.79% earned RMB11.20 per ADS, down from RMB17.97 per ADS a year prior and below the FactSet consensus, which called for RMB11.86 per ADS.

“This quarter, Alibaba continued to firmly invest into our three strategic pillars of domestic consumption, globalization, and cloud computing to establish solid foundations for our long-term goal of sustainable growth in the future,” Chief Executive Daniel Zhang said in a release.

Revenue increased to RMB200.7 billion from RMB155.1 billion, while analysts tracked by FactSet had been modeling RMB204.1 billion

Alibaba noted that it saw 1.24 billion annual active customers in the 12 months that ended Sept. 30. That marked a roughly 62 million increase from what the company recognized in the June quarter. Alibaba’s active-customer total consisted of 953 million customers in China and 285 million customers overseas.

The company said that it now expects to grow fiscal 2022 revenue by 20% to 23%. At the beginning of the fiscal year, Alibaba targeted over RMB930 billion in revenue, which would have marked an increase of at least 29.7% from its fiscal 2021 total.

The company disclosed in its earnings report that the outlook reflects its “current view of macroeconomic conditions and the competitive landscape.”

Chief Financial Officer Maggie Wu said in response to a question on the company’s earnings call that “if you look at our guidance and then try to derive the second-half growth,” that would imply “revenue growth at the teens.” She noted that growth in overall gross domestic product and consumption in China has slowed but also said that Alibaba has been diversifying its revenue streams to include greater contributions from areas like cloud computing and international markets.

Alibaba’s cloud business saw revenue increase 33% in the most recent quarter, outpacing the company’s overall 29% revenue growth.

U.S.-listed shares of fellow Chinese e-commerce company JD.com Inc. JD, +4.13% are up 3% in morning trading Thursday after JD.com exceeded expectations with its own results.

Alibaba’s U.S.-listed shares are off 15.3% over the past three months as the S&P 500 SPX, -0.19% has risen 6.7% and as the KraneShares CSI China Internet ETF KWEB, -3.61% has added 6.4%.