Alibaba (NYSE:BABA) broke higher in early trading despite posting second quarter results below the expectations of analysts.
Revenue was up 2% year-over-year to RMB247,652 million ($34.6 billion), which was below the consensus expectation. Excluding revenue from the disposed businesses of Sun Art and Intime, revenue on a like-for-like basis would have grown by 10% year-over-year.
Customer management revenue grew 10% and revenue from Cloud Intelligence Group grew 26%, with AI-related product revenue achieving triple-digit growth for the eighth consecutive quarter. Local e-commerce growth was weak during the quarter amid intense competition and deflationary pressures in China, with rivals like PDD (PDD) and JD.com (JD) aggressively cutting prices again.
Operating income dropped 3%, and non-GAAP net income declined by 18% year-over-year, weighed down by investments in new rapid commerce and AI initiatives.
“Our decisive investment in the quick commerce business achieved key milestones as we won consumer mindshare. We generated substantial synergies from combining resources of our consumer platforms which resulted in new highs in monthly active consumers and daily order volume,” stated CEO Eddie Wu. “Driven by robust AI demand, Cloud Intelligence Group experienced accelerated revenue growth, and AI-related product revenue is now a significant portion of revenue from external customers,” he added.
On Seeking Alpha, Danil Sereda, Investing Group Leader for Beyond the Wall Investing, said that once Alibaba’s (NYSE:BABA) one-offs that negatively impacted sales/earnings in the past quarters are gone, the company’s growth should accelerate. Sereda remained bullish on the e-commerce stock.
Shares of Alibaba (BABA) were up 3.7% in premarket trading on Friday.