Alibaba Group Holding Ltd. has announced a $25 billion expansion to its stock repurchase program as the company reported lower-than-expected revenue for the December quarter. The disappointing sales figures reflect the growing competition from rivals such as PDD Holdings Inc., which is eroding Alibaba’s dominance in the Chinese market.
Alibaba’s sales for the quarter rose by 5% to 260.3 billion yuan ($36.2 billion), slightly below analysts’ estimates. Net income also saw a sharp decline, reaching 14.4 billion yuan in the same period. In response to the results, Alibaba’s board has approved the new share buybacks, which has helped alleviate concerns about the company’s performance. The stock price surged by more than 5% in pre-market trading in New York.
The online shopping pioneer has been facing challenges from new rivals like PDD and ByteDance Ltd. as it strives to maintain its position as a leader in the Chinese tech industry. In an effort to revive growth, Alibaba is undergoing a restructuring process that involves dividing the company into separate units for its major business lines, including cloud computing and logistics.
Alibaba’s Chief Executive Officer Eddie Wu and Chairman Joseph Tsai, both long-standing confidantes of co-founder Jack Ma, are leading the company through this complicated multi-way split. The objective is to counter the competition from upstarts like ByteDance’s Douyin and PDD, while also establishing Alibaba as a major player in artificial intelligence and cloud computing.
To achieve these goals, Alibaba is focusing on streamlining its operations and making strategic moves. Wu is promoting a younger generation of executives to revitalize the core Taobao and Tmall platforms while exploring options to divest non-core assets and scale back on previous expansion plans. Additionally, Alibaba must find ways to compete with Douyin, which outperformed Alibaba during last year’s Singles’ Day shopping festival.
According to analysts, the competition in the market is likely to continue to center around building market share through low prices. Alibaba is also looking to strengthen its presence in overseas markets, with units like Lazada and Aliexpress driving its global e-commerce operations.
While Alibaba has listed AI as one of its long-term priorities, its initial efforts in this field have faced challenges. The company recently canceled the spinoff and IPO of its $11 billion cloud arm due to US restrictions on access to essential AI accelerator chips. It remains uncertain how Alibaba plans to rejuvenate its cloud business, which has experienced a decline in market share compared to state-owned players.
The disappointing sales figures and ongoing restructuring process pose uncertainties for Alibaba’s future growth. However, the approval of the $25 billion stock repurchase program suggests that the company is taking proactive steps to address these challenges and regain its competitive edge.
