Alibaba Group Holding Ltd, the Chinese e-commerce giant, reported a disappointing 2% increase in quarterly revenue on Thursday. This growth fell short of expectations and highlighted the challenges the company is facing in attracting new users in China’s maturing e-commerce market. In addition, Alibaba is also facing competition from emerging rivals such as PDD Holdings and Douyin, the Chinese version of TikTok.

Following the earnings announcement, shares of Alibaba on the US stock market dropped by 4.9% to $86.20 in early trading. These challenges, along with increased scrutiny from regulators, prompted Alibaba to announce its plans earlier this year to restructure into six units.

While the majority of these units are expected to seek external funding and go public, Alibaba has approved the spinoff of its Cloud Intelligence Group through a stock dividend distribution to shareholders. The goal is to complete the listing within the next 12 months. Additionally, Alibaba’s finance chief, Toby Xu, revealed that the board has approved the process for external financing for Alibaba International Digital Commerce Business Group.

Alibaba’s grocery arm, Freshippo, will also begin the initial public offering (IPO) process, and its logistics unit, Cainiao, intends to explore an IPO within the next 12-18 months. The chairman of Alibaba Group, Daniel Zhang, expressed his ambition to see these units grow and become as successful as the group company itself.

While Chinese consumer spending has been gradually recovering since the easing of COVID-19 restrictions, it still remains relatively subdued, affecting Alibaba’s revenue. For the three months ending in March, the company reported revenue of 208.20 billion yuan ($30.12 billion), slightly lower than the Refinitiv consensus estimate of 210.3 billion yuan. Furthermore, Alibaba’s full-year revenue only increased by 2% to 868.69 billion yuan, marking its slowest growth rate since going public in 2014.

However, there was positive news related to Alibaba’s net income, which amounted to 23.52 billion yuan for the quarter. This represents a significant turnaround from the loss of 16.24 billion yuan reported in the same period last year.

Alibaba’s main competitor, Tencent Holdings Ltd, has also engaged in a price war within the cloud computing sector by implementing drastic price cuts for its services. As a result, Alibaba’s cloud division recorded a 2% decrease in revenue to 18.6 billion yuan for the recent quarter, compared to the same period last year.

In addition to its financial performance, Alibaba has been focusing on innovation. Last month, the company introduced its generative artificial intelligence model called Tongyi Qianwen, which is similar to OpenAI’s ChatGPT. Alibaba made this model available for testing to its enterprise customers on Alibaba Cloud. Other Chinese companies, including Baidu, have also released similar AI models.

Although Alibaba faces challenges in revenue growth and fierce competition, the company continues to innovate and explore opportunities for its business units. Its strategy moving forward includes spinning off its cloud computing business, seeking external financing, and exploring IPOs for other divisions. The upcoming year will be critical for Alibaba as it strives to position itself for sustained success in China’s rapidly evolving market.

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1. Alibaba reports disappointing Q4 earnings
2. Alibaba reports slower annual revenue growth