- Alibaba shares fell just over 8% in premarket trading at 7:40 a.m. ET following the news, above previous lows.
- The company said U.S. chip export restrictions have made it more difficult for Chinese firms to receive key chip supplies from U.S. companies.
- “We believe that a complete spin-off of Cloud Intelligence Group may not achieve the intended effect of enhancing shareholder value,” the company said.
Signage at the Alibaba Group Holding Ltd. stand. at the Smart China Expo in Chongqing, China, on Monday, September 4, 2023.
Qilai Shen | Bloomberg | Getty Images
U.S.-listed shares of Chinese e-commerce giant Alibaba fell on Thursday after the company said it would not proceed with a full spinoff of its cloud group due to U.S. chip export restrictions.
The company’s shares fell just over 8% in premarket trading at 7:40 a.m. ET following the news, off previous lows.
In its earnings release on Thursday, Alibaba said it would no longer move forward with a spinoff of its Cloud Intelligence Group – Alibaba’s cloud computing arm that competes with Amazon Web Services and Microsoft Azure. Alibaba had planned to take the division public.
Alibaba said U.S. chip export restrictions have made it harder for Chinese firms to get key chip supplies from U.S. companies. The US banned sales of Nvidia’s advanced artificial intelligence-focused H800 and A800 chips in October.
On Thursday, Alibaba said the restrictions “have created uncertainty about Cloud Intelligence Group’s prospects.”
“We believe that a complete spin-off of Cloud Intelligence Group may not achieve the intended effect of increasing shareholder value,” the company said, adding that it would instead focus on developing a sustainable growth model for “under the changing circumstances.” the unit would concentrate. “
The decision to reverse the spinoff of the cloud unit marks a setback in Alibaba’s plan to restructure itself into six separate business units – one of the most radical restructurings in the company’s history.
Alibaba previously said it was putting plans to list its Freshippo grocery retail chain on hold “as we evaluate market conditions and other factors.”
The company still intends to list its intelligent logistics division Cainiao in Hong Kong.
Thursday’s results represent Alibaba’s first results since veteran executive Eddie Wu succeeded former boss Daniel Zhang as CEO. As part of a broader management reshuffle, the company’s co-founder Joe Tsai also took over as chairman, Alibaba said in June.
Alibaba reported net profit attributable to shareholders of 27.7 billion yuan ($3.8 billion) for the September quarter, below the 29.7 billion yuan expected by analysts.
However, revenue was in line with expectations, coming in at 224.79 billion yuan ($31 billion), up 9% year-on-year.
The company also announced that it will pay its first annual cash dividend in 2023. Companies use dividends to share some of their profits with shareholders.
In the press release, Alibaba said its board of directors approved an annual cash dividend of $0.125 per common share, or $1 per American depositary share (ADS), for the fiscal year.
The total amount of the dividend will be approximately $2.5 billion. Alibaba will distribute the amount to investors at the close of business on December 21, 2023, Hong Kong time and New York time, respectively.
“Going forward, we will continue to review and determine the dividend amount annually based on factors such as business fundamentals, capital requirements and others,” Alibaba said in its earnings release.
Alibaba’s results are often taken as an indication of the health of the Chinese consumer.
Economists had expected China’s economy to boom after the country emerged from Covid-19 lockdowns last year, but the recovery proved more muted as a housing crisis and other structural challenges posed risks to the country’s recovery.
However, Alibaba said it experienced healthy year-on-year growth in users of its domestic online shopping sites Taobao and Tmall. Alibaba added that the two locations experienced positive year-over-year order growth during China’s annual shopping holiday at 11:11 a.m.