Alibaba Group Holding missed analysts’ second-quarter sales estimates on Friday, as ongoing economic uncertainty in China continued to dampen consumer spending and weigh on the company’s domestic e-commerce business.
The company reported an adjusted profit of 15.06 yuan per American Depository Share, slightly exceeding estimates of 14.88 yuan.
However, its U.S.-listed shares opened down 0.3%.
Economic challenges, including a property sector crisis and youth job insecurity, have caused Chinese consumers to reduce discretionary spending, affecting retail sales despite promotions by Alibaba and JD.com.
“Traditionally, Alibaba is very dominant in apparel, sportswear, cosmetics, and skincare—all of which are highly discretionary. I do think these categories are impacted,” said Vinci Zhang, an analyst at M Science.
Alibaba also faces growing competition from discount-focused platforms like PDD Holdings’ Pinduoduo and ByteDance’s Douyin, which attract cost-conscious consumers with low prices.
Alibaba’s revenue for the quarter, ending Sept. 30, stood at 236.50 billion yuan ($32.72 billion), below analysts’ estimates of 240.17 billion yuan.
However, its Cloud Intelligence division saw a 7% revenue increase to 29.61 billion yuan, with public cloud products growing in double digits and AI-related products experiencing triple-digit growth.
“This Gen AI opportunity is the kind of opportunity that only comes along every 20 years,” said CEO Eddie Wu.
International e-commerce revenue rose 29% to 31.67 billion yuan, driven by global demand for affordable Chinese goods.
Domestically, Alibaba has improved its Taobao and Tmall platforms and expanded its 88VIP loyalty program, which now has 46 million members.
The company also began accepting rival Tencent’s WeChat Pay, aiming to attract new customers.
Despite these efforts, Zhang noted much of the quarter’s revenue growth came from higher take-rates rather than business expansion.
Singles’ Day sales rose 26.6% across platforms this year, although Alibaba did not disclose its specific revenue figures.