Alibaba Earnings: What to Expect From the Chinese E-Commerce Giant

Alibaba reports March-quarter results before Thursday's opening bell

Alibaba is expected to benefit from the reopening of the Chinese economy. (ALIBABA GROUP)

Alibaba Group Holding Ltd. is set to report earnings Thursday for the first time since announcing a major organizational shake-up.

The Chinese e-commerce company disclosed in late March that it would be reorganizing into six business groups that would have their own chief executives and boards, as well as the ability to tap outside capital or pursue initial public offerings. The move "is a material step to unlock shareholder value," according to Truist Securities analyst Youssef Squali, and Alibaba $(09988)$ executives may share more about the progress on the earnings call.

Beyond delivering structural updates, Alibaba's management should also reveal how the improving Chinese economy is impacting the business.

"While the March quarter (thru the Chinese New Year) started weak, demand trends improved throughout the second half of the quarter with the economy reopening," Squali wrote, while predicting that Alibaba could deliver a "slight beat" for the most recent period.

Commentary on the June quarter will also be important, as Mizuho analyst James Lee projects that the company will then see a return to positive growth in customer management revenue, which is essentially advertising revenue.

Another factor to watch will be how Alibaba handles its investment spending in the current economy.

"We're encouraged by the current trends but note that management commentary on the last earnings call pointed to increased investments to support select growth initiatives, which while sound, are likely to keep margins in check near-term," Squali wrote.

Here's what to watch for in the coming report, due out before Thursday's opening bell.

What to expect:

Earnings: Analysts tracked by FactSet expect that Alibaba earned an adjusted RMB9.44 a share for its fiscal fourth quarter, up from RMB7.95 a share in the year-earlier period.

Revenue: The FactSet consensus calls for March-quarter revenue of RMB29.97 billion, up from RMB30.28 billion a year prior.

Stock movement: U.S.-listed shares of Alibaba have fallen following seven of the company's past 10 earnings reports, including the most recent one. Alibaba's U.S.-listed shares are up 2.9% so far in 2023, though they're off 1.4% over the past 12 months. The KraneShares CSI China Internet ETF (KWEB) has declined 7.3% so far this year but risen 1.7% over a 12-month span.

Of the 62 analysts tracked by FactSet who cover Alibaba shares, 57 have buy ratings, three have hold ratings, and two have sell ratings, with an average price target of $141.98.