Alibaba Adds $25B to Share Buyback Allocation

Alibaba Group Holding Ltd. (NYSE: BABA) has increased its share buyback allocation by $25 billion and secured early wins in its fight to attract merchants and buyers in the Chinese commerce arena. A recent quarterly earnings report from the holding company revealed that Alibaba’s marketplaces in China saw a surge in transacting merchants and buyers in the last three months of 2023. This increased economic activity increased Alibaba’s third-quarter revenue by 5% year-over-year.

The Chinese holding company also announced that its cloud-computing business revenue increased by 3% year-over-year after Alibaba transitioned from project-based contracts with lower margins to cloud-computing contracts.

Last year, Alibaba announced sweeping changes to its management lineup and restructured its strategy to boost its stagnating growth. Alibaba Group CEO Eddie Wu said the company leadership’s highest priority was to reignite financial growth in its core businesses of cloud computing and e-commerce. Wu took the reins of Alibaba Group and Alibaba Cloud Intelligence Group last September and has also been at the helm of Tmall Group and Taobao as CEO since December 2023. He vowed to use Alibaba’s massive resources to push business growth.

The company’s addition of $25 billion in share-buyback allocations comes shortly after Alibaba paid its first-ever dividend. The $2.5 billion dividend came amid solid second-quarter financial results as the company ended the quarter with $63 billion in net cash. Alibaba also generated a whopping $27 billion in free cash flow in 2023, providing it with the funds it needs to invest in the growth of its core businesses in 2024. In late 2023, company management noted that it was looking for several ways to provide value to Alibaba shareholders.

According to Alibaba chair Joe Tsai, buying Alibaba stock is similar to purchasing a 10-year treasury bond with the benefits of stock-price appreciation. The company now has $34.3 billion remaining in the program after expanding its share buyback allocation and is looking to achieve a 3% annual reduction in share count over the next three fiscal years.

Although the company’s $15 billion share buyback addition was partly meant to reassure nervous investors, it did little to assuage their worries. Alibaba’s shares dropped by up to 6.1% in Hong Kong thanks to falling per-user spending as well as rising investor concern about falling Chinese consumption. Alibaba is also dealing with increased competition and market share loss to rival internet and technology companies such as ByteDance Ltd and PDD.

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