• Alibaba said net income rose 58% year-on-year over the quarter ending Sept. 30, on the back of the performance of its equity investments.
• Revenue, meanwhile, came in at 236.5 billion yuan, 5% higher year-on-year but below an analyst forecast of 238.9 billion yuan, according to LSEG data.
• The results come at a tricky time for Chinese commerce businesses, given the broad sluggishness in the world's second-largest economy.

Chinese e-commerce behemoth Alibaba on Friday beat profit expectations in its September quarter, but sales fell short as sluggishness in the world's second-largest economy hit consumer spending.

Alibaba said net income rose 58% year on year to 43.9 billion yuan ($6.07 billion) in the company's quarter ended Sept. 30, on the back of the performance of its equity investments. This compares with an LSEG forecast of 25.83 billion yuan.

"The year-over-year increases were primarily attributable to the mark-to-market changes from our equity investments, decrease in impairment of our investments and increase in income from operations," the company said of the annual profit jump in its earnings statement.

Revenue, meanwhile, came in at 236.5 billion yuan, 5% higher year on year but below an analyst forecast of 238.9 billion yuan, according to LSEG data.

The company's New York-listed shares have gained ground this year to date, up more than 13%. The stock was 3% lower in morning trading on Friday, after the release of the quarterly earnings.

Sales sentiment

Investors are closely watching the performance of Alibaba's main business units, Taobao and Tmall Group, which reported a 1% annual uptick in revenue to 98.99 billion yuan in the September quarter.

The results come at a tricky time for Chinese commerce businesses, given a tepid retail environment in the country. Chinese e-commerce group JD.com also missed revenue expectations on Thursday, according to Reuters.

Markets are now watching whether a slew of recent stimulus measures from Beijing, including a five-year 1.4 trillion yuan package announced last week, will help resuscitate the country's growth and curtail a long-lived real estate market slump.

The impact on the retail space looks promising so far, with sales rising by a better-than-expected 4.8% year on year in October, while China's recent Singles' Day shopping holiday — widely seen as a barometer for national consumer sentiment — regained some of its luster.

Alibaba touted "robust growth" in gross merchandise volume — an industry measure of sales over time that does not equate to the company's revenue — for its Taobao and Tmall Group businesses during the festival, along with a "record number of active buyers."

"Alibaba's outlook remains closely aligned with the trajectory of the Chinese economy and evolving regulatory policies," ING analysts said Thursday, noting that the company's Friday report will shed light on the Chinese economy's growth momentum.

The e-commerce giant's overseas online shopping businesses, such as Lazada and Aliexpress, meanwhile posted a 29% year-on-year hike in sales to 31.67 billion yuan.  

Cloud business accelerates

Alibaba's Cloud Intelligence Group reported year-on-year sales growth of 7% to 29.6 billion yuan in the September quarter, compared with a 6% annual hike in the three-month period ended in June. The slight acceleration comes amid ongoing efforts by the company to leverage its cloud infrastructure and reposition itself as a leader in the booming artificial intelligence space.

"Growth in our Cloud business accelerated from prior quarters, with revenues from public cloud products growing in double digits and AI-related product revenue delivering triple-digit growth. We are more confident in our core businesses than ever and will continue to invest in supporting long-term growth," Alibaba CEO Eddie Wu said in a statement Friday.

Stymied by Beijing's sweeping 2022 crackdown on large internet and tech companies, Alibaba last year overhauled the division's leadership and has been shaping it as a future growth driver, stepping up competition with rivals including Baidu and Huawei domestically, and Microsoft and OpenAI in the U.S.

Alibaba, which rolled out its own ChatGPT-style product Tongyi Qianwen last year, this week unveiled its own AI-powered search tool for small businesses in Europe and the Americas, and clinched a key five-year partnership to supply cloud services to Indonesian tech giant GoTo in September.

Speaking at the Apsara Conference in September, Alibaba's Wu said the company's cloud unit is investing "with unprecedented intensity, in the research and development of AI technology and the building of its global infrastructure," noting that the future of AI is "only beginning."

Correction: This article has been updated to reflect that Alibaba's Cloud Intelligence Group reported quarterly revenue of 29.6 billion yuan in the September quarter.