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Shares of Chinese e-Commerce and cloud computing giant Alibaba (BABA) have been mired in a slump, down 25% since early October, and this morning's mixed Q2 earnings report isn't helping to turn the tide. Before the open yesterday, competitor JD.com (JD) provided a warning flag when the company posted disappointing quarterly results that included sluggish revenue growth of 5%, merely meeting analysts' Q3 expectations and indicating that China's economy is still sputtering. On the top-line, BABA matched JD's 5% growth, but that was slightly below expectations, inducing another round of selling for the stock this morning.

• Once the predominant e-Commerce platform in China, BABA has ceded significant market share to rivals like JD and Pinduoduo (PDD) after the Chinese government hit BABA with antitrust fines and forced the company to restructure and split into six separate units in March 2023.  This so-called "rectification project", which was completed this past August, combined with China's real estate woes and slowing GDP growth, has put a serious dent into Taobao's and Tmall's growth -- BABA's two main e-Commerce platforms.
• In Q2, Taobao and Tmall generated revenue growth of just 1% on a combined basis to RMB 98.99 bln, missing expectations. That did represent an improvement from last quarter's 1% decline, but the pedestrian growth is doing little to instill confidence that BABA's e-Commerce business will experience a meaningful upswing in growth anytime soon. With that said, the company is optimistic that the launch of additional stimulus measures from the PRC government will provide a spark for consumer spending, although the positive impact from any stimulus package would take some time to trickle through the economy.
• There were some bright spots for BABA in Q2. Notably, the Cloud business generated stronger growth of 7% to RMB 29.6 bln, driven by AI product revenue, which grew at triple-digits for the fifth consecutive quarter. Alibaba Cloud provides a range of services such as storage, databases, security, and content delivery networks that's available on a pay-as-you-go basis. Recently, BABA had unleased new AI products and features, such as Quanzhantui, a marketing tool that's seeing strong merchant adoption.
• BABA's international business was another standout with revenue jumping by 29% yr/yr to RMB 31.67 bln. The international business mostly operates as a B2B e-Commerce platform, enabling foreign vendors to connect and source products in bulk from Chinese sellers. Strong growth in the AliExpress' Choice business, especially in the European and Gulf regions, fueled the impressive performance for international.

Overall, it was a decent quarter for BABA, thanks to its Cloud and International businesses, but macroeconomic headwinds in China continue to weigh the company's core e-Commerce business down. The prospects for additional stimulus measures from China's government offers some hope that growth will improve, but the stock could continue to languish in the meantime.