Alibaba Group Holding's (BABA 1.64%) stock popped 8% on Nov. 17 after the Chinese e-commerce and cloud leader posted its latest earnings report. For the second quarter of fiscal 2023, which ended on Sept. 30, its revenue rose 3% year over year to 207.2 billion yuan ($29.1 billion), which missed analysts' expectations by $490 million.

But its adjusted net income increased 19% to 33.8 billion yuan ($4.8 billion), or $1.82 per American depositary share (ADS) -- which cleared the consensus forecast by $0.17. Under generally accepted accounting principles (GAAP), it posted a net loss of 20.6 billion yuan ($2.9 billion) -- compared to a net profit of 5.4 billion yuan a year ago -- mainly due to investment-related losses.

Investors seemed satisfied with Alibaba's mixed report, but its stock remains 75% below its all-time high of $317.14 from Oct. 2020. Is it the right time to finally accumulate some shares of this fallen Chinese tech stock?

A person holds an umbrella on a rainy day in Shanghai.

Image source: Getty Images.

What happened to Alibaba?

Alibaba's problems started in late 2020 when the Chinese government launched an antitrust probe into its e-commerce operations. That investigation culminated in a record fine of $2.8 billion the following April, as well as bans on its exclusive deals with merchants and tighter restrictions on its promotions, marketing campaigns, and investments.

Those new rules eroded Alibaba's defenses against formidable e-commerce competitors like and Pinduoduo. That pressure was also exacerbated by the broader slowdown of the Chinese economy and intermittent COVID-related disruptions of supply chains and logistics networks.

Alibaba generates all of its profits from its retail business, which also operates brick-and-mortar stores and overseas marketplaces. Its smaller cloud, digital media, and innovation initiatives units are all still unprofitable. Therefore, the deceleration of Alibaba's retail profit engine -- along with the government-mandated restrictions on its investments -- made it tougher to subsidize the expansion of those unprofitable (but ecosystem-building) businesses.

At the same time, the growth of Alibaba's cloud business decelerated as macro headwinds curbed the market's appetite for its cloud-based services. It also lost ByteDance, the parent company of TikTok (known as Douyin in China), as a cloud customer in overseas markets last year.

Before Alibaba was hit by the antitrust fine and severe restrictions, its revenue and adjusted net income increased 41% and 30%, respectively, in fiscal 2021 (which ended in March of that calendar year). But in fiscal 2022, those measures took their toll, and Alibaba's revenue rose just 19% as its adjusted net income tumbled 21%.

Its growth remains sluggish

In the first half of fiscal 2023, Alibaba grappled with the sluggish growth of its domestic e-commerce and cloud businesses:


FY 2022

Q1 2023

Q2 2023

China commerce revenue growth (YOY)




Cloud revenue growth (YOY)




Total revenue growth (YOY)




Data source: Alibaba. YOY = year over year.

During the fiscal second-quarter conference call, CEO Daniel Zhang attributed the e-commerce deceleration to the "ongoing resurgence of COVID-19, geopolitical tension, inflation, and currency depreciation." Those headwinds throttled its sales of apparel and consumer electronics, which were only partly offset by its growth in "interest-based categories" like outdoor recreation, pet care, health, and other wellness-related products.

That pressure should persist in the current quarter. It recently reported roughly flat gross merchandise volume growth for this year's Singles Day shopping festival (an annual, multi-day promotional event that ended on Nov. 11) -- compared to its 8.5% growth in 2021 and 26% growth in 2020. It blamed that slowdown on the impact of warmer temperatures on its apparel sales, logistics disruptions, and competition from other e-commerce platforms.

As for Alibaba Cloud, its declining hybrid cloud revenue largely offset its double-digit growth in public cloud revenue, which was primarily driven by its financial, automotive, telecom, and public services customers.

Focusing on cost-cutting measures

Alibaba didn't provide any guidance for the rest of the year, but its top-line growth will likely remain sluggish as long as China's zero-COVID policies remain in effect. So for now, Alibaba is focusing on cutting costs and repurchasing its own shares to buoy its near-term margins and profits.

That's why its adjusted earnings before interest, taxes, and amortization (EBITA) margin grew 3.5 percentage points year over year to 17.5% in the fiscal second quarter, while its operating margin expanded from 7.5% to 12.1%.

For the full year, analysts expect Alibaba's revenue and adjusted EPS to increase 5% and 19%, respectively. Those growth rates aren't too shabby for a stock that trades at just 14 times fiscal 2024's earnings forecast. That said, its discount valuation reflects its various near-term challenges. And in addition to the macro headwinds in China, Alibaba still faces unpredictable delisting threats, semiconductor bans, and trade blacklists from American regulators.

It's not the right time to buy Alibaba yet

Alibaba might be a great investment if China's economy were still growing rapidly, its antitrust regulators were more relaxed, and its home government didn't repeatedly disrupt retailers with zero-COVID policies. But those problems all continue to cast dark clouds over Alibaba's future, and they make it tough to recommend buying the stock as a turnaround play.