Alibaba Group Holding announced on Thursday that it will abandon the planned spin-off of its cloud unit due to the recent export curbs by the United States on chips used in artificial intelligence applications. As a result, its U.S.-listed shares fell by about 5% in premarket trading. The company cited the expansion of U.S. restrictions on the export of advanced computing chips as the reason for the move and expressed concerns about the future of its Cloud Intelligence Group. Despite this, Alibaba’s second-quarter revenue was in line with market expectations at 224.79 billion yuan ($31.01 billion), according to LSEG data, slightly higher than analysts’ average estimate of 224.32 billion yuan.
While China’s industrial and retail sectors have performed better than expected, the crisis-hit property sector still weighs on consumer confidence, making the country’s economic recovery uneven. To take on competitors such as Douyin and PDD Holdings’ (PDD.O) Pinduoduo, who have been selling lower-cost products year-round, Alibaba resorted to pressuring merchants to price aggressively during its Singles Day festival.
This is the first quarterly results for CEO Eddie Wu, one of Alibaba Group’s co-founders and long-time lieutenant of former chief Jack Ma, who took over from former group chief executive Daniel Zhang in September.