Alibaba Stock Gains As AI Growth Helps Earnings Beat Despite Sales Miss

Alibaba (BABA) stock pushed higher early Friday, after the Chinese e-commerce giant reported fiscal second quarter earnings that beat estimates despite sales that were lower than expected.

Alibaba said that it earned an adjusted 15.06 yuan per American depositary share (ADS) on sales of 236.5 billion yuan, or $32.7 billion, for the September-ended quarter. Analysts polled by FactSet projected the Hangzhou-based company would post adjusted earnings of 14.82 yuan per ADS on sales of 239.45 billion yuan.

Sales grew 5% year-over-year in local currency while adjusted earnings per ADS decreased 4%.

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"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," Chief Executive Eddie Wu said in a news release. "We are more confident in our core businesses than ever and will continue to invest in supporting long-term growth. Our other businesses continued to improve their operating efficiency, with most of them continuing to increase their profitability or reduce losses."

Overall revenue from Alibaba's cloud business grew 7% to $29.6 billion, an acceleration from 6% growth in the previous quarter. It was a fifth consecutive quarter that AI revenue grew at a triple digit pace, the company said in a new release.

On the stock market today, Alibaba stock is up 3.2% at 93.50 in recent premarket-hours action.

More earnings coverage to come.

Alibaba Stock: Technical Ratings

Prior to earnings, Alibaba stock is down 4% so far this week, dipping further below its 50-day and 10-week lines. Shares have gained 17% year-to-date, with a recent run of volatility. The stock surged in September as the Chinese government said it would take steps to stimulate economic growth. But enthusiasm about the efforts has waned. Investors are also weighing the impact of Donald Trump's U.S. presidential victory, with pledging to place further tariffs on China during his second term.

After surging 27.3% in September, Alibaba retreated 7.7% in October and nearly 8% so far this month.

Coming into the report, Alibaba stock had an IBD Composite Rating of 55 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.

Further, Alibaba's IBD Relative Strength Rating was 70 out of 99. The RS Rating means that BABA stock has outperformed 70% of all stocks in IBD's database over the past year.

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