Baidu’s Stock Falls 5% Following Mixed Second-Quarter Results
Baidu, the Chinese internet search giant, saw its stock fall about 5% on Thursday following its mixed second-quarter results. The company reported non-GAAP earnings per American depositary share (ADS) that fell 7% year-over-year to RMB21.02, or $2.89, beating estimates. However, total revenue was flat year-over-year at RMB33.93B, or $4.67B, missing analysts‘ estimates.
Compared to the first quarter of 2024, revenue rose 8% to RMB31.51B, or $4.37B. Baidu attributed this growth to the acceleration of its AI Cloud business, which offset ongoing macro headwinds for online marketing revenue. The company also highlighted the renovation of Baidu search as a long-term strategy that may impact monetization in the short term.
Baidu’s AI Strategy and Rollout Compared to Google
Earlier this month, Bernstein highlighted how Baidu’s AI search strategy and rollout compare with that of global leader Google. The firm noted that Baidu’s AI strategy „will bear fruit“ but also pointed out that the company’s path to monetization is slower and more staggered, reflecting the competitive digital ad market in China.
Baidu announced the expansion of its Ernie family of large language models (LLMs) by launching Ernie 4.0 Turbo in June 2024. The company’s PaddlePaddle and Ernie developer community also grew to 14.7 million in the same month. Additionally, Baidu App’s monthly active users reached 703 million, marking a 4% year-over-year increase.
Autonomous Ride-Hailing Service and Revenue Breakdown
In the second quarter of 2024, Baidu’s autonomous ride-hailing service provided about 899K rides. Revenue from Baidu Core rose about 1% year-over-year to RMB26.7B ($3.67B), with online marketing revenue declining 2% to about RMB19.2B ($2.64B) and non-online marketing revenue increasing 10% to RMB7.5B ($1.03B), driven by the AI cloud business.
Baidu’s CFO, Rong Luo, emphasized the company’s focus on AI-native transformation and optimization of operations, maintaining a healthy margin. The company expects strong growth momentum in its AI Cloud business going forward.
Impact on iQIYI and Stock Buyback
Baidu’s online entertainment service iQIYI saw revenue decrease by 5% year-over-year to RMB7.4B ($1.02B). Baidu owns a majority stake in the company, and shares of iQIYI tumbled about 16% following its quarterly results.
Baidu also announced a stock buyback program, repurchasing shares worth $301M since the start of the second quarter of 2024. This brings the cumulative buyback to about $1.2B under the 2023 share repurchase program.
Market Reaction and Conclusion
On Thursday, other Chinese stocks also saw movement, with Alibaba down 2%, JD.com down 3%, and NetEase falling about 12% after missing estimates in its second-quarter results. Despite the mixed results and market reactions, Baidu remains focused on its AI strategy and cloud business growth, aiming to navigate the competitive digital landscape in China.