Baidu (BIDU) reported a smaller-than-expected decline in revenues, easing some worries about its internet search and artificial intelligence businesses facing increasingly intense competition in China.
Discover the Best Stocks and Maximize Your Portfolio:
- See what stocks are receiving strong buy ratings from top-rated analysts.
- Filter, analyze, and streamline your search for investment opportunities with TipRanks’ Stock Screener.
Revenue for the three months ended December fell 2% to 34.1 billion yuan ($4.7 billion) against estimates of 33.4 billion yuan. Forecasts had implied a much larger 5.4% decline in overall revenue.
BIDU stock was indicated lower in the pre-market, however this may be largely a catchup trade as the Hong Kong shares of Baidu (HK:9888) had plunged on Monday ahead of earnings, finishing down 7% after the founder of the Chinese search engine giant was absent from a between President Xi Jinping and a number of corporate leaders, including Alibaba (BABA) founder Jack Ma. US stocks were closed Monday due to the Presidents’ Day holiday.
BIDU Stock Underperforms
Shares of BIDU have been underperforming on a range of issues, from weak advertising revenue due to broader macroeconomic challenges, to AI search monetization issues and competitive pressures in its electric vehicle (EV) venture. Baidu launched its large language model, Ernie, in 2023 but it’s seen limited uptake. Lately it’s announced Ernie would become open source later this year and integration of DeepSeek to its internet search tool, a sign that its investments in AI may not be enough to keep pace with the rapid changes in the sector.
In its Fiscal fourth quarter the advertising weakness continued as its Baidu Core online marketing revenue fell 7% year-on-year. However, its AI cloud business helped offset losses as fourth-quarter revenue growth in this division accelerated to 26% year over year. This left revenues at everything not associated with its online ad business up 18%.
BIDU Defends AI Investment
It comes after Baidu CEO Robin Li comes under pressure for the company’s huge AI investment amid heightening domestic competition on its doorstep with the rise of DeepSeek among others.
“You have to invest to make sure that you are at the very front of this technological innovation or revolution,” he said last week at an event in Dubai. “The investment in cloud infrastructure is still very much required,” Li added.
Li acknowledged the rise of DeepSeek highlighted how innovation was unpredictable, while noting that constraints on access to the most advanced chips probably helped Chinese companies to innovate and lower costs.
Commenting alongside today’s results he again backed his AI vision, saying, “With our strategic foresight increasingly validated, we expect our AI investments to deliver more significant results in 2025.”
Is BIDU Stock a Good Buy?
Overall, Wall Street has a Moderate Buy consensus rating on BIDU stock, based on eight Buys and six Holds. The average BIDU price target of $107.54 implies about 10% upside from current levels, though this could well be revised in light of the earnings update.
