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Update: The story has been updated with stock movements.
Baidu’s (NASDAQ: BIDU) Share fell by 5% on Thursday following its mixed second-quarter results.
Baidu’s non-GAAP earnings per American Depositary Share (ADS) fell 7% year-on-year to RMB 21.02 or USD 2.89, beating estimates. Total revenue remained unchanged year-on-year at RMB 33.93 billion or USD 4.67 billion, missing the Estimates.
Compared to the first quarter of 2024, revenue increased by 8% to RMB 31.51 billion or USD 4.37 billion.
“AI Cloud continued to gain momentum in the second quarter, offsetting ongoing macroeconomic headwinds to online marketing revenue and leading to slightly positive revenue growth for Baidu Core. Operationally, we accelerated the renewal of Baidu Search, which we believe will lead to long-term success despite the short-term impact on monetization.”
Earlier this month, Bernstein highlighted how Baidu’s AI search strategy and rollout compares to that of global leader Google. The company noted that Baidu’s AI strategy “will bear fruit,” but noted that the company is pursuing a different path to monetization, one that is slower and more staggered, perhaps reflecting the inherently more competitive digital advertising market in China.
Baidu announced on Thursday that it has expanded the Ernie family of large language models (LLMs) with the launch of Ernie 4.0 Turbo in June 2024.
The Chinese internet search giant added that PaddlePaddle and Ernie’s developer community had grown to 14.7 million in June 2024.
The number of monthly active users of the Baidu app reached 703 million, an increase of 4% year-on-year.
Baidu’s autonomous ride-sharing service offered about 899,000 rides in the second quarter of 2024.
In the second quarter (April to June), Baidu Core’s revenue increased about 1% year-on-year to RMB 26.7 billion ($3.67 billion).
Online marketing revenue decreased 2% year-on-year to approximately RMB 19.2 billion (US$2.64 billion), while non-online marketing revenue was RMB 7.5 billion (US$1.03 billion), up 10% year-on-year, mainly due to the AI cloud business.
China’s cloud services market is witnessing a price war, with players such as Baidu, Alibaba (BABA), ByteDance (BDNCE), Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) and iFlytek cutting prices for their LLMs that power AI chatbots.
“As we accelerated the AI-native transformation of our products in the second quarter, we continued to optimize our operations and maintain a healthy margin,” said Baidu CFO Rong Luo. “For AI Cloud in particular, we expect growth to maintain strong momentum.”
Online entertainment service iQIYI (IQ) reported a 5% year-on-year decline in revenue to 7.4 billion RMB (1.02 billion USD). Baidu owns a majority stake in the company.
iQIYI (IQ) shares plummeted 16% on Thursday after the announcement of the quarterly results.
Share buyback: Baidu said it has repurchased $301 million worth of shares since the beginning of the second quarter of 2024, bringing the cumulative repurchase under the 2023 share repurchase program to approximately $1.2 billion.
Other Chinese stocks on Thursday: Alibaba (BABA) -2%JD.com (JD) -3%Meanwhile, shares of NetEase (NTES), whose second-quarter results today came in below estimates, fell 12%.
