Baidu (BIDU -1.87%), China's leading search engine and artificial intelligence company, released its third-quarter 2024 earnings on Nov. 21, 2024. The earnings were a mixed affair, revealing challenges in online marketing yet showing positive advancements in AI and autonomous driving. For the quarter, Baidu reported non-GAAP earnings per share (EPS) of $2.37, falling short of analysts' expectations of $2.41 by 1.7%. Despite this, the company's total revenue was robust, totaling $4.78 billion, surpassing projections of $4.63 billion by 3.2%. Overall, the results underscore a resilient quarter, highlighting growth in AI and autonomous segments amid ongoing marketing difficulties.
| Metric | Q3 2024 Results | Expectations | Q3 2023 Results | Year-over-Year Change |
|---|---|---|---|---|
| Revenue (Total) | $4.78 billion | $4.63 billion | $4.63 billion | 3.2% |
| Non-GAAP EPS | $2.37 | $2.41 | $2.31 | 2.6% |
| Online Marketing Revenue | RMB18.8 billion ($2.68 billion) | - | RMB19.6 billion ($2.78 billion) | -4% |
| iQIYI Revenue | RMB7.2 billion ($1.03 billion) | - | RMB8.0 billion ($1.14 billion) | -10% |
Source: Analyst estimates for the quarter provided by FactSet.
Overview of Baidu's Business
Baidu, a key player in the Chinese internet sector, operates as a core search engine while heavily investing in artificial intelligence and related technologies. Its business spans search, AI cloud, autonomous vehicles, and entertainment sectors. Baidu's traditional strength lies in its robust search engine capabilities, fueling its online marketing services, which constitute a vital revenue stream.
Recently, Baidu has intensified its focus on spearheading advancements in AI and cloud services. This strategic pivot indicates an emphasis on leveraging cutting-edge technologies to diversify and strengthen its business model beyond traditional advertising. Key success factors include dominating AI developments and broadening its technological ecosystem through strategic partnerships and innovations.
Quarterly Highlights
During the third quarter, Baidu saw positive revenue momentum in its AI Cloud segment, reporting a significant 12% year-over-year rise in non-online marketing revenues. This uptick was driven by the increased penetration of its AI model ERNIE into the market. Baidu's persistence in refining its AI capabilities further solidified its market leadership in cloud offerings.
The autonomous driving segment also delivered notable performance, with Apollo Go—Baidu's autonomous ride-hailing service—recording a 20% increase in rides, totaling 988,000. This growth signifies Baidu's continued advancements in smart transportation, highlighting the successful deployment of new technology across various Chinese cities.
Nonetheless, challenges persisted in the online marketing domain. Revenue from this sector dipped by 4% year-over-year, aligning with earlier warnings about macroeconomic pressures affecting advertiser spending. These pressures have led to intensified competition and reduced demand for search and display advertising, underscoring the need for Baidu to adapt to the current marketing landscape.
iQIYI, Baidu's online streaming platform, faced a tougher quarter with a 10% revenue decline year-over-year. This contraction reflects broader pressures within the digital entertainment market, where iQIYI grapples with rising competition and shifting consumer preferences, which impact its financial contributions to Baidu.
Management Outlook
Looking ahead, Baidu maintains a focus on robust investment in AI and cloud services. Management reiterates its commitment to scaling these segments, banking on AI's potential to drive future innovation and growth. While specific full-year guidance was not provided, the company aims to counterbalance current weaknesses in its online marketing division through strategic growth in these emerging areas.
Investors should keep an eye on developments within Baidu's AI initiatives and how they bolster its core business and revenue diversification strategies. Despite facing headwinds, Baidu’s confident positioning in AI and autonomous technologies offers a constructive outlook for its long-term competitive footing.
