(Bloomberg) — Baidu Inc., the Chinese search giant that’s shifting into artificial intelligence, reported quarterly revenue that beat analysts estimates, extending its recovery from the Covid-19 pandemic.
Revenue climbed 25% to 28.1 billion yuan ($4.4 billion) in the three months ended March, compared with the average 27.3 billion yuan of estimates. Net income surged to 25.7 billion yuan, mostly boosted by gains in the value of long-term investments, including in recently listed Kuaishou Technology.
The company predicted sales of 29.7 billion yuan to 32.5 billion yuan for the June quarter, versus the 30.2 billion yuan seen by analysts.
Founder Robin Li has in recent years sought to pivot Baidu away from search to reposition itself as an AI company with autonomous driving ambitions. The firm will eventually derive the bulk of its revenue from businesses beyond search and advertising, as it sustains record R&D investment into AI technologies, the 52-year-old chief executive officer said in an interview with Bloomberg Television in March.
What Bloomberg Intelligence Says:
Baidu’s sales mix is likely to shift further away from its traditional search advertising business as growth at its non-marketing initiatives continues to be much stronger. Cloud services, autonomous driving, smart transport and hardware drove a 52% jump in 4Q non-marketing sales, while core ads stayed flat for the second consecutive quarter. The trend may accelerate with the integration of Joyy’s domestic live-streaming business in 1H. Operating margin may plunge sequentially due to weak seasonality and stepped-up investment in new initiatives.
— Vey-Sern Ling and Tiffany Tam, analysts
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Baidu climbed almost 4% in pre-market trading in New York. The stock has plunged roughly 44% from its record in early February after it was caught up in the implosion of Bill Hwang’s Archegos Capital Management that led to a forced liquidation of the fund’s positions, including in Baidu. Its Hong Kong-listed shares are down nearly 26% since they began trading in March, the worst performer among recent major Chinese tech listings in the city. In contrast, Bilibili Inc., which made its Hong Kong debut about a week after Baidu, has declined 3% while Kuaishou has almost doubled since its February debut.
Once part of China’s internet triumvirate alongside Alibaba Group Holding Ltd. and Tencent Holdings Ltd., Baidu has fallen behind in the mobile era, where the effectiveness of its search service has been crippled by super-apps like WeChat creating siloed ecosystems.
To compete, Baidu’s core search product is morphing into an all-purpose platform hosting an array of content from news articles to live-streams and short videos, essentially emulating those apps. It last year agreed to pay $3.6 billion in cash for Joyy Inc.’s livestreaming video business in China is aimed at regaining lost ground to the likes of TikTok owner ByteDance Ltd.
Its Netflix-style unit iQiyi Inc. reported first-quarter revenue of 7.97 billion yuan, topping the 7.67 billion yuan average of estimates, after drawing more users. Sales in the three months ending in June will be between 7.21 billion yuan to 7.65 billion yuan, compared with an estimated 7.52 billion yuan. The stock rose more than 5% in pre-market trading.
It’s also making a big push into autonomous driving, betting on the smart vehicles of the future. In January, the company announced it’s teaming up with Zhejiang Geely Holding Group to produce smart electric vehicles, prompting analysts to hike their value estimates for Baidu’s self-driving unit Apollo. The venture, Jidu Auto, aims to spend 50 billion yuan over the next five years to develop smart-car technology and will hire as many as 3,000 employees for the project over the next two to three years, the company said last month.
Read more: Baidu and Geely Plan $7.7 Billion Smart Car Push
(Updates with iQiyi shares in ninth paragraph)
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