Baidu stock rose on Tuesday after reporting revenue that was 15% higher than a year ago.
BIDU – Weekly Chart
Baidu jumped 4% to trade at 127.55, but support is looming at 117.50 for any negative sentiment.
The Chinese search engine and AI company beat second-quarter revenue estimates on Tuesday, helped by strength in advertising. Businesses have started to raise their spending on digital ads after the covid restrictions were eased in the country, with Baidu making the lion’s share of its profit from advertising.
Baidu has also been pivoting the business toward its generative artificial intelligence large language model (LLM) bot, Ernie.
“In the second quarter of 2023, Baidu Core accelerated revenue and profit growth, driven by the solid performance of online marketing business and operating leverage,” said Robin Li, Baidu’s co-founder and CEO.
He added that the company was committed to building a “new engine” for the business around its AI tools. The company’s revenue for the quarter to June 30 was 34.06 billion yuan ($4.67 billion), compared with analysts’ estimates of 33.28 billion yuan.
The company’s online marketing revenue rose 15% while operating margins rose 3% over the year. “For the second half of the year, we should continue to see a pretty clear recovery trend for our online marketing business,” Li told analysts on a call.
Another bright spot was a rise in the company’s automated taxi service, which saw a jump of 149% in its robo-rides over the year. The company has now delivered over 3 million automated taxi rides.
Despite strength in the company’s earnings, they are also an improvement in a weak time for the Chinese economy. The rebound has been weaker than expected from the end of covid restrictions, and investors are now concerned about the state of the property sector in the country.
Alibaba and Tencent have since joined the LLM bandwagon, raising questions about whether Baidu can maintain its current lead. The CEO said the company awaits approval from the government to roll out its ChatGPT rival to the public. There is some uncertainty due to regulations that began in August requiring a security review before AI services can be launched on the market.
“Baidu is viewed as being in the lead for generative AI because of its more visible investments over the years,” Vey-Sern Ling at Union Bancaire Privee said before the earnings release. “But the development of generative AI applications is still at an early stage.”
