Baidu’s (BIDU) U.S.-listed stock initially gained ground after the Chinese search giant released its first quarter earnings report, which exceeded expectations. The positive performance was primarily attributed to the growth in Baidu’s AI cloud business. However, the stock retreated by the end of the day, continuing its trend of underperforming compared to other Chinese tech giants such as Alibaba Group (BABA) and Tencent Holdings (TCEHY).
In its earnings release published on Wednesday, Baidu reported adjusted earnings of 18.54 yuan per American Depositary Share (ADS), representing a 7% year-over-year decline. Despite this decrease, the figure surpassed analyst expectations of 14.38 yuan per ADS, as polled by FactSet. The company’s revenue for the quarter ending in March increased by 3% year over year to 32.45 billion yuan, or approximately $4.47 billion, beating estimates of 31 billion yuan. This improvement follows a 2% decline in sales reported in the previous quarter.
Baidu’s Chief Executive, Robin Li, highlighted that the company’s AI Cloud revenue experienced a significant 42% year-over-year increase. Li attributed this strong performance to the company’s competitive edge in providing comprehensive AI products and solutions at highly competitive prices. However, the company’s online marketing sales decreased by 6% year over year to 16 billion yuan, reflecting challenges in Baidu’s core advertising business due to macroeconomic factors and increased competition from entertainment and commerce platforms.
Analysts, including Angelo Zino from CFRA, noted that while Baidu’s advertising revenue remains under pressure, the company is expected to benefit from easier year-over-year comparisons and more favorable policies. Zino also emphasized that Baidu’s AI initiatives, particularly in cloud computing and autonomous driving, are likely to drive long-term growth despite near-term weaknesses in advertising.
On the stock market, Baidu’s U.S.-listed shares closed 4.3% lower at $85.48. Despite the company’s efforts to embrace AI technology early, including the launch of a ChatGPT-style AI bot called Ernie X1 in late 2023, Baidu’s stock has struggled. The company’s U.S. shares have recorded a modest gain of 1.7% year to date, significantly lagging behind the 47% rally in Alibaba’s U.S. stock and the 24% gain in Tencent’s over-the-counter U.S. shares.
Technical analysis indicated that Baidu’s stock fell below its 21-day, 50-day, and 200-day moving averages. The stock also received a weak IBD Composite Rating of 52, far below the 90 or above rating typically associated with top growth stocks. This rating combines several proprietary metrics to assess a stock’s performance potential.
