Baidu Extends Post-Covid Recovery With Quarterly Sales Beat

(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 in March, compared with the average estimate of 27.3 billion yuan. Net income surged to 25.7 billion yuan, mostly boosted by gains in the value of long-term investments, including recently listed Kuaishou Technology.

The company projected sales of 29.7 billion yuan to 32.5 billion yuan for the June quarter, compared with the 30.2 billion yuan estimated by analysts.

Founder Robin Li in recent years sought to reposition Baidu away from search to become an artificial intelligence (AI) company with autonomous driving ambitions. The company will eventually derive the bulk of its revenue from businesses besides search and advertising as it pours record R&D investments into AI technologies, the 52-year-old chief executive officer said in March in an interview with Bloomberg Television.

Baidu’s sales mix is likely to shift further away from its traditional search advertising business as growth in its nonmarketing initiatives continues much stronger. Cloud services, autonomous driving, smart transport and hardware drove a 52% jump in fourth-quarter nonmarketing sales, while core ads stayed flat for the second consecutive quarter.

The trend may accelerate with the integration of Joyy Inc.’s domestic livestreaming business in the first half. Operating margin may plunge sequentially due to weak seasonality and stepped-up investment in new initiatives, Vey-Sern Ling and Tiffany Tam, analysts at Bloomberg Intelligence, said in a research note.

Baidu shares climbed almost 4% in pre-market trading in New York. The stock plunged roughly 44% from its record in early February after it was caught up in the implosion of Bill Hwang’s Archegos Capital Management, which led to a forced liquidation of the fund’s positions, including in Baidu.

The company’s 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 separate ecosystems.

To compete, Baidu’s core search product is morphing into an all-purpose platform hosting an array of content from news articles to livestreams and short videos, essentially emulating those apps. It last year agreed to pay $3.6 billion in cash for Joyy’s livestreaming video business in China, aiming to regain 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 and 7.65 billion yuan, compared with analysts’ estimated 7.52 billion yuan. The stock rose more than 5% in pre-market trading.

Contact editor Bob Simison (bobsimison@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.

Follow the Chinese markets in real time with Caixin Global’s new stock database.