BEIJING – China’s tech giant Baidu on Thursday posted a 3% annual decline in third-quarter revenue, but beat market expectations amid growth in cloud AI.
Print revenue came in at $4.78 billion for the last quarter on September 30. Net income for the period rose by 14% to $1.09 billion.
Baidu recorded a 12% increase in non-online marketing revenue equivalent to $1.1 billion, mainly driven by its artificial intelligence cloud business.
Shares of the U.S.-traded company were down 2.3% at 08:42 a.m. ET in pre-market trading after the release of its results.
Here’s what analysts expect the company to report for the quarter, according to LSEG estimates:
- Revenue: $4.63 billion
- Net income: $857.17 million
Baidu has reported revenue of 34.45 billion yuan ($4.75 billion) and net income of 6.68 billion yuan for the third quarter of 2023.
Beijing-based Baidu operates one of China’s leading web browser search engines, along with a frequently used map application. The company also sells cloud computing services. Online marketing accounts for a significant portion of the company’s revenue.
Online ad spending by small and medium-sized businesses remained weak in the third quarter with no real improvement in those weeks, management said on the earnings call. He predicted that China’s stimulus announcement, which began at the end of September, will take time to take effect.
Growth in its AI cloud business offset “persistent weakness” in Baidu’s online marketing streams, CEO Robin Li said in the earnings release, also commenting on the performance of the company’s Ernie generative AI model and chatbot.
“Our powerful AI capabilities are gaining wider market recognition, as evidenced by increasing adoption of Ernie,” he said.
Baidu has promoted its chatbot Ernie as a local alternative to OpenAI’s ChatGPT, which is not available in China. Ernie bot now has 430 million users, and the program accesses the underlying AI model about 1.5 billion times a day, more than double the level of 600 million in August, Baidu said last week.
“Despite near-term pressures, we remain steadfast in our AI-focused strategy and are confident in our long-term trajectory,” Li said Thursday. “As we further expand AI, we are passionate about discovering how it can innovate and create value for consumers, companies and society in general.”
During an earnings call earlier in the day, he added that he expects generative AI to transform Baidu search into “the new killer app in the AI era.”
Li said that about one-third of Baidu’s code is currently generated by AI.
In the meantime, generative AI increased its revenue contribution to Baidu’s AI cloud business, reaching 11% in the third quarter, company management said Thursday – up from 9% in the previous quarter and also up from 5% in the fourth quarter. last year, when Baidu started tracking generative AI revenue.
The company this month also announced that Xiaodu AI Glasses will start selling in the first half of next year. The wearable has at least one camera and uses Ernie’s AI capabilities and Baidu’s map and search functions. While Baidu has yet to announce a price, the product is considered a Chinese alternative to the popular Ray-Ban Meta smart glasses.
Baidu announced a management rotation last month, with Junjie He, who previously headed the mobile ecosystem group, becoming the company’s interim Chief Financial Officer, while former CFO Rong Luo became head of the mobile division.
“AI Cloud continued to show healthy and sustainable development in the third quarter,” it said in an earnings release. “Meanwhile, Apollo Go continues to make operational strides, supporting our belief in the validity of the autonomous hailing business model.”
Apollo Go, which operates Baidu’s robotaxi business, reported a 20% year-over-year increase in rides in the third quarter. Average monthly ridership rose to 329,333 during the third quarter, from 287,500 in the first half of the year, according to CNBC calculations.
Li told investors that the company is actively exploring international expansion of Apollo Go, but did not specify a location or timing.
