Hitmetrix - User behavior analytics & recording

Baidu reports 3% revenue decline in Q3

Revenue decline
Revenue decline

Baidu Inc. reported a 3% decline in revenue for the third quarter of 2024, with total revenue amounting to RMB 33.56 billion ($4.78 billion). The Chinese internet search giant’s non-GAAP earnings per American depositary share (ADS) fell 19% year-over-year to RMB 16.60 ($2.37), missing analysts’ estimates.

The company’s online marketing revenue, a key contributor to its overall performance, underperformed during the quarter. However, Baidu’s cloud business showed signs of growth, providing a potential bright spot for the company’s future outlook. In the earnings call, Baidu’s management highlighted several positive points, including stable non-GAAP operating profit and margin, showcasing the company’s resilience despite macroeconomic challenges.

The AI cloud revenue grew by 11% year-over-year, driven by strong momentum in GenAI-related revenue. Baidu’s ERNIE model, a key component of its AI offerings, has shown significant improvements, with API call volume increasing from 600 million in August to 1.5 billion in November. The company’s autonomous driving service, Apollo Go, provided 988,000 rides in Q3, marking a 20% year-over-year increase.

Despite these positive developments, Baidu faced challenges during the quarter. The macroeconomic environment remains difficult, impacting advertising demand, particularly from small and medium enterprises. Baidu’s personal cloud revenue also faced a temporary impact due to short-term business adjustments.

Baidu’s Q3 performance highlights

During the Q&A session, management addressed questions regarding the ramp-up pace for generative AI results in search, the drivers behind ERNIE’s API call growth, the underlying ad demand trend, investment priorities, and the outlook for the AI cloud business. Rong Luo, EVP of Baidu Mobile Ecosystem Group, explained that over 20% of pages and 60% of monthly active users have engaged with GenAI content, with a focus on revolutionizing search experiences through personalized content.

While early monetization results are promising, the priority remains on enhancing user experience before fully monetizing AI search results. CEO Robin Li attributed ERNIE’s API growth to improved intelligence, reduced inference costs, and tailored toolchains for customers. Strong enterprise adoption is expected to unlock new revenue streams and strengthen Baidu’s market leadership.

Regarding the advertising demand trend, Rong Luo noted that it is closely tied to the macro environment, with recent policy measures providing encouragement for recovery. Baidu remains optimistic about advertisers returning once confidence rebounds. Junjie He, Interim CFO, emphasized Baidu’s commitment to its AI-focused strategy, particularly in search and AI cloud offerings.

While near-term margins may be under pressure, the focus is on long-term value creation, with resource allocation targeting high-growth opportunities in 2025. Dou Shen, EVP, highlighted the doubling of GenAI revenue to 11% of total AI cloud revenue, with enterprise cloud services maintaining strong momentum. Baidu’s AI cloud is expected to continue delivering strong revenue growth and healthy operating profits.

Despite the challenges faced in the third quarter, Baidu remains optimistic about its future growth, particularly in the artificial intelligence and cloud computing sectors. The company’s leadership is committed to innovation and expanding its AI capabilities to drive long-term growth and provide value to its stakeholders.

Total
0
Shares
Related Posts