Baidu, a leading Chinese technology company, reported a 3% decline in revenue for the third quarter of 2024. The company’s non-GAAP earnings per American depositary share (ADS) fell 19% year-over-year to RMB16.60, or $2.37, missing analysts’ estimates. Despite the earnings miss, total revenue exceeded analysts’ projections at RMB33.56 billion, or $4.78 billion.
The decline in revenue was primarily attributed to a 4% decrease in online marketing revenue, which overshadowed the growth in Baidu’s cloud business. In the earnings call, Baidu highlighted its AI cloud revenue, which grew 11% year-over-year, driven by significant improvements in its ERNIE model. The company also reported strong momentum in generative AI-related revenue, with API call volume increasing from 600 million in August to 1.5 billion by November 2024.
Baidu’s autonomous driving service, Apollo Go, saw a 20% increase in rides provided compared to the previous year, reaching 988,000 rides in Q3. This growth highlights the increasing adoption of Baidu’s autonomous solutions. However, the challenging macroeconomic environment, particularly affecting small and medium enterprises, impacted advertising demand.
Short-term business adjustments also led to temporary setbacks in Baidu’s personal cloud revenue. Rong Luo, EVP of Baidu Mobile Ecosystem Group, noted that over 20% of pages and 60% of monthly active users have interacted with GenAI content.
Baidu faces Q3 revenue challenges
The company is focusing on revolutionizing search experiences with personalized content through ERNIE, with early monetization beginning in verticals such as legal and education sectors. CEO Robin Li attributed the rapid growth in ERNIE’s API calls to improved intelligence, reduced inference costs, and tailored toolchains for customers. Despite current weaknesses in sectors like real estate and healthcare, Baidu remains optimistic about recovery, expecting advertisers to return as confidence rebounds.
Interim CFO Junjie He emphasized Baidu’s commitment to an AI-focused strategy, targeting high-growth opportunities in 2025. Despite near-term margin pressures, the long-term outlook remains positive, with resource allocation prioritizing AI advancements. Dou Shen, EVP, highlighted that generative AI revenue has doubled to 11% of total AI cloud revenue, and despite short-term adjustments in personal cloud services, enterprise cloud services maintain strong momentum.
Baidu’s AI cloud is expected to continue robust revenue growth and deliver healthy operating profits. The subdued sentiment among advertisers highlights the broader challenges faced by Baidu in an increasingly competitive and dynamic market. The company has been diversifying its portfolio to mitigate reliance on advertising, delving into artificial intelligence and cloud services.
However, these efforts have yet to offset the ongoing reduction in advertising revenue. Baidu remains hopeful that upcoming technological innovations and strategic partnerships will help revive growth in the coming quarters. The company is grappling with updated market dynamics that have impacted advertising spending across various sectors.
