Baidu dips after Q3 online marketing revenue disappoints, but cloud business picks up

Baidu’s (NASDAQ:BIDU) stock fell about 3% premarket on Thursday following its mixed third quarter results.

The Chinese internet search giant’s non-GAAP earnings per American depositary share, or ADS, tumbled 19% year-over-year to RMB16.60, or $2.37, missing estimates. Meanwhile, total revenue declined 3% year-over-year to RMB33.56B, or $4.78B, but beat analysts’ estimates.

“Baidu Core’s flattish third quarter top line reflected the ongoing weakness in our online marketing business, offset by the growth of our AI Cloud business,” said Baidu’s Co-founder and CEO Robin Li.

Li noted that the company’s AI capabilities are gaining broader market recognition, due to the increasing adoption of its AI model Ernie.

“Baidu AI advancements remain a key driver, with the ERNIE foundation model handling 1.5 billion API calls daily in November 2024, up significantly from 600 million in August,” said a Baidu spokesperson in an email to Seeking Alpha. The remarks reiterated what Li noted earlier this month at the Baidu World 2024 Conference in Shanghai.

The company’s PaddlePaddle and ERNIE developer community expanded to 18.1 million in November, compared to 14.7 million in June 2024, according to Baidu.

“Despite the near-term pressures, we remain steadfast in our AI-focused strategy and are confident in our long-term trajectory,” said Li in the company’s earnings release on Thursday.

Baidu’s autonomous ride-hailing service provided 988K rides in the third quarter of 2024, up 20% year over year.

The company added that its sixth generation autonomous vehicle RT6 is now operating on public roads in several cities in China.

In September, Baidu App’s monthly active users, or MAUs, reached 704 million, up 4% year over year. In June, the MAUs were 703 million.

For the third quarter (July to September) revenue from Baidu Core was flat year-over-year at RMB26.52B ($3.78B).

Online marketing revenue declined 4% year over year to about RMB18.8B ($2.68B), while non-online marketing revenue was RMB7.7B ($1.10B), up 12% year over year, mainly due to the AI cloud business.

China’s cloud services market has heated up with players such as Baidu, Alibaba (BABA), ByteDance (BDNCE), Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) and iFlytek having cut prices of their LLMs, which power AI chatbots, earlier this year to woo customers.

Online entertainment service iQIYI (IQ) saw revenue decrease 10% year-over-year to RMB7.2B ($1.03B). Baidu owns a majority stake in the company.

Shares of iQIYI (IQ) fell about 4% premarket on Thursday following its quarterly results.

Stock Buyback: Baidu noted it bought back shares worth $161M since early third quarter of 2024, bringing the cumulative buyback to about $1.4B under the 2023 share repurchase program.