Baidu's AI Cloud, Robotaxi Growth And Accelerated Buybacks Position It For Strong 2025: Analyst

Benchmark analyst Fawne Jiang reiterated Baidu BIDU with a Buy rating and a $130 price target.

Jiang was surprised by the pressure on Baidu’s stock yesterday despite a generally in-line quarter with an upsized beat in AI Cloud growth.

The analyst remains a firm believer in the accelerating adoption of generative AI in China in fiscal 2025, catalyzed by DeepSeek’s breakthroughs, and views full-stack service providers like Baidu as key beneficiaries of this trend, with cross-selling monetization opportunities against a highly competitive environment.

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Baidu’s decision to open-source its upcoming ERNIE 4.5 series and offer ERNIE Bot for free access should further drive broader adoption. While Jiang acknowledged market concerns surrounding search, management has guided for a gradual recovery in ad growth, with a return to growth expected in the second half.

Additionally, the integration of generative AI in search presents new monetization opportunities, particularly in transaction-based verticals.

The analyst acknowledged the global challenge of search engines competing against new traffic gateways (Chatbot) yet noted that it’s still too early to discount Baidu’s efforts to transform its search business through AI.

Along with minimum asset value recognition in robotaxi and the expected acceleration of share buybacks, he noted an attractive risk/reward profile for Baidu stock.

With the expected growth in generative AI adoption, the analyst raised his fiscal 2025 Cloud growth projection to 20% (versus 17% prior).

Jiang noted that search engines globally are facing ongoing debates about rising competition from Chatbot as new user gateways, yet indicated that Baidu’s decision to make its ERNIE Bot free should help to level the playing field.  

On the monetization front, the analyst noted that the company will prioritize user experience but nevertheless sees viable monetization opportunities, especially in Agent.

AI Agent’s strength in mastering complex, non-standardized service portfolios is conducive to transaction-based verticals, which Baidu has largely exposed to.

In light of anticipated monetization in the second half, Jiang left his fiscal 2025 core ad growth projection unchanged at flat.

Baidu plans to focus on scaling its domestic robotaxi operations, exploring asset-light operating models, and expanding its international presence.

While Apollo Go operates at a comparable scale as Waymo in terms of quarterly rides completed, there’s minimal or no asset value reflected in the stock, which the analyst noted presents an attractive optionality for investors; admittedly, valuation catalysts remain to be materialized. Regarding capital allocation, Baidu is committed to advancing its AI capabilities and has pledged to accelerate its buyback program in fiscal 2025 to enhance shareholder returns.

Jiang projected fiscal 2025 revenue of $19.033 billion and EPS of $11.81. He expects fiscal 2026 revenue of $20.098 billion and EPS of $12.95.

Price Action: BIDU stock is down 2.30% at $88.09 at last check Wednesday.

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