Baidu's Q3 Earnings: Revenue Slides, Weak Online Ads Market Impact Margins

On Thursday, Baidu, Inc (NASDAQ: BIDU) reported fiscal third-quarter revenue of $4.78 billion, down 3% year-on-year, topping the analyst consensus estimate of $4.69 billion. 

Baidu’s adjusted earnings per ADS of $2.37 beat the analyst consensus estimate of $2.35. The stock price slid after the print.

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Segments: Baidu’s Core revenue remained flat year over year at $3.78 billion; Online marketing revenue declined by 4% year over year to $2.68 billion. Non-online marketing revenue grew 12% year over year to $1.10 billion, driven by the AI Cloud business. 

Revenue from IQIYI, Inc (NASDAQ: IQ) decreased 10% year over year to $1.03 billion, beating the analyst consensus estimate of $1.02 billion. 

Baidu’s SG&A expenses were $836 million, up by 2% year over year, primarily due to an increase in channel spending and promotional marketing expenses. R&D expenses declined 12% year over year to $765 million, primarily due to a decrease in personnel-related expenses.  

Baidu’s adjusted EBITDA margin declined 200 bps to 26%, and its Core adjusted EBITDA margin decreased by 100 bps to 31%. As of September 30, 2024, Baidu had $20.59 billion in cash and equivalents and generated $376 million in free cash flow. 

Co-founder and CEO Robin Li said Baidu Core’s flat third-quarter revenue reflected ongoing weakness in the online marketing business, balanced by growth in the AI Cloud segment.

Strong AI capabilities gained broader market recognition, with ERNIE seeing increased adoption. Apollo Go maintained its leadership in the global autonomous ride-hailing market, achieving a milestone as the sixth-generation autonomous vehicle began operating on public roads in multiple Chinese cities.

Despite near-term challenges, Baidu remains committed to its AI-focused strategy, aiming to scale AI and drive innovation for consumers, enterprises, and society.

Interim CFO Junjie He said Baidu’s strict cost control measures supported stable operating margins for Baidu Core in the third quarter, with further cost optimizations across business units.

AI Cloud sustained healthy growth, and Apollo Go’s operational progress reinforced confidence in the fully autonomous ride-hailing business model.

Baidu stock plunged 25% year-to-date as it grappled with a weak economy, U..S. semiconductor sanctions on China.

Price Action: At the last check on Thursday, BIDU stock traded lower by 2.25% at $84.80 in the premarket session.

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