Chinese tech giant Baidu’s shares rise 2% after revenue beat

BEIJING — Chinese tech giant Baidu reported Tuesday third-quarter revenue that beat expectations, although growth was slower than during the previous three months.

The company’s U.S.-listed shares were up around 2% in pre-market trade at 5:00 a.m. ET. The stock is down almost 3% over the year so far.

Revenue grew by 6% year-on-year to 34.45 billion yuan ($4.72 billion) in the quarter that ended Sept. 30. That was slightly higher than analyst expectations of 34.33 billion yuan, according to Refinitiv.

Online marketing revenue at the search engine provider was up by 5% from a year ago, while non-online marketing revenue was 6% higher over the same period.

It comes after revenue in the previous quarter surged 15% from a year ago, with online and non-online marketing revenue growing by double digits.

“Baidu reported solid third-quarter financial results, demonstrating resilience in a challenging economic climate,” Robin Li, Baidu CEO and co-founder of Baidu, said in a release.

When asked on an earnings call about slower growth in ad revenue versus internet company peers, Li said that in addition to macroeconomic weakness, revenue from e-commerce platforms was also weak.

About 10% of online marketing revenue comes from e-commerce platforms, Li said.

Adjusted earnings per American Depositary Share were 20.40 yuan in the third quarter, down from 22.55 yuan in the previous three months, but up from 16.87 yuan in the year-ago period.

Baidu reported net income of 6.68 billion yuan for the quarter ended Sept. 30, up from 5.21 billion yuan in the previous quarter.

The company said higher marketing spend contributed to an 11% year-on-year increase in selling, general and administrative expenses which came in at 5.8 billion yuan.

Research and development expenses rose by 6% to 6.1 billion year-on-year, partly due to increased server fees to support Ernie bot research, the company said. That’s a pickup from 1% growth in the second quarter from a year ago.

Ernie bot is Baidu’s version of the artificial intelligence-powered chatbot ChatGPT. Baidu only started charging for a version of Ernie bot in November — the first in China to do so at about $8 a month, Li said.

The U.S. meanwhile has increased its restrictions on sales of advanced semiconductors to Chinese companies, limiting their ability to develop artificial intelligence technology.

When asked about the restrictions, CEO Li said Baidu has “a substantial reserve of AI chips” that can allow the company to keep improving Ernie bot for the next year or two.

Li also said Baidu has made changes to the Ernie foundation model to make it more compatible with different kinds of AI chips.

In the longer term, Li said he expects companies will focus on building applications based on Ernie instead of building their own large language models.

“Baidu Core maintained stable margins in the quarter,” Rong Luo, Baidu CFO, said in a release. “Our ongoing investments in AI have underpinned technological and product innovations. Moving forward, while we will continue prioritizing investments in AI, especially in generative AI and foundation models, we will do so with an unrelenting focus on efficiency and strategic resource allocation.”

The company said its Apollo Go robotaxi business operated 821,000 rides in the third quarter, up from 714,000 rides in the second three months of the year.

In September, the suburban Beijing city district of Yizhuang officially let local robotaxi operators charge fares for fully autonomous taxis, with no drivers inside.

Fully autonomous taxis also already operate in the Chinese city of Wuhan, accounting for more than 40% of orders in the region during the third quarter, up from 35% in the second quarter, Li said on the earnings call.

Many of the robotaxis still have human staff sitting inside with the passenger for safety purposes.

The robotaxi service in Wuhan covers an area with a population of about 2.7 people, Li said, noting that since August travelers at Tianhe International Airport in Wuhan can hail an Apollo Go robotaxi.

He said the company aims to reach break-even per robotaxi on a regional basis in a “couple of years.”

Baidu also announced that Sandy Xu, former CFO of JD.com, would join the company as an independent director of the board starting Jan 1, 2024.