China’s Baidu to report third straight fall in quarterly profit as search advertising stays soft
Chinese online search market leader expected to resume year-on-year growth by the second quarter of next year
Chinese internet search giant Baidu is widely expected to report its third consecutive quarter of net profit decline, as the company continues to face a slow recovery in its core advertising business.
Baidu has been significantly affected by Chinese regulators’ efforts to put more stringent controls on medical-related search advertising since May, following public outrage over the death of university student Wei Zexi linked to a cancer treatment he found in an online search result.
Jefferies equity analyst Karen Chan said in a report that Baidu is predicted to post a 15 per cent year-on-year decrease in third-quarter net profit to 2.41 billion yuan (HK$2.76 billion), up 9.2 per cent from the market consensus estimate of 2.21 billion yuan.
“We expect [Baidu’s] core search [advertising business] to remain soft in the near term before year-on-year growth resumes in the second quarter next year as more of the pent-up demand comes in,” Chan said.
Baidu in July forecast its third-quarter revenue would range from 18.04 billion yuan to 18.58 billion yuan, representing a year on year decrease of 1.9 per cent to an increase of 1.1 per cent.
Jefferies estimated Baidu’s third-quarter revenue would reach 18.3 billion yuan, the mid-point of the company’s guidance.
BNP Paribas Research analyst Ling Vey-sern said in a report that Baidu’s weak third-quarter revenue guidance “reflects a full quarter impact from the more stringent controls put in place on medical-related search ads from mid-May”.