Baidu revenue beats estimates as core search business recovers
- Users and advertisers returned to Baidu’s core search business in the last quarter of 2020
- The Chinese internet giant has made major investments into artificial intelligence
Baidu Inc’s quarterly revenue rose a better-than-expected 5 per cent after the company lured users and advertisers back to its core search business.
Revenue came in at 30.3 billion yuan (US$4.64 billion) for the three months ended December 31, compared with analysts’ average estimate of 30.1 billion yuan. China’s internet search leader forecast sales of 26 billion yuan to 28.5 billion yuan for the period ending in March.
Once one of China’s big three technology titans alongside Alibaba Group Holding Ltd and Tencent Holdings Ltd, Baidu is playing catch up as the country’s internet users increasingly shift from desktop to mobile. To compete, its flagship search app is morphing into an all-encompassing social platform not unlike Tencent’s WeChat, and the company is close to complete its US$3.6 billion acquisition of Joyy Inc’s YY live-streaming network. Baidu apps accounted for 8 per cent of Chinese users’ time spent in December, half that of TikTok owner ByteDance’s 16 per cent, according to researcher QuestMobile.
Shares of Baidu have surged nearly threefold from their March lows as China’s rebound from the pandemic drove ad spending and the company took steps to monetise its suite of AI technologies.
The internet giant has over the years sunk billions of dollars into areas from language learning to voice interaction and autonomous driving, betting on smart devices and vehicles of the future. Now, aided by years of investment and Beijing’s bid to build smart nationwide infrastructure, these efforts are finally paying off. In January, the company announced it is teaming up with Zhejiang Geely Holding Group to produce smart electric vehicles, prompting analysts to hike their value estimates for Baidu’s self-driving unit Apollo.
“The route and prospects for Apollo’s commercialisation are becoming clearer,” Huatai Securities analysts led by Saiyi He said in a report before the earnings. “We believe the government should encourage smart travel, supported by operating systems developed domestically.”
With its AI applications still in the early stages and R&D investments likely to keep compressing margins, Baidu has sought external capital to bankroll its expansion. Last year, the company’s smart speaker division received its first independent financing round at a US$2.9 billion value. It has recently reached out to investors including IDG Capital and GGV Capital to raise funds for its AI chips unit ahead of a potential spin-off of the business, people familiar with the matter have said.
At the same time, Baidu is seeking to raise another US$3 billion in its biggest syndicated loan deal, Bloomberg News reported last week. Those funding efforts precede a Hong Kong share sale that is said to be on track to raise US$3.5 billion