Baidu poised to beat third-quarter earnings forecast on back of solid search recovery and newsfeed ads

Positive momentum for China’s online search giant also aided by its growing iQiyi video-streaming service and major artificial intelligence initiatives

PUBLISHED : Monday, 23 October, 2017, 5:30pm
UPDATED : Monday, 23 October, 2017, 10:29pm

Mainland internet giant Baidu looks poised to beat market expectations and exceed its own financial guidance with solid earnings growth in the quarter to September, driven by strong recovery in online search and gains in mobile newsfeed advertising.

Nasdaq-listed Baidu, the largest online search provider for China’s more than 750 million internet users, will report its third-quarter financial results at the close of trading in the US market on Thursday.

“We expect Baidu’s revenue to top its previous guidance range, with net profit rising above the market consensus,” Jefferies equity analyst Karen Chan said on Monday.

Jefferies estimated that the Beijing-based company’s third-quarter revenue would total 23.9 billion yuan (US$3.6 billion), up 1.8 per cent from the 23.5 billion yuan average forecast by a Bloomberg survey of analysts.

That would also surpass Baidu’s guidance in July of third-quarter revenue between 23.1 billion yuan and 23.7 billion yuan.

Net profit is expected to reach 4.1 billion yuan, up 9.4 per cent from the market consensus estimate of 3.8 billion yuan, according to Jefferies.

These results would show that Baidu’s core search operations continue to improve this year amid tightened regulation on its online advertising business, following public outrage last year over the death of a mainland student from a cancer treatment he found in an online search.

Baidu’s annual revenue growth slowed down to 6.3 per cent last year, compared with a 35.3 per cent increase in 2015 and 53.6 per cent in 2014.

This year, Baidu is predicted to post a 22 per cent year-on-year jump in revenue growth to about 86 billion yuan, according to market consensus estimates.

“Our channel checks suggest a solid recovery in search, which grew 8 to 12 per cent quarter on quarter, as well as strong traction in mobile newsfeed ads and broadening advertiser base,” said Chan.

“Factoring in higher time spent per monthly active user, we currently estimate search plus newsfeed ads to deliver 30 per cent yearly growth in the third quarter, up from 8 per cent in the second quarter.”

Baidu reported 470,000 active online marketing customers in the quarter to June, with revenue per customer at about 37,500 yuan.

The company’s positive momentum has also been aided by its iQiyi online video streaming service, which has an intense rivalry with Tencent Video, and its initiatives in artificial intelligence.

Nomura analyst Shi Jialong said iQiyi’s “superior self-production capability in both dramas and variety shows may help it grow to become China’s Netflix”.

Shi said that iQiyi’s reported plans to pursue an initial public offering in the United States in the first half of next year would “lift investor sentiment” for Baidu.

In September, Baidu launched the 10 billion yuan “Apollo Fund” that will invest in more than 100 autonomous driving projects over the next three years.