BIDU stock climbed on Tuesday, after Chinese internet giant Baidu reported earnings and sales ahead of expectations for its third quarter. Further, the company said its artificial intelligence products are gaining adoption, with no short-term impact from U.S. curbs on computer chip exports to China.
For the three months ended Sept. 30, Baidu said it earned an adjusted $2.80 per share, ahead of analysts expectations of $2.39 per share, according to FactSet. Meanwhile, sales climbed 6% year over year to RMB 34.4 billion ($4.7 billion), topping expectations of RMB 34.2 billion.
On the stock market today, American-listed BIDU stock added 1.9% to close at 113.42.
BIDU Stock: AI Push
Baidu, which operates the second-largest search engine in the world, said average monthly active users for its app reached 663 million in September, up 5% from the same period last year.
In October, Baidu launched the latest version of its Ernie artificial intelligence chatbot. The company credited its AI efforts with helping its results for the quarter. AI tools have been integrated within Baidu's consumer and enterprise products, the company said.
"Our AI-centric business and product strategy should set the stage for sustained multiyear revenue and profit expansion within our Ernie and Ernie Bot ecosystem," said Robin Li, Baidu co-founder and chief executive, in a news release.
Online advertising revenue climbed 5% in local currency, totaling $2.7 billion. That marked a slowdown from the annual growth last quarter.
On the company's earnings call Tuesday, Li called out reduced ad spending from e-commerce companies in particular.
Meanwhile, cloud revenue fell 2% year over year, Li said on the call, but the company expects to swing back to growth next quarter.
U.S. Chip Restriction Impact
Last week, BIDU shares fell in sympathy with Chinese internet giant Alibaba, after Alibaba officials called off a planned spinoff of its cloud-services business. The company cited recent U.S. restrictions on exporting high-end computing chips to China.
Asked about the export restrictions by analysts Tuesday, Li said on the earnings call that Baidu has "a substantial reserve of AI chips which can help us keep improving Ernie Bot for the next year or two."
But long-term, "having difficulties in acquiring the most advanced chips inevitably impacts the pace of AI development in China," Li said. "So, we are proactively seeking alternatives."
Reuters reported earlier this month that Baidu had purchased AI chips from China-based Huawei.
Baidu updated its Ernie foundational model to be more compatible with a wider range of chips, Li added on the call.
BIDU Stock: Technical Ratings
Following the report, CFRA analyst Angelo Zino maintained a hold rating for BIDU stock. Further, CFRA lowered its price target for BIDU to 120 from 140.
"Despite the decent results, we are wary about deflationary pressures in China and the potential impact to BIDU's advertising-driven business, as well as greater U.S. restrictions around leading-edge AI chips (GPUs) that could stunt AI progression," Zino wrote in a client note Tuesday.
Nasdaq-listed BIDU stock is trading nearly flat for the year as of market close Tuesday. Shares are down a half-percent overall in 2023.
BIDU stock holds a so-so Composite Rating of 62 out of a best-possible 99, according to IBD Stock Checkup. IBD's Composite Rating combines fundamental and technical metrics for an overview of a stock's strengths. The best-rated growth stocks have a Composite Rating of 90 or better.
