Baidu stock fell Thursday, after the Chinese internet services giant reported mixed second-quarter results. The company said momentum for its artificial intelligence products powered better-than-expected earnings, while sales fell short of consensus estimates.
Baidu said early Thursday that it earned an adjusted 21.02 yuan per American depositary share on sales of 33.9 billion yuan, or $4.7 billion, for its June-ending quarter. On average, analysts projected the Beijing-based company would post adjusted earnings of 18.57 yuan per ADS on sales of 34.1 billion yuan, according to FactSet.
Adjusted earnings per share decreased 7% year-over-year while revenue was flat compared to the same quarter in 2023.
On the stock market today, U.S.-listed Baidu stock fell 4% to close at 85.79.
Digital Marketing Sales Decrease
The 24-year-old Baidu operates the largest internet search platform in China. Similar to Google parent company Alphabet, Baidu's sales are powered by online marketing, with cloud-computing services as a secondary business. Baidu also operates a streaming service and has an autonomous vehicle division, among other lines of business.
Baidu's other lines of business, particularly AI, have taken on greater importance as digital marketing revenue has slowed. Online marketing revenue decreased 2% year-over-year to 19.2 billion yuan, or $2.64 billion, in the second quarter. Online marketing sales grew 3% year-over-year for Baidu in the first quarter and 6% in the fourth quarter of 2023.
Meanwhile, non-online marketing revenue was up 10% year-over-year for Baidu, which the company said was powered by it AI Cloud Business. Last year, the firm launched a ChatGPT-like generative artificial intelligence chatbot called Ernie.
"AI Cloud continued to accelerate in the second quarter, offsetting the ongoing macro headwinds for online marketing revenue and resulting in modestly positive top-line growth for Baidu Core," Chief Executive Robin Li said in a news release.
Li added that the "transformative impact of Gen-AI and foundation models is becoming more tangible in business and everyday life."
Meanwhile, the company's Apollo Go autonomous ride-hailing service provided about 899,000 rides from April through June, Baidu said, up 26% from a year earlier.
Baidu Stock Down 28% Year-To-Date
Baidu gained 2% in Wednesday trading. But the stock has struggled for more than a year amid concerns about the broader Chinese economy. Baidu stock has lost 28% year-to-date and is down nearly 31% from 12 months ago.
Coming into the report, Baidu stock had an IBD Composite Rating of 43 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, Baidu's IBD Relative Strength Rating was 14 out of 99. The RS Rating means that Baidu stock has outperformed just 14% of all stocks in IBD's database over the past year.
