Chinese tech giant Baidu (BIDU -1.73%) released its first-quarter results for 2024 on Thursday, May 16, that suggest earnings were a mixed bag with small gains in revenue and EPS balanced by a drop in net income.
Baidu reported a total revenue of 31.51 billion yuan ($4.37 billion), slightly exceeding the analyst estimate of 31.35 billion yuan ($4.34 billion). Earnings per share (EPS) were a bright spot, with Baidu posting a non-GAAP EPS of 19.91 yuan ($2.76), significantly above the FactSet consensus analyst expectation of 15.97 yuan ($2.21). Overall, the quarter highlighted Baidu's strategic shifts, with notable progress in AI Cloud and autonomous driving.
| Metric | Q1 2024 | Analysts Estimate | Q1 2023 | Change (YOY) |
|---|---|---|---|---|
| Total revenue (RMB) | 31.51 billion | 31.35 billion | 31.14 billion | 1% |
| Non-GAAP EPS | RMB19.91 | RMB15.97 | RMB16.10 | 24% |
| Online marketing revenue (RMB) | 17 billion | N/A | 16.6 billion | 3% |
| Net income to Baidu (RMB) | 5.44 billion | N/A | 5.83 billion | (6%) |
|
Data sources: Company results from company. Analyst estimates from FactSet. RMB = Chinese yuan renminbi. YOY = Year over year. GAAP = Generally accepted accounting principles. |
||||
Baidu's business overview
Baidu is a leading Chinese internet-based company known for its search engine, Baidu Search, and various other services and products in areas such as AI and cloud services. It remains a dominant force in China's technology landscape, with a diverse portfolio of offerings.
Recently, Baidu has focused on expanding its presence in mobile internet services and AI technologies. Key success factors include maintaining and growing the company's user base, monetizing through advertising, and advancing AI cloud initiatives. These areas are crucial as they represent high-growth potential and help diversify the revenue streams beyond its core search business.
Performance highlights
The most notable aspects of Baidu's Q1 2024 results include strengths in its AI Cloud and autonomous driving segments. Baidu's online marketing revenue reached 17 billion yuan ($2.36 billion), up 3% year over year. This growth is despite economic fluctuations affecting advertising budgets, reflecting the resilience of its core services. However, the total revenue from online marketing services has not grown as quickly as other segments.
Baidu's mobile ecosystem saw increased engagement, with Baidu App's monthly active users (MAUs) growing 3% year over year to 676 million. Managed Page accounted for 50% of Baidu Core's online marketing revenue, indicating a strategic shift. Despite these positives, intense competition in the mobile space remains a significant challenge.
Additionally, Baidu's AI Cloud business showed strong momentum, contributing 6.8 billion yuan ($935 million) in non-online marketing revenue, a 6% increase year over year. As the company continues to invest in AI technologies, such as making its Ernie family of large language models (LLMs) more accessible, these initiatives serve as a promising future growth area.
Baidu's autonomous driving service, Apollo Go, provided approximately 826,000 rides in Q1 2024, marking a 25% increase year over year. The growing adoption of these services reflects Baidu's progress in this innovative sector, though achieving profitability remains a work in progress.
Meanwhile, Baidu's entertainment segment, iQIYI, reported a 5% decline year over year in revenue to 7.9 billion yuan ($1.10 billion). This decline underscores the challenges in monetizing streaming content amid intensified competition and market saturation.
Looking ahead
Looking forward, Baidu's management expects continued focus on operational efficiency and strategic investment. CFO Rong Luo stated, "In the coming quarters, we will execute on optimizing our operational efficiency in support of our AI-enabled businesses and high-quality growth, aiming to maintain a healthy non-GAAP operating margin."
For investors, key areas to monitor include the progress in AI Cloud, the expansion of autonomous driving solutions, and the adaptation of its core advertising business to changing economic conditions.
Management's guidance indicates cautious optimism, with steady investments in high-growth sectors like AI and autonomous driving expected to yield significant future returns. Keeping an eye on these developments and how they impact overall profitability will be crucial in the upcoming quarters.
