What happened
Shares of Baidu (BIDU +11.37%) charged sharply higher on Tuesday, surging as much as 11.7%. As of 3:24 p.m. ET, the stock was still up 8.5%.
The catalyst that sent the Chinese tech giant higher was mixed quarterly earnings results that were still better than expected.
NASDAQ: BIDU
Key Data Points
So what
For the fourth quarter, Baidu generated revenue of 33.1 billion yuan (roughly $5.2 billion), up 9% year over year. The company reported net income of 1.7 billion yuan ($269 million), a decline of 67% compared to the prior-year period. This resulted in earnings per share (EPS) of 11.60 yuan ($1.82).
Image source: Getty Images.
To put those numbers in context, analysts' consensus estimates were calling for revenue of 32.3 billion yuan ($5.12 billion) and EPS of 9.39 yuan ($1.47).
Baidu reported a slowdown in its core online advertising business, which grew just 1% year over year, the result of a decline in consumer spending, which in turn resulted in lower ad rates.
What surprised investors was the robust contribution from the company's non-core businesses -- including Baidu Cloud, artificial intelligence, and self-driving cars -- as revenue from these businesses surged 63% year over year, helping fill the shortfall from its advertising business.
Additionally, the results from iQiyi (IQ +2.50%), the company's streaming video platform, were much better than expected. Revenue of 7.4 billion yuan ($1.16 billion) was down about 1% year over year. The good news was that iQiyi's cost-cutting initiatives reduced losses by 25% compared to the prior-year period.
Now what
Many technology companies -- including Baidu -- have faced regulatory crackdowns by the Chinese government, and these have weighed on results. At this point, analysts posit that the worst may be over, removing a significant overhang that had investors watching from the distance.
The improving performance of Baidu's adjacent businesses is great news for investors and bodes well when there's a rebound in the advertising segment.
