(Bloomberg) — Baidu Inc. announced a $5 billion share buyback after reporting better-than-expected revenue, reflecting how its cloud computing service is making up for an advertising break during China’s economic downturn.
Bloomberg’s Most Read
Its shares gained 6% in US premarket trading. Sales were flat at 33.1 billion yuan ($4.8 billion) for the three months ending in December, compared with expectations of 32,100. million yuan. Net income nearly tripled to about 5 billion yuan during the quarter, buoyed by gains on its investments.
Baidu is now accepting forecasts of an economic rebound as China’s internet giant emerges from a two-year drought underscored by a steady stream of regulatory investigations and far-reaching pandemic restrictions. In December, Xi Jinping’s government dismantled most of its covid restrictions and opened China’s borders to travelers a month later, raising hopes that the world’s No. 2 economy has turned the corner.
China’s Big Tech companies are able to spend again after a year of cost cutting and cautious expansion to shore up the bottom line. Baidu, for its part, is leading a race to create China’s answer to OpenAI’s hot ChatGPT. The Beijing company plans to roll out “Ernie Bot” and embed AI into its main search services in March, while partners from automakers to news sites say they will use Baidu’s tool in their businesses.
Baidu plans to make Ernie an integral part of all major lines of business, from search and smart speakers to cloud and car software platforms, founder Robin Li said in an internal memo seen by Bloomberg News.
“The development of AI technology is at a turning point, which will inevitably change all kinds of enterprises and industries,” Li said. “Baidu is the best example of long-term growth for China’s AI market.”
It’s too early to tell, even before considering censorship or the quality of Internet content in China, whether Ernie could catch up with Tencent Holdings Ltd.’s ubiquitous WeChat or Alibaba Group Holding Ltd.’s dominant Taobao. Over the years it has invested billions of dollars in artificial intelligence technology, its biggest rivals have dominated the mobile age with more consumer-friendly products.
In the short term, Baidu still has the basic online marketing service to generate cash. Meanwhile, its still-fledgling cloud unit is targeting clients including smart city projects and industrial groups to find a niche against bigger foes such as Huawei Technologies Co. and Alibaba.
Baidu’s Netflix-like subsidiary iQiyi Inc. reported revenue growth of 3%, in line with estimates, as the drop in online ad sales turned out to be less than feared.
“Baidu aims to maintain faster growth for its marketing business than China’s GDP,” Daiwa Capital analysts led by John Choi wrote in a note ahead of the results. “Some out-of-pocket share gains in e-commerce and retail advertisers will support above-GDP growth.”
(Updates with CEO comments from fifth paragraph)
Bloomberg Businessweek Most Read
©2023 Bloomberg L.P.