Chinese internet services giant Baidu on Thursday reported better-than-expected sales and earnings for its first quarter. But Baidu stock fell following the report.
Beijing-based Baidu reported adjusted earnings of 19.91 Chinese yuan ($2.76) per American depositary shares on sales of 31.5 billion yuan ($4.4 billion) for the March-ending quarter. On average, analysts projected Baidu would post adjusted earnings of 15.98 yuan per ADS on sales of 31.3 billion yuan, according to FactSet.
Sales advanced 1% year-over-year in local currency while earnings per share increased 24%.
On the stock market today, U.S.-listed Baidu stock is down more than 3% at 106.32 in morning trades.
Baidu's Revenue Growth Slows
Founded in 2000, Baidu operates the largest search website in China. Similar to Google parent company Alphabet, Baidu derives revenue from online marketing while also offering cloud-computing services. The company also operates a streaming service and has an autonomous vehicle division, among other lines of business.
Online marketing revenue for Baidu increased 3% year over year in the quarter, to 17 billion yuan. Non-marketing revenue increased 6% year-over-year to 6.8 billion yuan. The majority of that revenue came from Baidu's AI cloud business, the company said in its news release.
Baidu's iQIYI streaming service saw a 5% year-over-year decrease in sales, to 7.9 billion yuan.
Overall, Baidu's 1% sales growth marked a slowdown from 6% growth in both of the December and September quarters.
Baidu's AI Push: Ernie Bot
Baidu is looking to generative artificial intelligence as a potential growth driver. Last year, Baidu launched a ChatGPT-like artificial intelligence chatbot called Ernie. The company has described its AI large language model as comparable to global market leaders such as OpenAI. The company touted its AI progress in its earnings release Thursday.
"The end-to-end optimization of our AI technology stack continued to propel the growth of our AI Cloud revenue during the quarter," said Chief Executive Robin Li. "As a new era of Gen AI unfolds in China, foundation models like Ernie will serve as the underlying infrastructure, infusing various facets of people's lives."
In March, the Wall Street Journal reported that Baidu was in talks with Apple to use Baidu's AI models on iPhones in China.
Baidu Stock: Technical Ratings
Coming into Thursday trading, Baidu stock had lost 7% this year and 13% in the past 12 months.
Coming into the report, Baidu stock had an IBD Composite Rating of 61 out of 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.
Meanwhile, Baidu's IBD Relative Strength Rating was a meager 22 out of 99.
