Baidu, a leading Chinese technology company specializing in artificial intelligence and internet-related services, reported its second-quarter revenue figures that fell short of Wall Street's expectations. However, the company’s earnings did not decline as steeply as feared, supported by its rapidly growing AI Cloud business that has helped mitigate some of the macroeconomic challenges impacting its online marketing revenue. For the quarter ending in June, Baidu posted adjusted earnings of 21.02 renminbi, which translates to approximately $2.89 per American depositary share.
This marks a decrease from the previous year’s earnings of 22.55 renminbi. Analysts had forecast a normalized earnings per share (EPS) of 18.69 renminbi, indicating that Baidu outperformed expectations in this regard. In terms of total revenue, Baidu reported 33.93 billion renminbi, a slight decline from 34.06 billion renminbi in the same quarter last year.
This was notably below the Street's estimate of 34.04 billion renminbi, illustrating the pressures the company faces. Chief Executive Officer Robin Li commented on the results, stating, "AI Cloud continued to accelerate in the second quarter, offsetting the ongoing macro headwinds for online marketing revenue and resulting in modestly positive topline growth for Baidu Core." He further emphasized the swift renovations of Baidu's search capabilities, which the company believes will yield long-term success, even as it may have a short-term effect on their monetization strategy. Revenue from Baidu Core, which consists of its AI Cloud and Intelligent Driving segments, increased by 1% year-over-year, reaching 26.69 billion renminbi.
Breaking this down, online marketing sales saw a decrease of 2%, amounting to 19.2 billion renminbi. Conversely, non-online marketing revenue displayed considerable growth of 10%, totaling 7.5 billion renminbi, largely driven by performance in the AI cloud sector. The company’s online video platform, iQIYI, recorded revenue of 7.44 billion renminbi, reflecting a decline from 7.8 billion renminbi in the second quarter of 2023.
This decline illustrates the competitive pressures facing the platform in a rapidly evolving digital landscape. In terms of costs associated with revenue, there was a slight increase of 1%, rising to 16.4 billion renminbi. This increase was mainly attributed to higher traffic acquisition expenses and investments in the AI cloud business.
However, total costs and expenses for the company decreased to 27.99 billion renminbi, down from 28.85 billion renminbi compared to the previous year. Chief Financial Officer Rong Luo noted, "As we sped up the AI-native transformation of our products in the second quarter, we continued to optimize our operations and maintained a healthy margin.
For AI Cloud in particular, we expect growth to maintain a strong momentum." The emphasis on AI Cloud underscores Baidu's strategic pivot towards leveraging artificial intelligence as a cornerstone of its business operations moving forward. The company's stock was trading at 88.90, reflecting a price change of -0.84 and a percent change of -0.94, indicating the market's cautious sentiment in response to the earnings report.
Overall, Baidu’s performance encapsulates the intricate balance between navigating immediate revenue challenges while investing in future growth avenues with its AI-driven initiatives..