Baidu's U.S.-listed stock initially gained after the China search giant posted stronger-than-expected first quarter earnings, helped by AI cloud growth. But Baidu stock retreated lower by end of day, continuing the trend of its shares lagging compared to China tech peers such as Alibaba Group and Tencent Holdings.
In a news release published early Wednesday, Baidu said its adjusted earnings declined 7% year over year to 18.54 yuan per American depositary share (ADS). Analysts polled by FactSet expected earnings of 14.38 yuan per ADS for the March-ended quarter. Meanwhile, revenue increased 3% year over year to 32.45 billion yuan, or $4.47 billion. That beat estimates of 31 billion yuan. Sales fell 2% in Baidu's December quarter.
Baidu's AI Cloud revenue increased 42% year over year, Chief Executive Robin Li said in a statement.
"The strong performance of our AI Cloud business underscores the growing market recognition of our distinctive strength in providing full-stack AI products and solutions with a highly competitive price-performance advantage," Li said.
However, online marketing sales decreased 6% year over year to 16 billion yuan. Advertising revenue is Baidu's largest overall business.
"While core advertising remains pressured due to macroeconomic challenges and increasing competition from entertainment and commerce platforms, we see easier year-on-year comparisons and more favorable policies supporting revenue," CFRA analyst Angelo Zino wrote to clients following Baidu's report Wednesday. "We expect Baidu's AI initiatives, particularly in Cloud and autonomous driving, to be key to long-term growth amid near-term advertising weakness."
On the stock market today, U.S.-listed Baidu stock fell 4.3% to close at 85.48.
Baidu Stock Up 1.7% This Year
Baidu was one of the quickest Chinese tech companies to embrace AI, launching a ChatGPT-style AI bot called Ernie X1 late in 2023. It is battling for AI leadership among Chinese companies. That includes tech giants Alibaba and WeChat parent company Tencent, as well as startups like DeepSeek.
But concerns about Baidu's core advertising business have weighed on shares, despite AI optimism and a broader rally for China tech stocks this year.
Wednesday's slide leaves Baidu's U.S. shares with a slight gain of 1.7% year to date, lagging the 47% rally from Alibaba's U.S. stock and 24% gain from Tencent, which trades over the counter in the U.S.
Baidu stock also fell decisively below its 21-day moving average, as well as the longer-term 50-day moving average and 200-day trend line.
Further, Baidu stock has a weak IBD Composite Rating of 52 out of best-possible 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.
