Daiwa has released a research report lowering its target price for Baidu (9888.HK) by 6.3%, from HK$160 to HK$150, while reiterating its "Buy" rating.
Daiwa noted that the slight target price adjustment mainly reflects the pressure on Kunlunxin's valuation from the weak market environment.
At the same time, due to pressure on advertising and continued investment in AI large models, the firm has cut its earnings per share forecasts for Baidu for 2026 to 2027 by 2% to 3%.
Despite the revised earnings forecasts, Daiwa emphasized that Baidu's AI cloud infrastructure business is showing significantly accelerating growth momentum.
Daiwa expects that Baidu's AI cloud infrastructure revenue growth in the third quarter will surge to approximately 90% year-on-year from about 50% in the second quarter, mainly driven by strong demand for GPU computing power and increased AI training and inference workloads from large external customers, with many clients even signing multi-year contracts and making prepayments to lock in GPU capacity in advance.
In addition, the firm expects Baidu's traditional advertising business to remain weak in the third quarter, with a year-on-year decline of over 20%; Baidu's core business adjusted operating profit is expected to be approximately RMB 1.6 billion, with the profit margin falling 2.6 percentage points year-on-year.
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