To The Moon

Just now, Baidu $Baidu(BIDU)$ $BIDU-SW(09888)$ released its second-quarter report, revenue and net profit exceeded expectations, and the stock price rose more than 4% before trading:

Specifically, Baidu's revenue in the second quarter was 34.056 billion yuan, an increase of 14.9% year-on-year, exceeding analysts' consensus expectation of 33.29 billion yuan:

By business, Online Advertising revenue in the second quarter was 21.08 billion yuan, up 15.4% from the same period last year, exceeding analysts' expectations of 20.39 billion yuan; Others revenue was 12.975 billion yuan, up 14% year-over-year and higher than the 12.77 billion yuan expected by analysts:

iQIYI's second-quarter revenue was 7.8 billion yuan, up 17.2% from the same period last year, slightly exceeding analysts' expectations of 7.78 billion yuan:

In the second quarter, iQIYI’s average daily number of total subscribing members was 110 million, an increase of 13.3% over the same period last year:

Baidu continued to reduce costs and increase efficiency in the second quarter, of which the cost of sales was 16.2 billion yuan, an increase of 7% over the same period last year, mainly due to the increase in content cost and traffic acquisition cost; Selling, general and administrative expenses were 6.3 billion yuan, up 32%, mainly due to the increase in channel expenditure and marketing expenditure.

The R&D expenditure was 6.4 billion yuan, an increase of 1% over the same period last year, mainly due to the increase in server depreciation and cloud-related expenses invested in supporting ERNIE Bot research, which was partly offset by a decrease in personnel-related expenditure.

Research and development expenses were RMB6.4 billion, an increase of 1%, mainly due to an increase in server depreciation expenses and cloud-related expenses to support ERNIE Bot research investment, partially offset by a decrease in personnel related expenses.

Thanks to the cost reduction and efficiency improvement, Baidu's net profit in the second quarter of 5.21 billion yuan, a year-on-year increase of 43%.

Although Baidu's revenue and net profit exceeded analysts' expectations in the second quarter, Baidu's 15% revenue growth was hardly surprising given the low revenue base caused by the Shanghai pandemic in the second quarter of last year.

Take the core online marketing services as an example, although the revenue of 21.08 billion yuan in the second quarter exceeded analyst expectations, the business revenue was 19.24 billion yuan and 20.83 billion yuan in the same period in 2019 and 2021, respectively, and the growth rate was extremely slow.

If compared with Tencent $Tencent(00700)$ $Tencent Holding Ltd.(TCEHY)$ 's advertising revenue in the second quarter increased by 34.2%, Baidu's performance will be much bleak.

All in all, Baidu's traditional main business has fallen into the era of low growth, the outbreak of AIGC may boost the traditional search business, but so far, ERNIE Bot has not contributed meaningful revenue, and the big model war is still continuing, the future is still unknown!

In terms of valuation, Baidu's current price-to-sales ratio is about 2.4 times, close to 2019 and still at the bottom:

In the earnings report, Baidu does not provide revenue guidance for the next quarter. Analysts currently expect 35.47 billion yuan, an increase of 9% over the same period last year, mainly due to the loss of the low base advantage of revenue in the second quarter of last year, coupled with the weakness of the domestic economy, analysts are worried about the disadvantage of Baidu.

In the earnings conference call, let's see whether the management can provide more information about ERNIE Bot. Baidu is in urgent need of a new growth point.