To The Moon

$Baidu(BIDU)$ $BIDU-SW(09888)$ released its fourth quarter report in premarket, with revenue slightly below analysts' expectations:

However, under the strategy of reducing costs and increasing efficiency, Baidu's profitability once again exceeded expectations.Unfortunately, the market didn't seem to appreciate it, and Baidu's stock price tanked by nearly 6% in pre-market:

Revenue in the fourth quarter was 34.95 billion yuan, up 5.7% from a year earlier, slightly less than the 35 billion yuan expected by analysts:

Such a slight difference is negligible, coupled with the improvement on the profit side, Baidu's earnings report is not bad compared with expectations.

However, the current growth rate of Baidu is really worrying. The impact of the pandemic in the fourth quarter of last year basically disappeared, coupled with the fourth quarter of 2022 coincided with the most serious time of the pandemic, it was also the low point of Baidu's performance. Despite this low base, revenue growth in the fourth quarter of last year was only 5.7%, indicating a loss of growth momentum.

By segments, revenue from advertising was 20.8 billion yuan, an increase of 6.3%, Others revenue was 14.1 billion yuan, an increase of 4.7% :

In the whole year of 2023, Baidu's revenue was 134.6 billion yuan, an increase of 8.8% over the same period last year:

Over a long period of time, Baidu's compound annual growth rate in the last five years is only 5.65%, which is really weak!

Although the profit exceeded expectations, it was also brought about by cost reduction and efficiency. For example, Selling, general and administrative expense in the fourth quarter was 5.85 billion yuan, down 0.5% year-on-year.

On the other hand, Research and Development expense has increased by 11.1% against the trend due to AI investment:

Sure, we can cut back on sales expenses, but research and development cannot be halted. Looking ahead, AI investments still need to be scaled up, and it's going to be tough to lower those expenses anytime soon.

Baidu has invested a lot in AI, but the revenue hasn't budged. Back in the day, the "all-in AI" mantra was shouted from the rooftops, and the autonomous driving business was constantly touted.

But now, all we hear in the financial report is that "Baidu's self-driving taxi service, Apollo Go, provided 839k rides in the fourth quarter of 2023, up 49% year-on-year. As of January 2, 2024, Apollo Go has provided over 5 million rides on open roads." And that's it. No mention of revenue.

The same goes for ERNIE Bot. It was all the rage last year, but now it seems like it's vanished into thin air.

And let's not forget about $iQiyi Inc.(IQ)$ , which is also stuck in neutral. Fourth-quarter revenue was 7.7 billion yuan, a mere 2% year-on-year growth. Daily total subscribed members in the fourth quarter were 100.3 million, which is no longer growing compared to the 111.6 million in the fourth quarter of 2022 and the 107.5 million in the third quarter of 2023. But thanks to membership price hikes, the average monthly revenue per member (ARPU) is now 15.98 yuan, up from 14.17 yuan and 15.54 yuan in the previous quarters.

So, iQIYI is pretty much stuck where it is. If ERNIE Bot doesn't pan out, where is the future growth of Baidu?

All that's left is a cheap valuation and 200 billion yuan sitting idly on the balance sheet.

Even though the cash on the books is almost equal to the company's total market capitalization, what's the point if Baidu doesn't use it for a major repurchase?

In the fourth quarter of last year, Baidu repurchased $318 million worth of shares, and for the whole year, it repurchased $669 million. That's not even enough to make a dent in the company's lack of growth. Might as well use that cash to reward shareholders.

Unfortunately, Robin Li doesn't seem to understand his destiny. He'd rather let the money sit in the bank earning interest than use it for a major repurchase. And he's still not giving up, investing even more in AI with ERNIE Bot.

If the company's reinvestment can't generate good returns, it might be better to just give the money back to shareholders.