To The Moon

$Baidu(BIDU)$ $BIDU-SW(09888)$ is scheduled to report results on 18 February 2025 for the period ending 31 December 2024.

BIDU is expected to report a 4.7% decrease in revenue to CNY33.32 billion from CNY34.95 billion a year ago, according to the mean estimate from 19 analysts, based on LSEG data.

The earnings per share is expected to come in at CNY13.02 per share or $1.98.

Baidu (BIDU) Last Neutral Earnings Call Give a 12.37% Change Since

Baidu gave an earnings call on 21 Nov 2024 which has a neutral sentiment but BIDU has since saw a change of 12.37% to its share price.

The earnings call highlighted Baidu's strong performance in AI innovations and autonomous driving, with significant improvements in ERNIE and cloud revenue growth.

However, these positives were offset by overall revenue decline and macroeconomic challenges affecting core advertising business, resulting in a balanced outlook.

Baidu (BIDU) Guidance To Focus On AI-Driven Transformation

During Baidu's Q3 2024 earnings call, the company provided several key metrics and guidance regarding its performance and strategic focus. Baidu's total revenue was reported at RMB 33.6 billion, with Baidu Core contributing RMB 26.5 billion, remaining flat year-over-year. The AI cloud revenue showed an 11% year-over-year growth, reaching RMB 4.9 billion. The company's non-GAAP operating profit margin for Baidu Core stood at 25%. Baidu also highlighted its AI-driven transformation efforts, particularly with its ERNIE models, noting that ERNIE handled approximately 1.5 billion API calls daily in November, up from 600 million in August, showcasing strong market adoption.

ERNIE's enhanced capabilities have led to diverse applications, resulting in a significant increase in API calls and token generation. The company emphasized its commitment to AI innovation, with advancements in its AI infrastructure and a focus on expanding AI capabilities across its product lines.

Additionally, Baidu's autonomous driving service, Apollo Go, provided approximately 988,000 rides in the third quarter, marking a 20% year-over-year increase. The company remains cautiously optimistic about macroeconomic conditions and anticipates improvements in its advertising business next year, driven by its strategic emphasis on AI.

AI Cloud and Apollo Go Could Be The Catalyst For Revenue Growth

In the third quarter, BIDU saw the AI cloud revenue reached RMB 4.9 billion in Q3, maintaining a double-digit year-over-year increase at 11%, driven by Gen AI-related revenue. This trend could continue into the four-quarter as the demand for AI Cloud from Chinese businesses saw an increase as the countries began to see AI deployment across multiple industries.

ERNIE Model Enhancements To Give Result In Four-quarter

ERNIE 4.0 Turbo achieved notable improvements in inference efficiency, with throughput increasing significantly since its debut in June. ERNIE handled approximately 1.5 billion API calls daily in November, up from 600 million in August. We should be seeing more API calls demand from ERNIE as may chinese companies would be riding on this model to enhance their own existing AI model.

Higher Subscription Expected For Baidu Wenku

AI-enabled features in Baidu Wenku exceeded 50 million uses in September, representing a year-over-year increase of over 300%, with subscription revenue growing by 23% year-over-year. I am expecting the subscription for Baidu Wenku to increase as there are more and more integration on AI projects among enterprises and also startups.

Apollo Go Creating New Autonomous Driving Milestone

Apollo Go provided about 988,000 rides in Q3, a 20% year-over-year increase, and surpassed 8 million cumulative rides in October. We should be able to see a new milestone record in the cumulative rides as cumulative rides in December would continue to increase even towards 10 million.

Macroeconomic Impact Might Weaken Financial Performance

In the third quarter, Non-GAAP operating income was RMB 7 billion, with a non-GAAP Baidu Core operating margin of 25%. Total revenues were RMB 33.6 billion, decreasing 3% year-over-year. Baidu Core's online marketing revenue decreased by 4% year-over-year. This might see Q4 having a dip in the marketing revenue from Baidu Core, but hopefully AI Cloud and Apollo Go revenue contribution could help to offset the dip.

But we need to take note of the challenging macroeconomic conditions affected Baidu Core's online marketing revenue and IT revenue, which decreased by 10% year-over-year.

Expect To See Further Decline In Operating Expenses

In the third-quarter, operating expenses were RMB 11.2 billion, decreasing 5% year-over-year, mainly due to reduced personnel-related expenses. This trend could continue into four-quarter and should help Baidu to better manage its cash flow.

Baidu (BIDU) Price Target

Based on 14 Wall Street analysts offering 12 month price targets for Baidu in the last 3 months. The average price target is $106.47 with a high forecast of $144.60 and a low forecast of $79.00. The average price target represents a 9.22% change from the last price of $97.48.

BIDU share price might remain range-bound around the $100 to $110 level if the earnings beat estimates, but the guidance and outlook for 2025 need to be positive on the AI transformation as it could be affected by the economic condition in China.

BIDU could be benefitting from the ongoing tariffs as Chinese companies might look towards domestic for IT services including the AI spending.

Technical Analysis - Exponential Moving Average (EMA)

We are seeing a very nice upside move in the later part of last week where we saw a crossover of the RSI over the RSI MA, this has help BIDU trade above the 200-day period as well as clearing the 12-EMA level.

I would be expecting an earnings surprise from BIDU as they should be benefitting from the ongoing tariffs from the U.S., but one thing we need to understand is whether IT spending would picked up from the Chinese companies as China is navigating its economic slowness.

I am expecting BIDU to be trading range bound in the asian market as U.S. is having a holiday on 17 Feb 2025.

Summary

I would be watching how BIDU could be trading on 17 Feb in the Asian market as it should give us an idea on how investors would be looking at BIDU before its earnings result tomorrow (18 Feb) before market open.

Appreciate if you could share your thoughts in the comment section whether you think BIDU would be able to beat the estimate with stronger IT spending and AI demand from its domestic market.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.