To The Moon

Before the US stock market opened on May 16, Baidu $Baidu(BIDU)$ $BIDU-SW(09888)$ released its first-quarter results for 2023, and its share price rose nearly 5% at one point:

Compared with analysts' expectations, Baidu once again delivered more than expected results:

Specifically, Baidu's revenue in the first quarter was 31.1 billion yuan, exceeding analysts' consensus expectations of 30 billion yuan, up 9.6% year-on-year:

Judging from the quarterly revenue trend, Baidu initially reversed in the second half of last year, while revenue growth returned to 10% in the first quarter, and the operating turning point was officially established.

By business, Baidu's online marketing business revenue in the first quarter was 17.97 billion yuan, up 6.2% year on year; non-online marketing revenue was 13.17 billion yuan, up 14.7% from the same period last year:

In the quarterly results, Baidu did not give second-quarter performance guidance, but given the severe pandemic in Shanghai and the whole country in the second quarter of last year, Baidu's second-quarter revenue growth is expected to be higher from a low base.

In addition to the core business, iQIYI $iQiyi Inc.(IQ)$ 's revenue growth rate has also increased to 14.7% this quarter, and the total income has reached an all-time high:

iQIYI's average daily number of total subscribing members for the quarter was 129 million, compared to 101 million for the first quarter of 2022, a record number of paying users:

In terms of expenses, Baidu continued to reduce R&D investment in the first quarter, down 3.3% from the same period last year, but Selling, general and administrative expenses unexpectedly increased by 20% this quarter, returning to the expansion range:

As other income in the quarter, mainly from fair value changes resulting from long-term investments, reached 1.5 billion yuan, compared with a loss of 3 billion yuan in the same period last year. Other income rose sharply to 2.6 billion yuan in the first quarter, bringing net income to 6.382 billion yuan, compared with a loss of 750 million yuan in the same period last year.

Therefore, the price-to-earnings ratio valuation is very difficult to truly reflect performance. Here, the price-to-sales ratio valuation, that is, a multiple of revenue, which is currently 2.5 times, is still at a relatively low valuation in recent years:

From the quarterly report, there is no doubt that Baidu's operating turning point has arrived, and the future is expected to usher in Davis Double Play, which valuation and performance rise at the same time to bring a big rise in the stock price.

As for the ability of AI to Baidu's performance, it is not obvious at present, and we will see what kind of information the management will release on the earnings call!