Baidu (BIDU) Sinks Despite Beating On Earnings And Revs In Q2 As Near-Term Concerns Linger
3:17 pm Tuesday, August 30th, 2022
Chinese internet giant Baidu (BIDU), often dubbed the Google (GOOG) of China, is seeing its shares sink today despite posting beats on its top and bottom lines in Q2. With over half its revenue derived from online advertising, the weak economic picture in China dented BIDU’s Q2 results to a degree. Specifically, COVID-19 continued to lead to a softening demand backdrop, adversely affecting advertising spending throughout the region. However, the situation started to improve in July, illustrated by a narrowing decline in ad revenue yr/yr from June.
In Q2, revs fell yr/yr for the first time since 2Q20, dropping 5.4% yr/yr to $4.43 bln. Ad revenue taking a 10% spill yr/yr to $2.55 bln weighed most heavily on overall revs in the quarter.
A positive standout was BIDU’s non-ad revenue, consisting of its cloud and AI offerings, which jumped 22% yr/yr to $906 mln. Although this represented a deceleration from the +35% growth seen in Q1, it marked over eight-straight quarters of double-digit growth.
One highlight from non-core revs was BIDU’s autonomous driving business Apollo, which provided over 280K rides in Q2, a nearly 500% climb yr/yr. BIDU continues to make strides in Apollo, securing regulatory permits in additional cities, which helps generate more data to implement improvements within the autonomous driving system.
BIDU also has a stake in iQIYI (IQ), sometimes referred to as the Netflix (NFLX) of China. Revenue from IQ was $994 mln, a 13% dip yr/yr. Although IQ’s membership business saw yr/yr growth in the quarter, this was more than offset by weak non-membership growth stemming from the souring macro environment.
Bottom line, we like seeing BIDU’s non-ad business continue to perform nicely in Q2, especially given the headwinds currently plaguing China. However, BIDU’s cautious commentary on the back half of FY22 is a concern and a leading cause of a sell-the-news reaction today.
