Baidu Rocks Q2 Report With The Power Of AI

On Tuesday, Baidu Inc (NASDAQ: BIDU) reported stronger-than-expected second quarter revenue as it was fueled by advertising growth. In response, Baidu shares rose more than 4% in premarket trading today. Baidu has also been making profess with the alternative to ChatGPT that is not easily accessible in the country, so Microsoft Corporation (NASDAQ: MSFT) and Open AI are now facing an increasingly competitive landscape on the other side of the globe. Baidu has joined the AI hype, along with Alibaba Group Holdings Limited (NYSE: BABA) and Tencent Holdings Limited (OTC: TCEHY) who revealed last week it will be launching its AI model for use in gaming and advertising later this year. Like Microsoft who integrated ChatGPT in its Microsoft 365 offerings, Tencent already integrated its AI model with Tencent Cloud, Tencent Meeting and Tencent Docs, while also listing that Tencent Games, Tencent Advertising, QQ Browser, WeChat Search and Tencent Fintech to have been testing the model.

Second Quarter Highlights

Boosted by growth in advertising, revenue grew 15% YoY to 34.1 billion yuan ($4.7 billion), which was far ahead of Refinitiv’s consensus estimate of 33.28 billion yuan. According to Refinitiv, this is Baidu’s fastest quarterly YoY growth pace in two years.

Online marketing revenue expanded 15% to 19.6 billion yuan while non-online marketing revenue grew 12% to 6.8 billion yuan. The YoY growth in marketing sales is owed to AI that was used to better match ads to Baidu search queries. As a reminder, Baidu operates China’s primary internet search engine along with commonly used consumer apps for navigation and cloud document storage.

AI Progress

Ernie bot that was launched in March is now open to the public, unlike the Microsoft and Open AI alternative that cannot be easily accessed in China. Last week, Baidu revealed that five Ernie bot plugins, including those that convert text to video and for PDF search, will also be widely available, with three of them being able to be used simultaneously. Until now, companies were prioritized for access to Baidu’s AI tool, and the unavailability of Microsoft-supported tool made quite the waiting list. As for its integration with consumer facing apps, Baidy is still waiting for regulatory greenlight but CEO and co-founder Robin Li described the latest version of China’s AI rulebook that took effect a week ago as being supportive of innovation.  

Also last week, Baidu unveiled its AI assistant that can be of help in booking meetings and travel arrangements, such as tickets and hotels. Like Tencent who started expanding the use of its AI tool, Baidu is also exploring the ways in which it can bring AI further, such as to the automotive world. It entered into a strategic agreement this month with Changan Automobile to develop autonomous driving capabilities based on the same model on which it built its Ernie bot. 

This is undoubtedly only the beginning of the AI story with a new era on the horizon, one that Baidu has entered with a solid performance of its online marketing business that merely got a glimpse of the boost that AI is capable of giving. With Chinese regulators paving the way for tech innovation, Baidu, along with Alibaba and Tencent, have a long runway for AI development that will undoubtedly change the way the world works, both online and offline.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.