Everbright Securities reiterated its "Buy" rating on Baidu Group-SW (09888), citing strong AI-driven performance growth. In Q3 2025, Baidu's core business revenue reached RMB 24.66 billion, exceeding expectations by 1.5%, with AI-related revenue surpassing RMB 10 billion for the first time, up over 50% year-on-year. Apollo Go accelerated global expansion, while AI-native advertising became the second growth curve complementing traditional search. Key highlights include:

**Financial Performance** Baidu's core business generated Q3 revenue of RMB 24.66 billion (+1.5% vs. estimates), with operating profit at RMB 1.22 billion (4.9% margin). Increased AI investments reduced reliance on traditional search, while capital expenditures surged 106.4% YoY to RMB 3.38 billion.

**AI Breakthroughs** AI revenue hit RMB 10 billion (+50% YoY), driven by: 1) **AI Cloud**: RMB 6.2 billion (+21% YoY), including RMB 4.2 billion from IaaS/PaaS (+33% YoY) and 128% growth in AI infrastructure subscriptions. 2) **AI Applications**: RMB 2.6 billion from products like Baidu Docs, Baidu Netdisk, and enterprise AI tools. 3) **AI-Native Ads**: Revenue soared 262% YoY to RMB 2.8 billion, now accounting for 18% of core ad revenue (vs. 4% in Q3 2024), boosted by Agent and digital human solutions.

**Apollo Go Expansion** Autonomous ride-hailing service Apollo Go completed 3.1 million trips (+212% YoY), expanding to 22 global cities. Partnerships with Uber (Asia/Middle East) and Lyft (Europe) underscore its global ambitions.

**Outlook & Valuation** Everbright expects Baidu’s AI ecosystem—spanning ads, proprietary models, and chips—to sustain growth. It maintains 2025–27 revenue forecasts of RMB 130.8/139.9/148.3 billion and Non-GAAP net profit estimates of RMB 18.2/20.5/23.0 billion, with shares trading at 15x/14x/12x forward PE. Risks include macroeconomic headwinds and slower AI monetization.