Baidu will release its Q3 FY2025 earnings report before the U.S. market opens on November 18. According to data projections from Tiger International APP, Baidu's revenue for the third quarter is expected to be RMB 30.71 billion, a year-on-year decrease of about 8.13%. Earnings per share are expected to be RMB 7.66, a year-on-year decrease of 56%.
Although revenue and profit figures may decline, the company's innovations and transformations in several fields, including artificial Intelligence (AI), cloud services, autonomous driving, and content ecosystem, continue to provide strong support for future growth.
Last Quarter Review: Advertising Revenue Faces Challenges, AI Innovation Business Shines
Baidu's Q2 revenue was RMB 32.71 billion, down 4% year-on-year, roughly in line with market expectations of RMB 32.74 billion. Despite the overall decline in revenue, the company's performance in several key areas remained outstanding.
Advertising Business: Baidu's core revenue source - online marketing revenue - fell by 15% year-on-year to RMB 16.2 billion. The weakness in the advertising business reflects some short-term pressures on Baidu's AI transformation of its search business, especially in monetization capabilities.
AI Innovation Business: Baidu's non-online marketing revenue grew by 34% year-on-year, surpassing RMB 10 billion for the first time, mainly driven by its AI cloud business. As AI technology continues to be deeply applied, Baidu's AI cloud business is gradually becoming a key growth engine for the company, showing strong development potential.
iQIYI: Baidu's online video platform iQIYI reported Q2 revenue of RMB 6.6 billion, a year-on-year decline of 11%. Although overall revenue was under pressure, iQIYI's member growth strategy and content layout continued to advance steadily.
Autonomous Driving: Baidu's Apollo Go autonomous driving business continued to expand, achieving a 148% year-on-year increase in fully driverless orders in the second quarter, reaching 2.2 million. Cooperation with global mobility giants Uber and Lyft has accelerated the commercialization process of Apollo Go in the global market.
Highlights This Quarter: AI, Cloud Services, and Autonomous Driving Could Become Growth Drivers
Looking forward to the third quarter, Baidu will continue to accelerate its AI commercialization process, especially in the fields of search, cloud services, and autonomous driving, which are expected to provide stable revenue and profit support for the company.
Online Marketing and AI Search Transformation: Baidu's AI search transformation is accelerating. The proportion of AI-generated search results on mobile search pages continues to rise, significantly increasing user activity and retention. Baidu is promoting the personalization of search results, generating customized responses based on user behavior and interests, to improve user experience and enhance user stickiness. This strategy not only helps to improve the conversion efficiency of search ads but also may lay the foundation for long-term growth.
Intelligent Cloud: Baidu's intelligent cloud business is also steadily growing, becoming a key part of its AI strategy. The company provides full-stack AI solutions to help enterprises achieve efficient application of AI technology and business transformation. With the further expansion of the domestic AI market, Baidu is expected to lead in the AI ecosystem transformation.
Autonomous Driving: In the field of autonomous driving, Baidu's Apollo Go is accelerating its global expansion. As a global leader in the Robotaxi field, Baidu has achieved fully driverless operations in several left-hand drive markets. Additionally, the company's expansion in right-hand drive markets is also steadily progressing, expected to promote the wide application of smart driving technology in the coming years as partnerships deepen and market conditions adapt.
AI Commercialization and Enterprise Digital Intelligence: With the maturity of generative AI technology, Baidu's Wenxin ecosystem platform is realizing multi-scenario commercial applications from enterprises to consumers. The implementation of large models will advance in areas such as customer service, marketing, content generation, and code writing, potentially increasing the willingness to pay and renewal rates of enterprise customers, driving the growth of smart cloud and solution businesses.
Advertising and Content Ecosystem: Dual-Engine Profit Model
Although advertising revenue declined in the second quarter, as the macro economy recovers and AI improves ad conversion efficiency, Baidu's search and information flow advertising business is expected to rebound. This quarter, local services, travel, education, and other industry advertisers' budget returns are expected to support Baidu's advertising business, enhancing ad placement ROI and retention rates.
iQIYI's revenue growth relies on both member payments and advertising revenue. Despite uncertainties in content procurement and blockbuster cycles, iQIYI is expected to improve ARPU (average revenue per user) and ad revenue through refined pricing strategies and cost control. If content and advertising can achieve a virtuous cycle in the future, iQIYI's profitability is expected to improve further.
Analysts' Views: Optimistic About AI Commercialization, Short-Term Challenges Remain
Recent institutional and analyst views generally hold an optimistic outlook on Baidu's future development, especially its AI commercialization process. Several research institutions have pointed out that as the Wenxin ecosystem platform deepens its application in government, enterprise, and the internet industry, Baidu's smart cloud order growth and AI value-added services will become new revenue pillars for the company. Additionally, search and information flow advertising are expected to benefit from the recovery in macro demand and AI-driven conversion efficiency improvements, gradually improving profit structure.
However, institutions also noted that Baidu's profits may be affected by AI investment and computing power costs in the short term. As Baidu continues to invest in AI, it may face higher cost pressures in the short term. Nevertheless, as unit computing cost gradually decreases and product pricing optimizes, Baidu's profitability path will become clearer in the mid-to-long term.
Conclusion
The core highlights of Baidu's Q3 FY2025 earnings report will focus on the AI commercialization process, the recovery of the advertising business, and the performance of its intelligent cloud and autonomous driving businesses. Although short-term advertising revenue and gross margin may face pressure, the company's continuous investment in AI technology innovation, autonomous driving, and cloud services will provide strong momentum for future growth. Baidu's leading position in AI and autonomous driving, as well as its global market expansion, will provide strong support for the company's performance growth in the coming quarters. With the promotion of the Wenxin ecosystem and AI commercialization, Baidu is expected to take a more favorable position in industry transformation.
This content is based on data generated by Tiger AI and is for reference only.