2023-08-21 14:42:23 ET
When Baidu Inc ( NASDAQ: BIDU ) reports its second quarter earnings on Tuesday, all eyes will be on the search engine giant’s ad revenue as well as updates on its artificial intelligence (AI) model, amid a slowing Chinese economy.
Spending on advertisement is slowly reviving after China has eased its strict lockdown policy since last year, with Baidu saying it saw a recovery in advertisement for offline sector such as travel, healthcare and local services.
“I expect Baidu's advertising business, which is the company's primary profit center, to shine and outperform against expectations,” a recent Seeking Alpha analysis pointed out, adding that an earnings beat may serve as a catalyst for strong share price momentum through the second-half of 2023.
Wall Street expects the Beijing-based company to post Earnings Per Share (EPS) of $2.33, while revenue is expected to rise 3.3% at $4.5 billion.
Investors are expecting comments on any development regarding its ChatGPT rival Ernie bot, which is still waiting government approval. Baidu said it is integrating Ernie bot into all of its businesses for testing.
Seeking Alpha analyst Yiannis Zourmpanos said that Baidu's early mover advantage in launching Ernie Bot positions the company ahead in AI development.
However, a still slow Chinese economy and low consumer confidence along with Beijing's clamp down on its tech sector over the past two year continues to be a red alert for Baidu’s business.
The stock, which lost more than 20% in 2022, saw a growth of nearly 4% so far this year.
Over the last two years, Baidu has beaten EPS estimates 100% of the time and has beaten revenue estimates 88% of the time.
Wall Street is bullish on the stock with Seeking Alpha analysts and Seeking Alpha’s Quant rating considering the stock a “buy”, while Wall Street analysts rate the stock a “strong buy”, boosted mostly by profitability and growth.
Over the last three years, EPS estimates have seen four upward revisions , compared to 10 downward revisions. Revenue estimates have seen three upward revisions versus 13 downward moves.
Earlier this month, other Chinese companies including JD.com ( JD ) beat revenue and earnings estimates, while Alibaba ( BABA ) and Tencent Music Entertainment ( TME ) posted a 14% and more than 5% rise in quarterly revenue.
More on Baidu
- Baidu: Q2 Beat May Catalyze A Price Appreciation
- Baidu: Driving Towards Glory
- Baidu And AI: History, Investments, And Regulation
- Baidu Stock: Emerging As A Strong Buy Now (Technical Analysis)
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Baidu’s ad sales, AI updates in focus for Q2 earnings