China’s Baidu beats quarterly revenue estimates, cheers generative AI progress

By Akash Sriram and Brenda Goh

(Reuters) -China’s Baidu Inc beat second-quarter revenue estimates on Tuesday, helped by a post-pandemic recovery in advertising spending, and said it would further intensify its efforts on generative artificial intelligence (AI).

Businesses have revived spending on digital advertising after easing of COVID-19 restrictions spurred an economic recovery, benefiting the tech giant which runs China’s largest search engine and relies on online ads for most of its revenue.

Baidu’s co-founder and CEO Robin Li told analysts that areas including advertising, healthcare, financial services, local services and travel were outperforming and that they expected the momentum to continue.

The company’s U.S.-listed shares rose 1.2%.

Baidu was going through a “paradigm shift”, he added, describing its move towards towards AI in recent years with investments in autonomous driving and in large language models (LLM). Global interest in the latter has especially surged in recent months thanks to the success of OpenAI’s ChatGPT chatbot.

Baidu has been embedding its Ernie AI model into its products including its search engine and the company said it believed the improvements would help many of its products gain market share.

“The hard work we’ve poured into generative AI is beginning to bear fruit,” Li said during the post-earnings call.

The company, however, is still waiting for Chinese regulators’ approval for a large-scale roll out of its ChatGPT-like Ernie bot to the public, with the chatbot now still limited to invite-only tests since it was unveiled in March.

Li said, however, that he saw authorities as being increasingly supportive of generative AI. China last month published measures to manage its generative artificial intelligence industry in a long awaited move analysts said would bring regulatory clarity.

The rules were also less onerous than a previous draft published in April. “This version, you can probably tell, is more pro-innovation, rather than pro-regulation,” Li said.

Baidu’s revenue for the quarter ended June 30 was 34.06 billion yuan ($4.67 billion), compared with analysts’ average estimate of 33.28 billion yuan, according to Refinitiv data.

Its online marketing revenue rose 15% in the second quarter.

The company reported adjusted profit of 22.55 yuan per American Depositary Share (ADS), compared with profit of 15.79 yuan per share a year earlier. This also exceeded analysts’ average estimate of 16.86 yuan per ADS, according to Refinitiv.

($1 = 7.2928 Chinese yuan renminbi)

(Reporting by Akash Sriram in Bengaluru and Brenda Goh in Shanghai; Editing by Shilpi Majumdar, Kirsten Donovan and Tomasz Janowski)