- Q2 earnings smash expectations by 34%
- Online advertising recovery largely behind performance
- Shares have failed to capture minds of investors this year
The online advertising recovery seen in parts of the global economy appears to be filtering through into China also, judging by latest results from Chinese tech firm Baidu (9888:HKG).
Shares in the $45 billion company often likened to the Google parent Alphabet (GOOG:NASDAQ), and which also trades on Wall Street (BIDU:NASDAQ), shot up 4% after posting knockout results for the second quarter to 30 June, comfortably beating expectations on both the top and bottom lines bolstered by growth in advertising.
This was the fastest quarterly year-on-year growth in two years, according to Refinitiv data.
KNOCKOUT NUMBERS
Revenues in US dollars for the quarter jumped 15% from last year to $4.7 billion, versus the consensus of $4.57 billion. Non-GAAP earnings per ADS (American Depository Receipt) came in at $3.11, up 43% from last year, and well above the consensus of $2.32.
The company said the improvement in profit and margins as well as strong cash generation were primarily driven by revenue acceleration and efficiency gains.
‘In the second quarter of 2023, Baidu Core accelerated revenue and profit growth, driven by the solid performance of online marketing business and operating leverage,’ said Robin Li, co-founder and CEO of Baidu.
AI INVESTMENTS AND OPPORTUNITIES
Li also talked about Baidu’s early AI investments, saying ‘Generative AI and large language models (LLM) hold immense transformative power in numerous industries, presenting a significant market opportunity for us.’
AI was a point hammered home by chief financial officer Rong Luo. ‘Baidu has invested in AI for over a decade and is well-positioned to capitalise on the opportunities arising from generative AI and LLM. As we look ahead, we remain steadfast in investing in AI, in particular large language models and generative AI in the upcoming quarters.’
Baidu’s shares have struggled to capture the imagination of investors this year despite the more optimistic mood. The US-traded ADRs are up just 8% year to date, and even the Hong Kong shares have done little better, about 12% ahead.
At $128.36, the ADRs remain miles off all-time highs of $339.91, hit in February 2021.
