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China’s Baidu Surpasses Quarterly Revenue Estimates on Ad Recovery and AI Cloud Demand

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China’s leading search engine provider, Baidu, has exceeded analysts’ revenue projections for the first quarter, driven by a rebound in advertising sales and increased demand for its AI-powered cloud products. The company reported a revenue of 31.51 billion yuan ($4.37 billion) for the three months ending March 31, surpassing the average analyst estimate of 31.21 billion yuan according to LSEG data.

U.S.-listed shares of Baidu rose about 3% in premarket trading following the announcement. Baidu’s strategic emphasis on AI-related products and services is part of an ongoing rebranding initiative, although the company continues to derive the majority of its revenue from advertising sales.

“Baidu Core’s online marketing revenue remained stable, while the end-to-end optimization of our AI technology stack continued to propel the growth of our AI Cloud revenue during the quarter,” said co-founder and CEO Robin Li in the earnings release.

Revenue from Baidu Core, which includes search-based ad sales, cloud offerings, and autonomous driving initiatives, grew by 4% to 23.8 billion yuan. However, revenue from its streaming service iQIYI fell by 5% to 7.9 billion yuan.

Baidu reported an adjusted net income of 7 billion yuan for the quarter, significantly higher than the analysts’ average estimate of 5.57 billion yuan.

Despite the positive financial results, CEO Robin Li acknowledged the challenges posed by the weak Chinese economy, which has kept advertisers cautious. “The weak micro economy contributes to the softness of our ad business,” Li said, noting that a large portion of Baidu’s advertisers are small and medium-sized enterprises (SMEs), making advertising revenue highly sensitive to economic conditions.

Li emphasized Baidu’s confidence in AI driving future growth, noting that daily usage of its AI language model Ernie by cloud clients had reached 200 million, up from 50 million in the previous quarter. AI-related revenue accounted for 6.9% of the total cloud business revenue, which increased by 12% to 4.7 billion yuan.

Baidu’s ongoing efforts to diversify beyond online search include expanding its autonomous driving business. The company recently launched a new version of its robotaxi service in Wuhan and aims for profitability in its autonomous vehicle business by next year.

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