Search giant Baidu beat analyst expectations for its third quarter revenues as the company’s diversification away from its core search business showed signs of paying off.

Why it matters: Baidu has seen increased competition for advertising revenue from rivals including Bytedance and Tencent in the midst of a macroeconomic slowdown that has led advertisers to tighten their belts.

  • Baidu has had a tough year—the company’s share price fell by more than 35% prior to its latest earnings release.
  • The search giant this year posted its first quarterly loss since listing in 2005.
  • Baidu CEO Robin Li warned in January that “winter is coming,” acknowledging the effects of China’s slowing economy and the fallout from the trade war with the US.
  • The company has since implemented numerous cost-cutting measures to mitigate risks to its business.

Details: Baidu’s Q3 revenue reached RMB 28.1 billion (around $4 billion), beating analyst expectations of RMB 27.5 billion. Revenue was up 7% compared with the second quarter.

  • The company posted a net loss of RMB 6.4 billion. Baidu made a profit of RMB 12.4 billion during the same period last year.
  • The company, in part, attributed the losses to its investment in online travel agency, whose share price has declined, according to Baidu. In October, Baidu reduced its holdings in, selling $1 billion of its shares.
  • Q3 revenue from Baidu’s video-streaming platform iQiyi increased 7% compared with the same quarter a year ago, reaching RMB 7.4 billion, boosted by 31% year on year growth in subscribers to nearly 106 million.
  • While iQiyi’s subscription revenue increased, the platform’s advertising sales shrunk as a result of increased competition, Herman Yu, Baidu’s chief financial officer, said during the company’s earnings call.
  • Meanwhile, online marketing revenue fell by 9% compared with the same period last year as competition and the slowing economy took their toll.
  • Baidu expects revenues of between RMB 27.1 and RMB 28.7 billion in the fourth quarter, representing growth of -1% to 7%.
  • Baidu’s share price rose 4% in after-hours trading on Wednesday.

Context: Baidu has plowed billions into diversifying its offerings, particularly on artificial intelligence and cloud computing, and is looking to enterprise services for growth.

  • Nonetheless, several of these investments, most notably its bet on autonomous driving, have yet to pay off. It’s likely that the company’s focus on self-driving cars will only begin to bear fruit in the next five to 10 years, putting additional pressure on its other businesses.

Chris Udemans

Christopher Udemans is TechNode's former Shanghai-based data and graphics reporter. He covered Chinese artificial intelligence, mobility, cleantech, and cybersecurity.

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