Search giant Baidu’s profits ballooned in the fourth quarter but the company warned of flagging revenue during the first three months of 2020 as a result of economic uncertainty from the novel coronavirus outbreak.

Why it matters: Baidu has seen mounting competition from companies like Bytedance and Tencent which have been enticing advertisers and Chinese consumers with their short video and social apps.

  • Baidu reported its first quarterly loss since listing in 2005 during the first quarter of last year.
  • The company’s share price plunged by nearly 30% last year. Gaming and internet giant Netease and lifestyle services company Meituan have surpassed Baidu in market value.

Details: Baidu’s Q4 revenue reached RMB 28.9 billion, up 6% year on year, the company said in a statement on Thursday, beating analysts’ expectations of RMB 28.4 billion.

  • However, the search giant forecast a 5% to 13% year-on-year decline in its top-line figures to between RMB 21 billion and RMB 22.9 billion in the first quarter of this year, below the midpoint of analyst estimates.
  • “The Coronavirus situation in China is evolving, and business visibility is very limited,” the company said of its guidance.
  • The expected plunge casts a shadow on Baidu’s better-than-expected Q4 results. The company’s profits soared to RMB 6.35 billion in the December quarter, up more than 200% year on year.
  • Baidu attributed the positive results to growth in its cloud unit, smart devices, and video-streaming business, iQiyi.
  • The company continues to face stiff competition, as companies like Bytedance, which runs content aggregator Jinri Toutiao and short video platform Douyin, eat away at the company’s advertising revenue, which fell 2% year on year to RMB 20.8 billion.
  • While the short-term impact of the coronavirus on Baidu’s businesses has been negative, a side effect is that people are staying at home more and getting to know the company’s products, Baidu CEO Robin Li said during an earnings call on Friday morning.

Context: A deadly new coronavirus, dubbed Covid-19, has had a profound impact on most businesses in China, as the government prolonged the Lunar New year holiday to prevent the spread of the disease and consumers slash spending.

  • Baidu is the latest company to warn the Covid-19 outbreak will affect its business.
  • The outbreak doesn’t only affect firms from China. Companies around the world have brought up the possible fallout from the coronavirus during recent earnings calls.

Christopher Udemans is a Shanghai-based technology reporter. He covers Chinese artificial intelligence, mobility, and cybersecurity. You can contact him at chrisudemans [at] technode [dot] com.

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