Revenue for Chinese search giant Baidu contracted 1% in the second quarter compared with the same year-ago period, with the company warning that the downward trend could continue in the second half of 2020.
Why it matters: Baidu narrowed a revenue decline from the first quarter, showing some signs of recovery after the Covid-19 outbreak in China.
- Nevertheless, the company’s ad sales, a major contributor to overall revenue, took a significant hit as companies in China have tightened their belts in the aftermath of Covid-19.
Details: Baidu’s revenue reached RMB 26.03 billion ($3.69 billion) in the quarter ended June 30, down 1% from the RMB 26.33 billion it earned during the same period in 2019, the company announced on Thursday. Baidu previously forecasted sales of between RMB 25 billion and RMB 27.3 billion in Q2.
- Revenue from online marketing was RMB 17.7 billion, falling 8% year on year, as Chinese companies weather the fallout from the Covid-19 outbreak and competition from rivals including Bytedance and Tencent increases.
- Baidu managed to narrow a decline in its revenue in the first quarter, which fell 7% year on year to RMB 22.55 billion.
- Net income reached RMB 3.6 billion, up 48% year on year, slowing from 62% annual growth it saw in Q2 2019.
- The company warned that a decline in overall sales could continue in the second half of the year. During the third quarter of 2020, Baidu expects revenues fall between RMB 26.3 billion and RMB 28.7 billion, representing a 6% year-on-year decline or 2% growth as a result of the “very limited” business visibility in China as a result of the Covid-19 pandemic.
Context: Baidu has plowed billions into diversifying its offerings in search of additional revenue streams. It has focused this spending on artificial intelligence and cloud computing, while the company is exploring enterprise services for growth.
- Nevertheless, a number of these investments, most notably its bet on autonomous driving, have yet to pay off. It’s unlikely the company’s self-driving car project will see significant returns in the next decade, putting additional pressure on its other businesses.