Baidu (NASDAQ: BIDU) stock rose in pre-market trading Tuesday as the Chinese tech giant posted better-than-expected third-quarter revenues and reiterated its commitment to investing in artificial intelligence to drive future growth.
The owner of China’s largest search engine reported a revenue of 34.45 billion yuan ($4.72 billion) for the quarter that ended September 30, outperforming analysts’ estimates of 34.33 billion yuan, as per LSEG data. This exceptional feat was notably attributed to a surge in advertising income amid positive signs of recovery in the Chinese economy.
Earlier this month, the International Monetary Fund made an upward adjustment to its previous forecast for the growth of the Chinese economy. The updated forecast indicates a 5.4% expansion in the Chinese economy for the year, marking an increase from the initially estimated 5% growth. This optimistic outlook has prompted businesses to boost their spending on online consumer advertising.
Investors have responded positively to the news, with Baidu (NASDAQ: BIDU) shares jumping by 2.23% in pre-market trading, indicating a Tuesday opening bell price of $113.77 each.
Baidu has recently shifted its focus towards artificial intelligence (AI), creating a self-driving vehicle and making substantial investments in generative AI capable of creating text, images, and other media. Last month, it unveiled the latest version of its generative AI model, Ernie 4.0, claiming capabilities on par with ChatGPT maker OpenAI’s GPT-4 model.
Chief Financial Officer Rong Luo affirms the company’s unwavering commitment to prioritize AI investments, particularly in generative AI and foundation models, stating,
“We will do so with an unrelenting focus on efficiency and strategic resource allocation.”
Unlike its tech counterparts, Alibaba Group (NYSE: BABA) and Tencent, Baidu (NASDAQ: BIDU) remains silent on the potential impact of intensified U.S. export curbs on high-end technology to China on its cloud business. Recent developments saw Alibaba abandoning plans to independently list its cloud unit due to uncertainties arising from these restrictions.
Earlier this month, Reuters reported that Baidu had proactively ordered domestically-made AI chips from Huawei in August, anticipating tighter export restrictions from Washington.
In Q3, Baidu’s online marketing revenue surged 5% to 19.7 billion yuan. Adjusted net income for the quarter came in at 7.27 billion yuan, a 23% increase from last year.
The company reported an adjusted profit of 20.4 yuan per American Depositary Share (ADS), outperforming analysts’ average estimate of 16.55 yuan per ADS. This also marked significant growth from 16.87 yuan per share a year earlier, according to LSEG.