Q2 Results Position Baidu as Top Runner in China's Innovative Tech

AI cloud, robotaxis, and semiconductors are Baidu's growth segments while search and feed performance remains solid.
Aug. 12, 2021 20:26
Q2 Results Position Baidu as Top Runner in China's Innovative Tech

Baidu Inc. (Nasdaq: BIDU; HKEX: 9888) released its financial results for the second quarter Thursday, showing continued solid delivery from Baidu Core and the fast growth of AI cloud.

The company, one of China's top internet giants, booked $4.9 billion in revenue in the quarter through June, up 20% year-over-year. Of that, revenues from Baidu Core were $3.7 billion, an increase of 27% from a year ago. The AI cloud segment surged 71% year-over-year, according to the report. Net loss was $90 million, or 26 cents per share, while non-GAAP net income was $830 million, or $2.39 per share.

Baidu's co-founder and CEO, Robin Li, highlighted the performance of the company's AI business. "AI enables businesses and local governments to do more and serve more people," Li said in a statement. "We are excited about the opportunities to help different industries transform their business with AI and support our goal to become carbon neutral by 2030."

Leading Position in AI Cloud Market

Indeed, AI has been Baidu's focus sector, even as its search and feed business remains strong and other segments are gaining traction. Enjoying strong demand from internet, media, and fintech industries, in mid-July, Baidu boasted to hold the largest market share and highest number of invocations in China's AI public cloud services market. Citing a report by the International Data Corporation (IDC), Baidu said the market was worth $166 million in 2019 and is expected to grow at a compound annual growth rate of 93.6% by 2024. Worldwide, IDC showed, the worldwide public cloud services market reached an astonishing $312 billion in 2020.

And the IDC report showed Baidu Cloud as offering the most overall AI products and AI capabilities in China's market. It also highlighted Baidu's "natural language processing (NLP) and strong positions in intelligent voice, facial and body recognition, conversational AI, and machine learning." In addition, Baidu's deep learning platform PaddlePaddle (short for PArallel Distributed Deep Learning) is reportedly No. 1 in China.

Li said in a speech at the 2021 WAIC conference, "Baidu's approach towards AI technology has always revolved around delivering equitable outcomes by making technology more accessible, providing freedom and possibilities for all."

Top Racer in Autonomous Driving

Another promising sector for Baidu has been autonomous driving. This year and in the second quarter in particular, Baidu has taken strides in accelerating the commercialization of its driverless robotaxis. As CapitalWatch reported in June, the company scored a partnership with BAIC Group's EV brand Arcfox to roll out 1,000 autonomous EVs for taxi service over the next three years.

Baidu has said it hopes the new Apollo Moon robotaxi will significantly reduce the costs of production. Moreover, the cost-per-mile was reduced by 60% in its newest, fifth-generation robotaxi – so much so that its service will become cheaper than ride-hailing, according to the company.

So far, Baidu has launched its Apollo Go robotaxi ride-hailing services in areas of Beijing, Shanghai, Guangzhou, Chongqing, and Guangdong. The company began to offer the service in Beijing in May, marking the launch of the first commercial autonomous taxi service in China without a safety driver behind the wheel. At the time, Baidu noted the significance of the commercialization step and said it hopes Apollo Go will shuttle athletes and staff at the 2022 Beijing Winter Olympics. In the second quarter, Baidu said, Apollo Go provided 47,000 trips to the public, with user rating averaging at 4.9 stars.

As to more recent developments, in June, Great Wall Motors announced its flagship WEY Mocha SUV, to be released this year, will feature Apollo Automated Valet Parking (AVP). In addition, Baidu prepares to host the annual Baidu World 2021 on Aug. 18 in collaboration with CCTV and is expected to show off its latest developments in autonomous driving.

Buy the Dip

To note other developments, Baidu prepares to unveil its second-generation Kunlun microchip this month. And that makes it just another industry (and the semiconductor market holds major potential for China right now) where Baidu has been advancing.

Amid fears of a Covid-19 resurgence and a lower-than-expected outlook, Baidu's stock is closing down 3% on Thursday. The company's guidance for the year is to record revenue growth of between 9% to 20%; for the third quarter it expects revenue of up to 33.5 billion yuan, which has disappointed some investors as it was lower than analysts predicted.

And that makes it a good time to buy. Year-to-date, shares in Baidu are down 26%, down 51% in the past six months. But as the company accelerates in top innovative fields, it is now a strong "buy" opportunity on the dip. While many Chinese tech giants have been suffering from regulatory scrutiny and fines for violations, Baidu has seen it relatively easy. The crackdown has not affected the company's fundamentals – and yes, Baidu remains that titan that is "too big to fail."

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