Baidu beats estimates after spending curb

Group president Qi Lu has said Baidu can beat Google parent Alphabet at driverless cars in a few years.
Group president Qi Lu has said Baidu can beat Google parent Alphabet at driverless cars in a few years.

BEIJING • Baidu Inc's move to slash spending on services such as food delivery helped China's largest search giant soundly beat estimates, as it recovers from government restrictions and prepares to invest more in artificial intelligence (AI).

Baidu yesterday reported a better-than-projected 83 per cent leap in net income after both general and traffic acquisition costs shrank.

The company forecast revenue of 23.1 billion yuan (S$4.7 billion) to 23.8 billion yuan for the third quarter, versus the 23 billion yuan average of analysts' estimates compiled by Bloomberg. Net income soared to 4.4 billion yuan in the second quarter, sharply outpacing projections of 2.9 billion yuan.

The boost comes as it is asking investors to back investments in content and AI projects such as autonomous driving. Group president Qi Lu has said Baidu can beat Google parent Alphabet at driverless cars within three to five years.

Baidu is committed to spending big on TV and movie rights for a streaming video service called iQiyi, which has more than 30 million paying subscribers. It also plans to buy content for a news aggregation service that uses AI to target ads at 100 million daily active users.

Its ad business was hit hard last year after harsher regulations and a change in tax status of a key product. The entire customer base had to re-register with stricter conditions and many switched platforms, reducing the pool of advertisers.

As a result, the company reported its first annual earnings decline since its 2005 initial public offering.

Baidu is now counting on AI projects to offset slowing growth in its core business of selling Internet ads placed next to search results.

One example is its financial services group, which lends money to students and others using AI technology to determine credit risks.

The push led Fitch Ratings and Moody's to place the company on review for a potential downgrade - both rating agencies said the risks of such businesses were very different from those of a traditional search engine.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 29, 2017, with the headline 'Baidu beats estimates after spending curb'. Print Edition | Subscribe