Baidu's US-listed shares rise as earnings exceed estimates

BEIJING • Chinese Internet search giant Baidu blew past earnings estimates on Thursday, sending its US-listed shares sharply higher in after-hours trading as investors cheered strong growth in its advertising business.

The firm, which has had to bounce back from a bruising medical advertising scandal in 2016, said it was now taking extra measures to clean up content on its platforms amid a fierce online crackdown by China's censors.

Baidu's stock climbed 5.5 per cent in late trading on Thursday after marketing revenue grew 23 per cent to 17.2 billion yuan (S$3.6 billion), its second-fastest quarterly rate in over two years. Net profit rose 23.4 per cent versus forecasts of 19.5 per cent.

Baidu said it now expects second-quarter revenues of between 24.91 billion yuan and 26.19 billion yuan, indicating a 19.3-25.4 per cent rise versus estimates of a 15.9 per cent climb according to Thomson Reuters I/B/E/S.

The search firm's news feed received an unexpected bump in the first quarter due to a crackdown by Chinese Internet regulators on low-brow content, which saw several competing apps targeted during a key client-acquisition period.

Jinri Toutiao, one of China's most popular news feed apps and a key Baidu rival, is among the apps punished by censors this year.

"This is a one-off, but the timing is quite interesting. Baidu in its marketing can now assure clients that at least on the feed side it has safer content," said Pacific Epoch analyst Raymond Feng, adding it made the firm "a more reliable choice".

Analysts said the early year bump boded well for the rest of this year, as advertisers tended to sign year-long contracts.

During a conference call with analysts yesterday, chief executive Robin Li said the company has employed artificial intelligence technology to target click-bait and inappropriate content. Baidu removed 20.2 billion malicious Web pages last year.

"We proactively clean up indecent content and limit the volume of entertainment gossip news in one sweep... We use AI to identify and remove click-bait and vulgar content... We believe such a strategy will pay off in the long run," said Mr Li.

The helping hand from censors is in stark contrast to Baidu's woes two years ago, when regulators cracked down on its advertising practices, gutting its marketing client base and bringing its revenue growth to a grinding halt.

The company has since sold or withdrawn from a number of businesses to focus on autonomous driving, AI and its news feed product, regaining momentum and investor confidence.

Baidu's total revenue rose about 24 per cent to 20.91 billion yuan in the three months to March 31, its slowest rate in three quarters despite topping analyst estimates.


A version of this article appeared in the print edition of The Straits Times on April 28, 2018, with the headline 'Baidu's US-listed shares rise as earnings exceed estimates'. Print Edition | Subscribe