Key Takeaways
Baidu Inc. (BIDU) shares rose after Haitong International raised its price target by 7% to $201, citing better-than-expected first-quarter earnings driven by strong momentum in its artificial intelligence business.
"AI has clearly become the primary growth driver of Baidu, reinforcing our position as an AI-first company," Chief Executive Robin Li said in a news release.
The Chinese tech giant reported first-quarter revenue of RMB 32.1 billion ($4.7 billion), beating analyst estimates, while adjusted net profit of RMB 4.3 billion was 5% above market forecasts. Its core AI-powered business revenue jumped 49% year-over-year to RMB 13.6 billion, making up 52% of Baidu's general business revenue for the first time.
Haitong increased its price-to-earnings valuation for Baidu's cloud business to 30x from 15x to reflect the rapid growth. The bank expects a series of value-unlocking initiatives, including the spin-off of its Kunlunxin AI chip unit, to further support the stock.
The AI segment's performance was fueled by a 79% year-over-year increase in AI Cloud Infrastructure revenue. Growth in its GPU Cloud offering was even more pronounced, accelerating to 184% from 143% in the prior quarter. Baidu attributes the demand to its full-stack AI capabilities, which includes its self-developed Kunlunxin AI chips. The company's AI focus stands in contrast to its legacy online marketing services, where revenue fell 22% to RMB 12.6 billion.
Baidu is also pushing to expand its AI applications. Its autonomous ride-hailing service, Apollo Go, delivered 3.2 million fully driverless rides in the quarter and has begun international expansion with testing in London and Dubai. Management highlighted that the shift toward higher-margin AI businesses like GPU Cloud and robotaxi operations should benefit the company's long-term profitability. Competitors like Alibaba (BABA) and Tencent (TCEHY) are also heavily invested in the AI race.
The strong earnings and analyst upgrade reinforce the narrative that Baidu is successfully transitioning from a search and advertising company to an AI-centric one. Investors will be closely watching for progress on the Kunlunxin spin-off and further international expansion of Apollo Go as the next major events.
This article is for informational purposes only and does not constitute investment advice.
