Baidu shares rose on Tuesday after the Chinese technology company reported better-than-expected quarterly results, giving investors hope for growth in its artificial intelligence business amid risks to the sector.
Baidu (ticker: BIDU) reported profit of 20.40 Chinese yuan ($2.86) per share on revenue of 34.5 billion yuan ($4.8 billion), beating expectations FactSet reported earnings of 17.11 yuan per share on revenue of 34.3 billion yuan, analysts polled. This corresponds to profit and sales growth of 21% and 6%, respectively – results that are laughable given the economic slowdown in China.
“Baidu reported solid financial results for the third quarter, demonstrating its resilience in a difficult economic climate,” said Robin Li, co-founder and CEO of the company.
Hailed as China’s answer to Google, Baidu’s core business remains online search and advertising, although the group also has a compelling artificial intelligence (AI) business, with units offering self-driving taxis, cloud computing and an AI bot in ChatGPT -Cover style. Baidu began charging for its bot called Ernie this month, outside of its third-quarter results, but updates to AI remained the focus.
“We have fully opened the ERNIE API to cloud companies, giving them the ability to develop their own AI-native applications and solutions. “Our AI-centric business and product strategy should set the stage for sustainable, multi-year revenue and profit growth within our ERNIE and ERNIE Bot ecosystem,” Li said, adding that the company is also leveraging its AI capabilities to “reinvent our consumer-focused and entrepreneurial operations.” -related products as well as our own operations.”
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However, risks likely remain for the AI business, highlighted by unexpected news from rival Alibaba (BABA) last week. Alibaba, which is also pushing for AI, warned that expanded U.S. export controls on advanced chips – an attempt to control Chinese access to critical technology – would severely impact its AI business, housed in the group’s cloud division would have affected.
The U.S. regulations “could materially and adversely affect Cloud Intelligence Group’s ability to provide products and services and perform under existing contracts, thereby adversely affecting our results of operations and financial condition,” Alibaba said.
Investors can assume that similar risks exist for Baidu, as the company also needs to secure chip supplies to fuel its AI growth. In fact, Alibaba shares have lost 10.5% since the release last Thursday, and Baidu shares fell as much as 5.5% over the same period before erasing losses as the selloff spread.
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For now, Baidu maintains that AI continues to be a pillar of growth – or at least puts on a brave face. Shares of the company rose 2.4% in U.S. premarket trading on Tuesday after the company reported earnings.
Write to Jack Denton at [email protected]