2025-05-22-Bernstein-百度（BIDU）_百度2025年第一季度探寻产品策略..._20页_499kb

Baidu Inc Summary

Core Content

Baidu Inc (BIDU) reported Q1 2025 results, with core revenue reaching RMB25.5Bn (+7% YoY), beating the consensus estimate of -2.6% YoY. This growth was primarily driven by a strong increase in AI Cloud revenue, which rose 42% YoY to RMB6.7Bn. However, the Online Marketing Search segment declined by 6% YoY to RMB16Bn. Non-GAAP operating margin came out to 19%, influenced by the weaker performance in the ads business.

Main Points

• Revenue Performance: Baidu's core revenue increased by 7% YoY, outperforming the consensus estimate, while Online Marketing Search revenue declined by 6% YoY.
• AI Cloud Growth: AI Cloud revenue grew by 42% YoY to RMB6.7Bn, with strong demand for enterprise subscription-based cloud services.
• Monetization and Engagement: AI Search is undergoing continuous re-engineering, with AI Search traffic increasing to 35% of mobile MAU in May 2025 from 22% in January. However, monetization remains uncertain, with plans to increase AI features in ads to 50% by the next quarter.
• User Metrics: MAU and DAU increased by 7%, showing some recovery from the decline in search traffic.
• 2Q Guidance: The company expects continued AI traffic growth but further delay in monetization. Search revenue is expected to worsen, while AI Cloud revenue is projected to sustain strong growth.

Key Information

• Stock Performance: Baidu's stock was down after the earnings report due to the negative outlook for the Search business.
• Price Target: The price target is USD97/HKD95, with a 13% upside from the current price.
• Financials:
  • Revenue (M): RMB133,125 in 2024, with a forecast of RMB135,529 in 2025E and RMB145,565 in 2026E.
  • Net Earnings (M): RMB24,175 in 2024, with forecasts of RMB19,688 in 2025E and RMB22,099 in 2026E.
  • Gross Margin (%): 50.3 in 2024, projected to decrease to 44.5 in 2025E and 45.8 in 2026E.
  • Net Income Margin (%): 18.2 in 2024, expected to decline to 14.5 in 2025E and 15.2 in 2026E.
  • Operating Margin (%): 16.0 in 2024, projected to fall to 9.9 in 2025E and 12.1 in 2026E.

Investment Implications

• Rating: Market-Perform.
• Model Adjustments:
  • Revenue growth for 2025E was revised down from +4% to +2% YoY.
  • Search revenue growth for 2025E was reduced from +8% to +4% YoY.
  • AI Cloud revenue growth for 2025E was increased from +25% to +28% YoY.
• Valuation Metrics:
  • Adjusted P/E (x): 8.0 (2024), 9.9 (2025E), 8.3 (2026E).
  • EV/Sales (x): 2.5 (2024), 2.5 (2025E), 2.3 (2026E).

AI Initiatives

• ERNIE Model: Baidu upgraded its ERNIE model and released ERNIE 4.5 turbo and ERNIE X1 turbo with multimodal functions and improved capabilities, at lower prices. They plan to open-source the model in June.
• AI Agents: AI agents revenue increased 30x from the previous year, with around 30,000 enterprise users. AI agents are expected to take up ~9% of online marketing revenue and offer higher margins due to token-based operations.
• MaaS Platform: The Qianfan platform has seen continuous upgrades, with a full stack E2E solution popular among mid-tier businesses in internet, tech, and online education.

Financial Forecast Changes

• Search Revenue: Revised from 72,029 to 67,939 in 2025E, with a YoY growth of -7%.
• Cloud Revenue: Revised to 28,569 in 2025E, with a YoY growth of 30%.
• Non-GAAP Operating Profit: Revised to 16,002 in 2025E, with a YoY growth of -33%.
• Non-GAAP Operating Margin: Revised to 15% in 2025E, with a YoY growth of -35%.

Valuation and Equity

• Group Equity Value (USD mn): Current value is USD21,083, with forecasts of USD27,704 (Base) and USD37,017 (Bull) in 2026E.
• Equity Value per Share (USD): Current is USD68, with Base at USD97 and Bull at USD136.
• Equity Value per Share (HK$): Current is HK$67, with Base at HK$96 and Bull at HK$135.

Financial Highlights

• Non-GAAP Net Profit: RMB23,596 in 2024, projected to be RMB21,407 in 2025E and RMB25,460 in 2026E.
• Basic EP-ADS (RMB): RMB78.64 in 2024, expected to be RMB54.07 in 2025E and RMB57.35 in 2026E.
• Non-GAAP Diluted EP-ADS (RMB): RMB67.09 in 2024, projected to be RMB62.01 in 2025E and RMB73.74 in 2026E.

Conclusion

Baidu is facing challenges in the Search business due to the shift towards AI and Gen AI, which has led to a decline in ad inventory and monetization. However, the AI Cloud segment is performing well, with strong growth and a sustainable subscription model. The company is focusing on improving user experience and expanding its AI initiatives, which may lead to higher margins in the long term. Despite these efforts, the overall Non-GAAP operating margin is expected to face pressure due to the increasing mix of low-margin cloud services and weaker Search performance.