Baidu Earnings Preview: Sustained Revenue Growth Expected Across Segments

by Trefis Team
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Baidu (NASDAQ:BIDU) is scheduled to announce its Q4 and full year earnings on February 13. The internet giant reported a solid 17% growth in revenues to RMB 61.3 billion ($9.3 billion) through the first three quarters of the year. Strong revenue growth was complemented by a massive 38% improvement in the company’s adjusted EBITDA to RMB 16.5 billion, with adjusted EBITDA margins expanding by over 4 percentage points. This trend is expected tot continue through the December quarter, with revenues expected to grow 25%. We have created an interactive analysis where you can change expected revenue and EBITDA margin figures for Baidu to gauge how it will impact expected EPS for the full year.

Key Growth Drivers

Baidu witnessed strong adoption of its new technology among users last year, particularly Mobile Baidu 9.0, which launched mid-year. The refreshed flagship app focuses on enhancing user experience through faster loading and easier navigation, making it more like a mobile native app with “query-less” searches. The new app also has voice recognition searches, making it even easier for first time users to navigate. This helped boost the total daily active users (DAUs) on Mobile Baidu above 100 million in mid-2017, from around 80 million in the previous year.

Similarly, iQiyi had a strong year, with the total number of DAUs on the mobile app reaching 160 million by the end of Q3, up from 125 million at the end of the prior year. During the year, Netflix and Baidu signed an agreement which would allow Netflix to stream some of its programs in China pending regulatory approval. This could further fuel revenue growth in Baidu’s online video business.  We forecast Baidu’s share in the Chinese online video streaming market to remain comfortably above 20% through the end of our forecast period.

In addition to strong growth metrics, the company’s net income was up considerably due to the company selling off its food delivery business during the year. Baidu’s net income and diluted earnings per share for the three quarters of the year increased nearly 100% on a y-o-y basis to RMB 17 billion ($2.6 billion) and RMB 49 ($7.25), respectively.

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