Baidu Earnings Preview: Core Businesses To Sustain Revenue Growth

by Trefis Team
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Baidu (NASDAQ:BIDU) is scheduled to announce its Q1 earnings on April 26. The company reported a 20% increase in net revenue to RMB 84.8 billion ($13 billion) through 2017. Strong revenue growth was complemented by a massive 55% increase in the company’s operating income to RMB 15.7 billion ($2.4 billion). Correspondingly, Baidu’s net income was up 57% to RMB 18.3 billion ($2.8 billion) while earnings per ADS were up 65% y-o-y to RMB 52.41 ($8.06).

While the strong revenue growth is expected to continue through 2018 on an organic basis, year-over-year comparisons could suffer for two key reasons. First, the large base factor could impact the growth rate of revenues for the year. Secondly, Baidu announced the IPO of its video streaming platform iQiyi last month, which should slow down revenue growth. On a positive for the company, it raised cash through the IPO and iQiyi had been operating at significant losses in the last couple of years. Going forward, this should help Baidu’s profitability in the near term. We have summarized our full year forecasts for Baidu on our interactive dashboard. You can modify our forecasts for segment revenues and margins to gauge how it would impact the company’s results for 2018.

In recent quarters, Baidu witnessed strong adoption of its new technology among users, particularly Mobile Baidu 9.0, which launched mid-year. The product rebuild was also a key reason for a loss of online marketing customers, with the company expected to continue to focus on core business segments going forward. The new app also has voice recognition searches, making it even easier for first time users to navigate. This has helped boost the total daily active users (DAUs) on Mobile Baidu over the last few quarters.

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