iQiyi’s Swelling Revenue Share Will Drive Baidu’s Stock Over Coming Years

by Trefis Team
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Baidu’s (NASDAQ:BIDU) stock has fallen from an all-time high of over $280 a share roughly a year ago to around $100 due to a combination of slowing economic conditions in China, continuing headwinds from the U.S.-China trade war, as well as a sharp decline in Baidu’s core search-related revenues. Trefis highlights trends in Baidu’s revenues over recent years along with our forecast for 2019 and 2020 in an interactive dashboard. While we believe that Baidu’s core revenues will grow at a subdued rate in the near future, its content subscription services, iQiyi, should continue to drive the top line. We maintain a $159 fair value for Baidu’s stock – with iQiyi contributing a larger share of the company’s value despite being responsible for roughly 28% of its revenues.

You can make changes to our forecast for Baidu’s revenues in our interactive dashboard. Additionally, you will find more Trefis information technology data here.

An Overview of Baidu’s business model

Baidu makes money through advertising and content subscription services (similar to Netflix). The company also has other developing avenues of revenue generation such as cloud and autonomous driving.

Baidu is China’s leading search engine, with alternatives being Google China, Bing, Sogou, Youdou, Shenma, Easau etc. In the autonomous driving, Baidu competes with Waymo etc. And in the cloud business, the company competes locally with Alibaba.

There are two main segments of Baidu’s revenue ($15 billion in 2018):

  • Baidu Core (fiscal 2018 revenue of $11 billion, 76% of total revenue): Segment revenues are derived from advertising income and related services for merchants. Baidu continues to be the largest search engine in China with a market share of roughly 70%.
  • iQiyi (fiscal 2018 revenue of $4 billion, 24% of total revenue): Segment revenues are derived from subscription of streaming and content marketing services. iQiyi is also known as the Netflix of China.

Key Trends In Baidu’s Revenues

Baidu’s revenue has increased 46% over 2016-18 to $14.9 billion and is expected to increase 26% to $18.7 billion by 2020.

Baidu Core

  • Baidu’s core revenue is expected to grow by 15.6% over 2018-20 to $13 billion (an increase of $1.8 billion)
  • We expect revenues for the segment to be $12 billion (+7% y-o-y) in 2019.
    • Revenue growth is likely to be driven by strong growth in No. of Baidu users as well as an increase in average revenue per user (ARPU)
    • Over the next 2 years, we expect user growth of 6.7% from 692 million to 738 million, and ARPU growth of 8.3% from $16.3/user to $17.6/user
  • The growth in Baidu’s user base is likely to continue due to limited participation of foreign search engines in China. Also, the increasing component of AI in Baidu’s offerings is likely to help drive up pricing (through more intuitive ad serving).
  • Furthermore, Baidu’s growing focus on increasing user monetization is likely to lead to faster ARPU growth relative to user growth.


  • iQiyi is also known as the Netflix of China. iQiyi’s streaming business is also likely to benefit from increase in the artificial intelligence component in Baidu’s offerings.
  • Especially for content-based offerings, increase in receptiveness of suggestions is likely to influence incremental consumption and thus growth in revenue.
  • For iQiyi, revenue growth has been higher at a CAGR of 49% with the division adding $2 billion in revenues the last two years.
  • We expect revenues for the segment to grow to $5 billion (+28% y-o-y) in 2019.
  • Revenue growth of about $2.1 billion over two years to be driven by increasing online content consumption trends.

You can modify any of the key drivers to visualize the impact of changes on its valuation.
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