Baidu’s share price surged last week thanks to earnings beat
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Baidu’s share price surged last week thanks to earnings beat

Chinese internet titan Baidu blew analysts’ expectations out of the water last week when it reported quarterly earnings, sending its share price up by 7%. The company said that adjusted first quarter earnings rose by an incredible 139% from the previous year to $2.60 per share. Revenue also rose by an impressive 31% to $3.33 billion. On both counts, this overshot the Street’s expectations: analysts were hoping for earnings of $1.73 per share on revenues of $3.26 billion.

Baidu’s share price surged last week on the back of stronger than expected earnings

graph 3004 baidu

SOURCE: Yahoo Finance

A big contributor to Baidu’s overall revenue beat were lower costs regarding research and development. The company is ruthlessly streamlining its expenditure in a bid to add more value to shareholders. Herman Yu, Baidu’s chief financial officer, said: "We have never been more focused than we have in the past year, by scaling down or exiting non-core businesses and doubling down on investments in artificial intelligence-powered businesses to generate significant long-term return to our shareholders."

Baidu received an unexpected boon from government censors in the early part of 2018, as a number of rival online ad platforms saw government crackdowns over “low-brow” content. Baidu’s artificial intelligence technology pre-empted this crackdown, removing clickbait-style ads from its newsfeed automatically. Pacific Epoch analyst Raymond Feng thinks this makes Baidu a “more reliable choice” for advertisers, and says: "This is a one-off, but the timing is quite interesting. Baidu in its marketing can now assure clients that at least on the feed side it has safer content."

Since advertisers tend to sign long-term contracts with online platforms, this bodes well for the coming quarters.

Disclosure

Dominion holds Baidu in its Global Trends Managed Fund.


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