Baidu shares gain after earnings beat. Artificial intelligence makes money.

Baidu shares gain after earnings beat.  Artificial intelligence makes money.

Baidu shares rose on Tuesday after the Chinese technology company reported better-than-expected quarterly results and gave investors hope for growth in its artificial intelligence business amid risks to the sector.

Baidu (ticker: BIDU) reported earnings of CNY20.40 ($2.86) per share on revenue of CNY34.5 billion ($4.8 billion), beating analysts surveyed by FactSet’s forecast of CNY17.11 per share on revenue of CNY34.3 billion. This represents a growth in profits and revenues of 21% and 6%, respectively, which are results to smile about, given the backdrop of the economic slowdown in China.

“Baidu reported strong financial results in the third quarter, demonstrating resilience in a challenging economic climate,” said Robin Li, co-founder and CEO of the company.

Hailed as China’s answer to Google, Baidu’s core business remains online search and advertising, although the group also has a compelling artificial intelligence (AI) business with units covering self-driving taxis, cloud computing and robotics. Artificial intelligence similar to ChatGPT. Baidu began charging fees for its robot, called Ernie, this month, outside of third-quarter results, but AI-related updates continue to take center stage.

“We have fully opened up the ERNIE API to cloud enterprises, enabling them to develop their own AI applications and solutions. Our AI-focused business and product strategy should pave the way for multi-year sustainable revenue generation and profit expansion within the ERNIE and ERNIE ecosystem,” said Lee. Our Bot,” he said, adding that it had also enhanced its AI capability to “reinvent the way we engage with the consumer and the enterprise.” – facing products, as well as our own operations.

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But risks still loom for the AI ​​business, as unexpected news from peer Alibaba (BABA) last week underscored. Alibaba, which is also moving into artificial intelligence, has warned that expanded US export controls on advanced chips – an attempt to control China’s access to critical technology – has hurt its AI business, which is housed within the group’s cloud division.

Alibaba said the US rules “may materially and adversely affect Cloud Intelligence Group’s ability to deliver products and services and perform under existing contracts, adversely affecting our results of operations and financial condition.”

It would be reasonable for investors to think there are similar risks for Baidu, which will also need to secure chip supplies to fuel its AI growth. In fact, Alibaba shares have fallen 10.5% since the disclosure last Thursday, and Baidu shares have fallen as much as 5.5% over the same period — before cutting losses — as the sell-off spreads.

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For now, Baidu stresses that AI remains a pillar of growth — or showing a brave face, at least. The company’s shares rose 2.4% in US pre-market trading on Tuesday after it reported earnings.

Write to Jack Denton at jack.denton@barrons.com

(tags for translation) Artificial Intelligence Technologies

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