Baidu unveils US$5 billion buyback after revenue beats estimates

BAIDU announced a US$5 billion share buyback after reporting better-than-expected revenue, reflecting how its cloud computing service is offsetting an advertising lull during China’s economic downturn.

Its shares gained 6 per cent in pre-market US trading. Sales slipped to 33.1 billion yuan (S$6.43 billion) for the three months ended December, compared with expectations for 32.1 billion yuan. Net income came in at almost 5 billion yuan during the quarter, when China made a U-turn on its Covid Zero policy that disrupted parts of the world’s No 2 economy.

Baidu is now embracing anticipations of an economic rebound as China’s giant Internet sector emerges from a two-year drought, underscored by a steady stream of regulatory investigations and far-reaching pandemic curbs. In December, Xi Jinping’s government dismantled most of its Covid restrictions and opened the Chinese borders for travellers a month later. Officially, China said it recorded 3 per cent growth for 2022, while consumer spending fell slightly.

China’s Big Tech firms may be back in spending mode after a year of cost cuts and cautious expansion to shore up the bottom line. Baidu, for its part, is leading a race to create China’s answer to OpenAI’s red-hot ChatGPT. The Beijing company is planning to roll out “Ernie Bot” and embed the AI in its flagship search services in March, while partners from automakers to news sites declare they’ll use Baidu’s tool in their businesses.

It’s too early to tell – even before considering censorship or content quality on China’s Internet – whether Ernie could rise to the level of Tencent Holdings’ ubiquitous WeChat or Alibaba Group Holding’s dominant Taobao. While Baidu over the years sank billions of dollars into AI technology, its bigger rivals dominated the mobile era with more consumer-friendly products.

In the near term, Baidu still counts on the bread-and-butter online marketing service to generate cash. Its still-nascent cloud unit, meanwhile, is targeting clients including smart-city projects and industrial groups to find a niche against bigger foes such as Huawei Technologies and Alibaba.

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“Baidu aims to maintain faster growth for its marketing business than China’s GDP,” Daiwa Capital analysts led by John Choi wrote in a note before the results. “Some pocket share gains in ecommerce and retail advertisers will support the above-GDP growth.” BLOOMBERG