BIDU Earnings Preview: Is Chinese Tech on the Rebound?

Chinese tech giant Baidu Inc. (BIDU) is set to report its fourth-quarter 2024 earnings on February 18, before the market opens. The report comes at a crucial time as Baidu navigates economic headwinds, evolving AI strategies, and an increasingly competitive market. Analysts expect the company’s revenue to decline slightly, with profitability facing pressures from strategic investments and macroeconomic challenges.

Key Topics and Drivers to Watch

Investors should closely monitor several key factors in Baidu’s earnings report:

Advertising Revenue: Baidu’s core ad business has been under pressure due to both macroeconomic factors and the shift to AI-driven search. The company expects stabilization in Q4 2024 and early 2025, potentially reversing some of the declines seen throughout last year.

AI and Cloud Growth: Baidu has aggressively expanded its AI capabilities, particularly in AI cloud services. Revenue from this segment is expected to show growth, helping to offset weaker advertising numbers.

Profitability Pressures: Baidu’s investments in AI and autonomous driving have weighed on margins. Management’s guidance on how these investments will translate into revenue growth will be key.

Competitive Landscape: Baidu faces increasing competition in AI and search from rivals like Alibaba and ByteDance. Additionally, new players such as DeepSeek have disrupted the Chinese AI sector with more cost-efficient models, posing a challenge to Baidu’s Ernie Bot.

Baidu’s AI Plans and Potential Apple Partnership

A major storyline surrounding Baidu is its aggressive push into artificial intelligence. The company’s Ernie AI chatbot, once considered a leader in China’s AI race, has faced increasing competition from DeepSeek, Alibaba’s Qwen, and ByteDance’s Doubao. In a bold move, Baidu announced that Ernie will be free for all users starting April 2025, signaling a shift in strategy to drive mass adoption and data collection rather than short-term monetization. The decision also reflects the intense pricing pressures in China’s AI sector, where rivals are offering competitive products at minimal cost.

One of the most intriguing rumors is that Baidu may be in discussions with Apple (AAPL) regarding an AI partnership. While no formal agreement has been announced, speculation has grown that Apple may integrate Baidu’s Ernie Bot into iOS devices in China, where U.S.-based AI models face regulatory hurdles. Such a deal could provide Baidu with a significant boost in AI adoption and credibility.

Earnings Expectations and Market Reaction

According to FactSet, Baidu’s revenue for the quarter is expected to come in at 33.245 billion yuan, slightly lower than the 34.95 billion yuan reported in the same period last year. Net profit is projected to rise 44% year-over-year to 3.75 billion yuan ($517 million), primarily due to cost-cutting measures rather than top-line growth. However, investors will be looking for signs of revenue stabilization, particularly in its advertising and AI segments.

Baidu’s stock has been volatile, dropping 22% in the final quarter of 2024 due to concerns over China’s economic slowdown and weaker ad spending. However, shares have rebounded nearly 9% in 2025 amid renewed enthusiasm for Chinese tech stocks.

Key Segments to Watch

Advertising: After an estimated 7% decline in Q4, analysts believe AI-led search transformation could help stabilize advertising revenue in 2025.

AI Cloud: Jefferies estimates that revenue in this segment rose 13% in Q4, with further acceleration expected in 2025. Management’s commentary on competition and pricing will be important.

iQIYI and Autonomous Driving: Baidu’s video streaming platform iQIYI has struggled with declining revenue, and analysts expect continued weakness. The autonomous driving division, while promising, remains an investment-heavy business without clear near-term profitability.

Conclusion: A Pivotal Quarter

Baidu’s Q4 earnings report will be closely scrutinized for signs of a bottoming-out in its core businesses. While macroeconomic headwinds persist, the company’s AI initiatives, potential Apple partnership, and stabilizing ad revenue could drive a turnaround in 2025. Investors should pay attention to management’s guidance on AI monetization and how it plans to compete with emerging players in China’s crowded AI landscape.