"Baidu's AI cloud segment saw a significant 42% year-on-year revenue increase, driving overall first-quarter 2025 revenue growth to 3%."
"Weakness in online marketing revenue, which fell 6% year-on-year, offset the strength in the AI cloud, leading to a contraction in operating margins."
"Baidu's ad revenue decline is anticipated to continue, prompting a revision in their five-year revenue compound annual growth rate assumption from 3.5% to 3%."
"Despite current ad challenges, Baidu is considered undervalued, and the firm has a positive long-term outlook for its AI cloud business."
Baidu's first-quarter 2025 results show a 3% year-over-year revenue increase, primarily fueled by a 42% jump in enterprise AI cloud revenue. However, a 6% decline in online marketing revenue negatively impacted overall growth, leading to a contraction in operating margins. Management anticipates a continuing downturn in ad revenue, prompting a reduction in their revenue growth forecast. Despite negative market reactions and guidance on ad performance, Baidu’s long-term prospects for AI cloud services remain strong, with expectations for substantial revenue growth in the upcoming quarter.
Read at www.morningstar.com
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