Baidu, Inc. (BIDU) is scheduled to announce its second-quarter 2024 earnings on August 22. The company’s financial performance during this period will be closely watched, as it reflects the ongoing impact of its AI investments and the competitive landscape in China’s tech sector.
Analysts anticipate revenue growth, with the Zacks Consensus Estimate projecting $4.74 billion, representing a 0.8% increase from the previous year’s quarter. However, earnings are expected to decline by 13.8% to $2.68 per share. Baidu has a history of exceeding earnings expectations, having beaten estimates in the past four quarters with an average beat of 16.83%.
Key Factors Influencing Q2 2024 Results:
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AI Momentum:
Baidu’s AI business, particularly its generative AI model ERNIE Bot, is expected to continue driving revenue growth. The expanding reach of ERNIE Bot in China and the strengthening of its underlying foundation models are likely to have boosted customer adoption during the quarter.*
Baidu Cloud Growth:
Baidu’s cloud computing business is another area anticipated to contribute to overall performance. The company’s focus on providing cloud services to businesses in China is expected to have driven growth in this segment.*
Mobile Ecosystem Strength:
Baidu’s mobile ecosystem, including the Baidu app, is expected to have seen growth in average daily active users due to the company’s sustained investments in mobile search and AI tools.*
Autonomous Driving Progress:
Baidu’s autonomous driving platform, Apollo Go Robotaxi, has been expanding its presence in several Chinese cities. The increasing availability of this service and the growing number of rides are expected to have positively impacted Baidu’s performance.Potential Headwinds:
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Promotional Expenses and Investments:
Higher promotional expenses and significant investments in new growth areas, such as AI, are likely to have impacted Baidu’s profitability during the quarter.*
iQIYI Segment Weakness:
The company’s iQIYI video streaming platform might have experienced some weakness due to broader industry trends.*
Competitive Landscape:
The intensifying competition in the generative AI and large language model markets, both domestically and globally, poses a challenge for Baidu.Earnings Outlook:
Baidu’s Earnings ESP (Earnings Surprise Prediction) is currently 0.00%. While a positive Earnings ESP combined with a favorable Zacks Rank (1, 2, or 3) generally indicates a higher probability of exceeding earnings expectations, Baidu’s Zacks Rank is currently 4 (Sell). This suggests that analysts are not overly optimistic about the company’s ability to beat estimates in the upcoming quarter.
Other Stocks to Consider:
For investors looking for companies with a higher likelihood of exceeding earnings estimates, alternative options include American Eagle Outfitters (AEO), Abercrombie & Fitch (ANF), and Affirm (AFRM). These companies have positive Earnings ESPs and favorable Zacks Ranks, indicating a stronger earnings beat potential.
