The article "After the Performance" summarizes the latest ratings, target prices, and views of brokerages after Baidu announced its quarterly results

Baidu-SW (09888.HK) saw its stock price rise and then fall this morning, opening up 2.2% at HKD 113.9, reaching a high of HKD 115.7 at one point, a gain of 3.9%. However, the gains narrowed later, closing at HKD 110.5, down 0.8%. According to a report by Credit Suisse, Baidu's core revenue and operating profit for the third quarter exceeded expectations, with online advertising business expected to bottom out in the third quarter and achieve quarter-on-quarter growth in the fourth quarter. AI-driven business is expected to maintain robust growth momentum. The non-GAAP operating profit for the department is expected to grow quarter-on-quarter in the fourth quarter. In the field of intelligent driving, Baidu is opening up the potential of overseas markets through different business models. The firm maintains a "Buy" rating on Baidu and adjusts the target prices for American Depositary Shares and H-shares from USD 157 and HKD 152 to USD 159 and HKD 154, reflecting the latest business trends following the earnings announcement.

Baidu announced its third-quarter results after the market closed yesterday (19th), reporting a net loss attributable to Baidu of RMB 11.232 billion for the quarter, compared to a net profit of RMB 7.632 billion in the same period last year, falling short of the lower limit of the net profit forecast of RMB 1.038 billion from four brokerages surveyed. The diluted loss per American Depositary Share was RMB 33.88. During the period, long-term asset impairment was approximately RMB 16.2 billion. The non-GAAP net profit attributable to Baidu fell 36% year-on-year to RMB 3.77 billion, exceeding the upper limit of the forecast of RMB 3.116 billion from eight brokerages surveyed; the diluted profit per American Depositary Share was RMB 11.12. Adjusted EBITDA fell 49% year-on-year to RMB 4.429 billion, with the adjusted EBITDA margin down 12 percentage points year-on-year to 14%.

Quarterly revenue fell 7% year-on-year to RMB 31.174 billion, close to the upper limit of the forecast of RMB 31.195 billion from eight brokerages surveyed. Among them, Baidu's core revenue fell 7% year-on-year to RMB 24.659 billion. By business segment, online marketing revenue fell approximately 18% year-on-year to RMB 15.3 billion, while non-online marketing revenue rose approximately 21% year-on-year to RMB 9.3 billion, mainly driven by growth in intelligent cloud business. iQIYI (IQ.US) reported a year-on-year revenue decline of approximately 8% to RMB 6.7 billion during the period. The company disclosed that revenue from intelligent cloud infrastructure rose 33% year-on-year to RMB 4.2 billion, and revenue from AI high-performance computing facility subscriptions rose 128% year-on-year. During the quarter, revenue from AI applications rose 6% year-on-year to RMB 2.6 billion, and revenue from AI-native marketing services grew 262% to RMB 2.8 billion. Baidu's autonomous vehicle service, Luobo Kuaipao, provided 3.1 million fully autonomous driving operation orders in the third quarter, a year-on-year increase of 212%.

【Goldman Sachs points out that the value of AI business will be emphasized】

Goldman Sachs noted that Baidu's third-quarter performance overall met expectations: robust growth in cloud business offset the decline in advertising revenue. More importantly, it disclosed more information on AI revenue and reclassified its growth business lines, explicitly introducing the concept of "AI-enabled business" for the first time, with this segment's quarterly revenue rising 50% year-on-year to RMB 10 billion, accounting for 40% of Baidu's total revenue The bank pointed out that the relevant businesses span across cloud infrastructure/chips, artificial intelligence applications and agents, autonomous driving, and other fields, fully demonstrating Baidu's strong capabilities in the entire artificial intelligence ecosystem. Even though the traditional search advertising business will still face pressure in the coming quarters, it is expected that AI-enabled businesses will continue to grow rapidly, and the market will increasingly value these high-value businesses, especially as their proportion further increases. Looking ahead to the fourth quarter and next year, the bank expects Baidu's revenue to likely recover quarter-on-quarter, with profit margins bottoming out from the third quarter. The bank maintains a "Buy" rating on Baidu, adjusting the target price to HKD 151.

Nomura believes that Baidu's efforts to disclose details of its fastest-growing artificial intelligence business will help win investor favor. However, its advertising business remains the bank's main concern, as it believes that despite the AI vision, the advertising business will still struggle to reverse its decline. The bank also noted that Baidu's Chief Financial Officer hinted at a willingness to propose to the board to consider improving capital return prospects. Although Baidu has historically had ample cash on its balance sheet, its returns to shareholders are not as generous as some peers. If it can persuade the board to change its capital return stance, it is believed that this will help enhance Baidu's attractiveness to long-term investors. The bank maintains a "Neutral" rating on Baidu's American Depositary Shares, with a target price of USD 135.

Morgan Stanley expects Baidu's advertising revenue decline in the fourth quarter to narrow to 17%, while revenue from artificial intelligence cloud infrastructure will continue to expand. Due to weak revenue and increased investments, gross margins will still be under pressure. The bank anticipates that strengthening shareholder returns in the fourth quarter will serve as a short-term catalyst for the stock price. It lowers the target price for Baidu's American Depositary Shares to USD 130, with a rating of "In Line with the Market."

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The latest comprehensive investment ratings and target prices from 8 brokerages are as follows:

The table below lists the ratings and target prices for Baidu (09888.HK) from 5 brokerages:

Brokerage│Investment Rating│Target Price

Macquarie│Outperform│HKD 164->HKD 160

Jefferies│Buy│HKD 152->HKD 154

UBS│Buy│HKD 151

Goldman Sachs│Buy│HKD 150->HKD 151

JP Morgan│Neutral│HKD 105

The table below lists the ratings and target prices for Baidu (BIDU.US) from 8 brokerages:

Brokerage│Investment Rating│Target Price

Citi│Buy│USD 166

Macquarie│Outperform│USD 169->USD 164

Jefferies│Buy│USD 157->USD 159

UBS│Buy│USD 155

Goldman Sachs│Buy│USD 154->USD 155

Nomura│Neutral│USD 135

JP Morgan│Neutral│USD 110

Morgan Stanley│In Line with the Market│USD 140->USD 130

Brokerage│Viewpoint

Macquarie│AI business transparency continues to improve

Citi│Quarterly results beat market expectations

Jefferies│Third quarter performance bottomed out, AI-driven business drives growth UBS | New disclosure improves visibility of AI potential

Goldman Sachs | AI business revenue remains strong, profitability may have bottomed out

Nomura | Quarterly results weak, beating market low expectations

JP Morgan | Quarterly results mixed

Morgan Stanley | Advertising remains weak, but AI revenue accelerates