Macquarie maintains Baidu's "Outperform" rating, lowers earnings forecasts for this year and next

Macquarie published a research report stating that Baidu (09888.HK) has for the first time disclosed performance related to AI-enabled businesses, with increased revenue transparency in the third quarter. The group revealed that third-quarter AI new business revenue grew by over 50% year-on-year to approximately 10 billion yuan, mainly driven by the newly categorized three major areas: AI cloud infrastructure, AI applications, and AI native marketing services.

Macquarie noted that Baidu's core advertising revenue in the third quarter fell by 12% year-on-year, but the proportion of AI-generated content in searches continued to rise to about 70% in October this year. The AI contribution to search business is high and has monetization potential, leading to the belief that the decline in search business will continue to narrow, and that the adjusted operating profit for the third quarter has bottomed out.

The firm has lowered Baidu's adjusted earnings per share forecasts for the next two years by 19% and 10%, respectively, and has reduced Baidu's H-share target price from HKD 164 to HKD 160. The target price for Baidu (BIDU.US) in the US stock market has been lowered from USD 169 to USD 164, maintaining an "Outperform" rating