"Major Banks" Bank of America Securities: Baidu's overall business revenue last quarter met expectations, and adjusted operating profit exceeded forecasts

Bank of America Securities published a research report indicating that Baidu (09888.HK) had total revenue of RMB 26.1 billion in the last quarter, in line with market expectations; adjusted operating profit was RMB 2.8 billion, higher than the market forecast of RMB 2.5 billion; operating cash flow turned positive in the second half of the year, and management believes it can maintain positive figures in the future.

The firm maintains its forecast for Baidu's first quarter, expecting the company's revenue to grow by 7% year-on-year this year, with adjusted operating profit increasing by 12%. The firm believes that competition for AI traffic poses risks for the company, but the accelerated demand for AI infrastructure will also present opportunities. The firm has lowered its forecast for the company's advertising revenue to a year-on-year decline of 5%, while maintaining its total revenue forecast.

The firm believes that the rapidly growing AI business will become Baidu's core. The firm maintains a target price of $180 for Baidu (BIDU.US) in the U.S. stock market and a target price of HKD 176 in the Hong Kong stock market, reiterating the company's "Buy" rating, and conservatively estimates that Kunlun Core will contribute $18 billion to the company. (sl/