Baidu Q4 Earnings: AI Cloud Grows, Margin Slides, Expects AI Investments To Bear Fruit In 2025

Core Insights - Baidu, Inc reported fiscal fourth-quarter revenue of $4.68 billion, a 2% year-on-year decline, but exceeded analyst consensus estimates of $4.56 billion [1] - Adjusted earnings per ADS were $2.63, surpassing the analyst consensus estimate of $1.78 [1] - The stock price experienced a decline following the earnings report [1] Revenue Breakdown - Core revenue increased by 1% year over year to $3.8 billion [1] - Online marketing revenue fell by 7% year over year to $2.46 billion [1] - Non-online marketing revenue rose by 18% year over year to $1.34 billion, driven by the AI Cloud business, which grew by 26% during the quarter [2] Expense and Profitability Metrics - SG&A expenses were $915 million, up 14% year over year, attributed to increased expected credit losses, channel spending, and promotional marketing expenses [3] - R&D expenses decreased by 12% year over year to $756 million [3] - Adjusted EBITDA margin declined by 600 basis points to 20%, while Core adjusted EBITDA margin also decreased by 600 basis points to 24% [3] - As of December 31, 2024, Baidu had $19.1 billion in cash and equivalents and generated $3 million in free cash flow during the quarter [3] Strategic Direction - CEO Robin Li indicated that 2024 is a pivotal year for Baidu's transformation from an internet-centric to an AI-first business, with AI Cloud gaining momentum [4] - The company is advancing its AI transformation in the Mobile Ecosystem, with Apollo Go facilitating global expansion and scalable strategies [4] - Li anticipates that AI investments will yield more significant results in 2025 [4] Market Performance - Baidu's stock declined 8% over the last 12 months, as its AI models struggled to gain traction [5] - The company plans to launch Ernie 5.0 in late 2025 and will offer Ernie Bot free to all users [5] - Baidu is a key partner for Apple Inc as it aims to integrate AI features into its iPhones for the Chinese market [5] - BIDU stock traded lower by 2.29% at $95.25 in premarket trading following the report [5]