Benzingaยท2025-08-21 17:17Core Insights - Baidu Inc faces challenges with fluctuating advertising revenues while also having opportunities in AI and non-advertising sectors [1][2] - Benchmark analyst Fawne Jiang maintains a Buy rating on Baidu but lowers the price target from $120 to $115 [1][2] Advertising Revenue - Baidu's advertising revenue is under pressure, with a projected decline of 25% year-over-year (Y/Y) in Q3 and 15% in Q4 of 2025 [4] - The second-quarter 2025 revenues were reported at 32.7 billion Chinese yuan, reflecting a 4% decline Y/Y, with Baidu Core down 2% Y/Y due to a 15% drop in advertising [2][3] Non-Advertising Revenue - Non-advertising revenue surged by 34% Y/Y, now accounting for approximately 40% of Baidu Core, driven by a 27% Y/Y growth in AI Cloud and strong subscription-based revenue [3][5] - AI Cloud is expected to grow by 19% Y/Y in the second half of 2025, aligning with management guidance [5] Earnings and Financials - Baidu posted an earnings per share (EPS) of 13.58 Chinese yuan ($1.90), slightly above expectations, with a Baidu Core EBITDA margin of 24%, down 7.9 percentage points Y/Y [3][6] - The company has $63 per share in net cash and is executing a ~5% annual buyback, providing some downside support amid earnings pressure [6] Future Outlook - The upcoming launch of ERNIE 5.0 is expected to enhance multimodal search and digital human technology, presenting potential upside for the company [4] - Early traction in GenAI monetization could reshape Baidu into a more diversified and innovation-led company [6]