Ge Long Hui·2025-11-24 21:15Core Viewpoint - The company is experiencing short-term performance pressure due to a slowdown in advertising revenue, with core revenue in Q3 2025 at 24.7 billion CNY, a year-on-year decrease of 7% [1]. Revenue Breakdown - Online marketing revenue decreased by 18% year-on-year to 15.3 billion CNY, while non-online marketing revenue increased by 21% to 9.3 billion CNY [1]. - The change in revenue structure has led to a decline in gross margin, which was 47.3% in Q3 2025, down 11.5 percentage points year-on-year [1]. - Sales expenses increased by 14%, and the company recognized a 16.2 billion CNY impairment on certain assets that did not meet current efficiency standards, resulting in a core operating loss of 15 billion CNY and an adjusted net profit of 3.8 billion CNY for Q3 2025 [1]. AI Business Performance - The company disclosed its high-potential AI business revenue for the first time, with Q3 AI revenue surpassing 10 billion CNY [2]. - AI Cloud revenue reached 4.2 billion CNY in Q3 2025, a year-on-year increase of 33%, with subscription revenue from AI high-performance computing facilities growing by 128% [2]. - AI applications, including Baidu Wenku and Baidu Wangpan, generated 2.6 billion CNY in revenue, up 6% year-on-year [2]. - AI native marketing services, including intelligent agents and digital humans, generated 2.8 billion CNY, a significant year-on-year increase of 262% [2]. - AI native marketing services now account for 18% of the company's core advertising revenue, indicating potential for further growth as AI search commercializes [2]. Autonomous Driving Expansion - The company’s autonomous driving service, "Luobo Kuaipao," has achieved 3.1 million orders in Q3 2025, a year-on-year increase of 212%, with growth accelerating compared to Q2 [2]. - As of October, "Luobo Kuaipao" has expanded to 22 cities globally, with weekly order volume exceeding 250,000 [2]. - The company plans to continue rapid expansion through self-operated or third-party collaboration models, aiming to accumulate safety data and iterate technology to create a virtuous cycle of technology, data, and scale [2]. Profit Forecast and Valuation - Given the decline in traditional online marketing and the nascent stage of AI new business, the company forecasts adjusted net profits of 19.3 billion CNY, 19.5 billion CNY, and 22 billion CNY for 2025-2027 [3]. - Using a PE valuation method and referencing comparable companies, a 16x PE valuation for 2026 suggests a reasonable value of 311.7 billion CNY, equivalent to 342.5 billion HKD, with a target price of 124.52 HKD per share, maintaining a "buy" rating [3].