GOLDEN SUN SECURITIES·2025-09-18 01:13Investment Rating - The report upgrades the investment rating to "Buy" based on the potential of AI to enhance Baidu's traditional search capabilities and drive demand for computing power, cloud services, and applications [4][6]. Core Insights - Baidu's Q2 2025 revenue was recorded at 32.7 billion yuan, a year-on-year decrease of 3.6%. Core revenue was 26.3 billion yuan, down 1.6%, with online marketing services revenue declining by 15% to 16.2 billion yuan, while non-online marketing services revenue grew by 34% to 10 billion yuan [1]. - The AI transformation of Baidu Search is accelerating, with over 64% of search result pages containing AI-generated content as of July 2025, up from 35% in April [2]. - The Wenxin large model X1.1 was released in September 2025, showing significant performance improvements over its predecessor and comparable results to leading international models [2]. Financial Summary - Revenue projections for Baidu are adjusted to 129.9 billion yuan, 139.1 billion yuan, and 157.4 billion yuan for 2025, 2026, and 2027 respectively. Non-GAAP net profit estimates are set at 17.9 billion yuan, 20.1 billion yuan, and 27.3 billion yuan for the same years [4][13]. - The report provides a detailed financial forecast, indicating a revenue decline in 2025 followed by growth in subsequent years, with a projected revenue growth rate of 13.2% in 2027 [13]. - The report highlights the performance of various segments, with online marketing services expected to face challenges while intelligent cloud services are projected to grow significantly [13].