Summary of Baidu (BIDU) and iQIYI (IQ) 3Q25 Earnings Call Company Overview - **Companies Involved**: Baidu (BIDU/9888.HK) and iQIYI (IQ) - **Quarter**: 3Q25 Key Highlights for Baidu 1. **Earnings Performance**: Baidu's 3Q25 results were largely in-line, with solid cloud growth offsetting a decline in advertising revenue. The AI-empowered business generated Rmb10 billion, accounting for 40% of total revenue and growing 50% year-over-year [1][10] 2. **AI Business Growth**: The AI business includes cloud infrastructure, AI applications, and autonomous driving, reflecting Baidu's capabilities across its ecosystem. The company expects continued rapid growth in AI-empowered business despite pressures on traditional search ads [1][9] 3. **Cloud Revenue**: Out of Rmb6.2 billion in cloud revenue, enterprise cloud revenue was approximately Rmb4.2 billion, growing at 33% year-over-year. Subscription-based revenue has more than doubled, indicating strong demand for AI training and inference [5][9] 4. **Robotaxi Expansion**: Baidu's Apollo completed 3.1 million fully driverless rides in 3Q25, a 40% quarter-over-quarter increase. The company is expanding its Robotaxi service to 22 cities globally and exploring an asset-light model [5][9] 5. **Advertising Revenue Pressure**: The advertising segment is expected to face high pressure for another 1-2 quarters, with a projected decline of high teens percentage year-over-year in 4Q25. AI agents and digital humans now account for 18% of ad revenue, up from 16% in 2Q25 [5][9] 6. **Profit Margin Outlook**: The group profit margin is expected to bottom out at 9% in 3Q25, with traditional ads contributing less to overall revenue as cloud and Robotaxi segments improve operational efficiency [9][10] 7. **Valuation Update**: Baidu's target price is revised to US$155/HK$151, reflecting a slight adjustment in revenue estimates for 2025E-2027E [6][9] Key Highlights for iQIYI 1. **Earnings Performance**: iQIYI reported inline 3Q25 results with total revenue down 8% year-over-year and a non-GAAP net loss of Rmb148 million. Membership revenue declined by 4% year-over-year, while advertising revenue fell by 7% [24][25] 2. **Content Performance**: The new drama policy and successful titles like "Strange Tales of Tang Dynasty III" are expected to help iQIYI's revenue return to positive growth in 4Q25E, with subscription revenue projected to grow by 3% year-over-year [24][25] 3. **International Growth**: iQIYI's overseas subscription revenue grew robustly by over 40% year-over-year in 3Q25, indicating potential for future contributions to profitability [24][25] 4. **Valuation Update**: iQIYI's 12-month target price remains unchanged at US$2.1, with a slight adjustment in revenue estimates reflecting higher content distribution business offset by softer advertising recovery [25][27] Additional Insights - **Market Sentiment**: The market is expected to start valuing Baidu's AI and cloud businesses separately, as these segments show significant growth potential [9][10] - **Long-term Investments**: Baidu's total net cash, including long-term investments, is approximately US$27 billion, representing over 70% of its market cap [9][10] This summary encapsulates the key points from the earnings call, highlighting the performance and outlook for both Baidu and iQIYI in 3Q25.