BIDU(US:BIDU)2025-09-28 14:57Summary of Baidu's Key Business Insights Company Overview - Company: Baidu - Date of Report: 26 September 2025 - Industry: Emerging Internet in China Core Business Insights 1. Stock Re-rating and Value Unlocking - Baidu's stock has been positively re-rated due to a more favorable outlook on capital structure and value unlocking initiatives, including potential listings for Robotaxi and other ventures. The estimated value of Baidu is approximately US$150/share, with US$100 from core businesses and US$50 from new ventures like Robotaxi and net cash/investments [1][5][9]. 2. Core Search Business - The core search business is expected to recover with a revamped AI product, projecting RMB61 billion in revenue for 2026, a 1% YoY decline, and an EPS of USD6.1, valued at USD17 billion or USD50 per share based on an 8x PE multiple [2][10]. 3. AI Cloud Business - Baidu AI Cloud, the only pure-play AI cloud provider in China, is projected to grow by over 20% YoY, with revenues of RMB34 billion in 2026 and a 15% operating margin. The business is valued at USD17 billion, equating to USD50 per share at a 25x PE multiple [3][29]. 4. Robotaxi Business (Apollo Go) - The Robotaxi segment is not expected to contribute revenue until around 2030, but Baidu is positioned as a leader with significant investments. The potential revenue is estimated at USD900 million in 2030, with a current value of USD7 billion based on a 30x PE multiple [4][44]. 5. Total Valuation and Future Growth - A sum-of-the-parts (SOTP) analysis values Baidu at USD47 billion or USD150 per share, with potential to reach USD61 billion or USD200 per share under more optimistic assumptions [5][9]. Challenges and Risks 6. Growth Sustainability - The company faces challenges in sustaining a 15% growth across its asset value, particularly with the core search business needing more time to show positive earnings trajectories. The cash portion remains a drag, and expectations for the Robotaxi business are high, which may not offset stagnant cash reserves [6]. 7. Market Share Loss - Baidu has been losing market share to short-form video platforms, with a strategic pivot to AI search content impacting traditional search monetization. The online marketing revenue is expected to decline by 15% YoY in 2025, but is projected to stabilize and recover in 2026 [12][27]. Additional Insights 8. User Engagement and AI Features - New AI products are beginning to monetize, contributing 13% and 3% of online marketing revenue from AI agents and digital humans, respectively. User engagement metrics, such as MAU and daily time spent, are showing positive trends, indicating potential for recovery in the search business [12][13][17]. 9. Financial Forecasts - Baidu's financial forecasts indicate a gradual recovery in net sales, with projected revenues of RMB138.86 billion in 2026 and RMB152.52 billion in 2027. The company is also expected to maintain a strong gross profit margin [54]. 10. Investment Implications - Baidu is rated as Market-Perform, with a target price increase from USD90 to USD150 reflecting the latest multiples for its various businesses. The valuation incorporates the search business, AI Cloud, Robotaxi, and other investments [9][54]. This summary encapsulates the key insights and projections regarding Baidu's business performance, market positioning, and future growth potential, while also highlighting the challenges it faces in a competitive landscape.