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Baidu's Quarterly Profit Slumps on Lower Investment Gains; AI Cloud Growth Accelerates

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Baidu's Quarterly Profit Slumps on Lower Investment Gains; AI Cloud Growth Accelerates

Baidu (HKG:9888) reported a sharp year-over-year drop in second-quarter profit, which the Beijing-based tech company attributed to lower investment income that offset steady growth in its AI cloud business.

Net income attributable to shareholders plunged 68% to 2.32 billion yuan from 7.32 billion yuan, with earnings per share shrinking to 5.74 yuan from 20.35 yuan, according to its after-hours Hong Kong bourse filing on Tuesday.

Baidu attributed the drop to a decrease in fair value gain from long-term investments and higher net foreign exchange losses linked to exchange rate fluctuations.

Revenue slipped 4% year over year to 31.3 billion yuan, weighed down by lower revenue across its core Baidu General Business and online video streaming platform iQIYI.

Cost of revenue rose year over year to 19.1 billion yuan on the back of higher traffic acquisition costs and costs related to its AI Cloud business.

"We are now in a critical phase of investment, and we intend to keep investing decisively in the areas that matter most to our long-term competitive position," CFO Haijian He said during an earnings call.

CEO and co-founder Robin Li added during the call that AI-powered business is now at the core of the company's revenue mix, and that Baidu is "focused on building a stronger foundation for its next phase of growth."

Revenue from Baidu's AI Cloud Infra segment rose 50% year over year to 7.3 billion yuan in the second quarter. Within that segment, GPU cloud revenue grew 283%, accelerating from the 184% growth in the first quarter, Li told analysts during the call.

Dou Shen, executive vice president of Baidu AI Cloud Group, said demand is broadening across sectors including internet, gaming, employed AI, autonomous driving, smartphones, financial services and more.

Baidu said it is moving forward with plans to convert to a dual-primary listing in Hong Kong after submitting its application in July.

The company added that it has returned $259 million to shareholders since the start of the first quarter through buybacks.

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