Baidu (HKG: 9888) Posted Stellar Quarterly Results, while Remaining Undervalued, Eyeing its Broadening AI-industry Exposure

Baidu (HKG: 9888) just published its quarterly results this early morning and exceeded consensus forecast with its Non-GAAP EPADS (Earnings Per Average Diluted Share) of $3.08, beating estimates by $0.58. The company also outperformed in terms of revenue, reporting $4.92 billion and surpassing expectations by $50 million.

In Q4, Baidu continued its impressive performance with the revenue breakdown showing that Baidu Core generated RMB (yuan) 27.5 billion (~$3.87 billion), marking a 7% increase from the previous year. Online marketing revenue saw a 6% growth, reaching RMB19.2 billion (~$2.70 billion), while offline marketing revenue reached RMB8.3 billion (~$1.17 billion), posting a 9% increase. These positive results were largely driven by the success of the AI Cloud business. Additionally, revenue from iQIYI reached RMB7.7 billion ($1.09 billion), showing a modest 2% growth compared to the previous year.

Despite its dominant position in the AI sector in China, Baidu shares have been so far underperforming other global technology companies. However, the stock is currently trading at an appealing valuation of ~11X its forward price-to-earnings ratio. This becomes even more attractive considering the recent volatility in the Chinese stock market and the broad welcoming reactions to news regarding the usage of Baidu's AI suite by the Chinese military.