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With Baidu (NASDAQ: BIDU) Having reached its lowest point in six years before the release of the report on this week's results, it's fair to say that expectations were at the pinnacle for the most beloved comedians on Monday. The Beijing-based company and the origin of the world's most popular Chinese search engine released financial results after the market closed which were far from perfect, but at least close to the top of its previous predictions.
Baidu's second-quarter revenue figure was set at $ 3.84 billion, an advance of only 1% over the previous year, but a welcome relief by the investors, with the medium of its forecasts forecasting a slight decline. According to Baidu, in mid-May, revenue growth is expected to be between a 3% drop and a 2% increase. Remove the impact of divestments announced over the past year and Baidu's business figure would have climbed 6%, the high end of their product line on that basis. The news was even better than expected on the results, and Wall Street responded by pushing the stock higher on Monday night.
Source of image: Baidu.
Success is relative
Wall Street has not been impressed by Baidu's previous financial exit, his first-quarter report having been marred by slower growth, the resignation of a key leader, poor forecasts and his first deficit declared as a public company. It would be an easy act to follow, but Monday's report could be further improved.
Revenue from online marketing – Baidu's business, which accounts for 73% of the revenue mix for the period – decreased by 9% for the period. This is the balance of the activity of Baidu that climbed by 44% to bring the overall results above those of the previous year, iqiyi (NASDAQ: IQ) Member services, cloud services and smart devices have achieved impressive gains.
The fact that iQiyi and other early-stage initiatives take over from growth poses a major problem is that these firms tend to be less profitable than their original paid search stronghold. Costs related to content, traffic acquisition, bandwidth, overhead, and research and development all increased at double-digit rates, well above the 6% decline of the turnover figure. The end result is that operating income and net income have contracted sharply, but at least Baidu remained in the dark this time on a published basis. Adjusted earnings of $ 1.47 per share was less than half of what it had earned the previous year, but investors were prepared for a much smaller profit on that basis.
Baidu may not have reached its low point here, as forecasts suggest that business will continue to slow down in the current quarter. Revenues of $ 3.84 to $ 4.07 billion that Baidu expects for the third quarter represent a 5% decrease from the previous quarter and a 1% increase over the higher segment. Cancel disinvestments in the past year, and the range calls for revenue to land between a 1% drop and a 5% increase.
The growing popularity of iQiyi's streaming video platform helps keep revenue growth in the right direction, but it weighs on bottom line results. Investors are forgiving more now than they were when the stock was trading higher earlier this year, making the second quarter a relative victory.
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