Baidu Company Overview

Zacks Rank #5 (Strong Sell) stock Baidu (BIDU) is a Chinese technology company that offers multiple internet services. With a focus on mainland China users, Baidu is best known for its search engine dominance (owns ~54% market share in China). However, the company has branched out into several other offerings. Baidu also offers cloud computing, artificial intelligence, autonomous driving, and online services like video streaming (iQIYI), an online encyclopedia (Baidu Baike), and even a popular discussion forum (Baidu Tieba). Like America’s Alphabet (GOOGL), Baidu strikes to be a one-stop destination for Chinese and global internet users.  

BIDU’s Slowing Earnings Growth

Zacks Consensus Estimates suggest that Wall Street analysts expect BIDU to produce negative earnings growth until at least 2026.

Image Source: Zacks Investment Research

Advertising, Baidu’s “bread and butter,” has been falling precipitously in recent quarters, and that decline is expected to continue. Below are some of the reasons for the company’s tepid earnings growth, including:

1.       Macroeconomic Challenges: China’s economy has been plagued by a devasting recession for several years, intensified by COVID-19, declining population growth, and an unprecedented real estate bear market.

2.       Changing Online Consumption: A trend has emerged where global internet users prefer short-form video content over long-form content. China’s ByteDance (owner of TikTok, known as Douyin in China), is dominating the short-form video market domestically. Presently, Baidu does not have an answer to this competition, and its search-based advertising has taken a hit as a result. In the US, Meta Platforms (META) has unveiled its “Reels,” while Google has debuted “YouTube Shorts.”

3.       AI and Cloud Computing: Though Baidu has invested many resources in these businesses, the company has yet to bear fruit.

Baidu’s Troubling Price Action

DeepSeek, China’s alleged “ChatGPT killer,” threw cold water on US equities Monday. Though US stocks like Nvidia (NVDA) and Microsoft (MSFT) plunged on the news, the action in Chinese equities was less than inspiring. For example, the iShares China Large Cap ETF (FXI) gained less than a percent Monday – a tepid response if you believe China has flipped the AI game on its head overnight. In addition, BIDU is exhibiting relative weakness compared to other Chinese tech juggernauts like Alibaba (BABA) and JD.com (JD).

Image Source: Zacks Investment Research

Bottom Line

Baidu faces significant challenges, from macro pressures in China to increasing competition in key markets like short-form video and AI. Slowing earnings growth and relative weakness in the tech sector underscore the uphill battle it faces in maintaining relevance.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Baidu, Inc. (BIDU) : Free Stock Analysis Report

iShares China Large-Cap ETF (FXI): ETF Research Reports

Alphabet Inc. (GOOGL) : Free Stock Analysis Report

JD.com, Inc. (JD) : Free Stock Analysis Report

Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report

Meta Platforms, Inc. (META) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research