百度2025年第一季度探寻产品策略

F25E21 May 2025116.25/74.716M6.4(1.8)8.205/25 RatingMarket-PerformPrice TargetBIDU9888.HKAdjusted EPSF24ABIDU (CNY)77.20OLD--9888.HK (CNY)9.65OLD--Source: Bloomberg, Bernstein estimates and analysis.Baidu Q125: In search of a product strategy...Strong AI Cloud revenue offset by continued Search disruption:Baidu core revenuereached RMB25.5Bn +7% YoY beating est of -2.6%YoY driven by strong AI Cloud growthof 42% YoY. Online marketing Search was weaker at RMB16Bn with -6% decline YoY. AICloud grew 42% YoY to RMB6.7Bn. Non GAAP operating margin came out to 19% driven byweaker ads business.Outlook mixed on AI Search disruption while AI Cloud sees strong demand andpricing:Stock was down after earnings on the negative outlook from Search, with mgmtguiding to -10% in 2Q and no sign of when this would pick up. This does not seem to haveoffset the strength in AI Cloud, with continued 30%+ growth rate expected and mgmt seeingfurther mix shift towards tokenized recurring revenue, supporting a longer term margin story.On robotaxi, mgmt talksAI Search is going through continued re-engineering of its product with engagementand monetization uncertain:Mgmt have said they will further take out ad inventory fromads as they further re-engineer the Search product. Currently mgmt have said AI features in~35% of ads but this will expand to at least 50% by next quarter. The issue we learn that AISearch is facing is that its product end state seems to be continuously shifting. Mgmt haveshifted from AI Overviews to recreating Search into a video output based Search product,with Search outputs being much more short video and multimedia outputs. Monetizationhasn’t started as this requires new monetization and mgmt will focus more on the customerexperience. Monetization could start in 3Q but mgmt was mum on this saying it will dependon the performance of pilots. That said they also pointed towards 7% increase in MAU andDAU recovering.Cont’d on next pageInvestment ImplicationsWe rate Baidu Market-Perform, TP USD97/HKD95. We lower our TP on reduced Searchbusiness revenue and worsening margin profile and adjust our multiples for Search andCloud based on market comps.See the Disclosure Appendix of this report for required disclosures, analyst certifications and otherimportant information. Alternatively, visit our Global Research Disclosure Website.First Published: 22 May 2025 14:00 UTC Completion Date: 22 May 2025 14:00 UTC 97.00 USD(108.00OLD)95.00 HKD(105.00OLD)F25EF26E62.0173.7467.4085.107.759.228.4310.64FinancialsRevenues (M)Net Earnings (M)Gross Margin (%)Net Income Margin (%)Operating Margin (%) F24AF25EF26ECAGR133,125135,529145,56524,17519,68822,099(4.4)%50.344.545.818.214.515.216.09.912.1 DETAILSFrom first page...In search of an AI Search ecosystem strategy.We remain on the sidelines as we have been looking for clarity of productdevelopment but it seems to be elusive. The broader question is whether the AI Search product they are developing hassufficient longevity and customer engagement to outlast AI chat bots and the strengthening of AI ecosystems at verticalsplatforms.We have been on the side lines for some time and at this point we frame our concerns around 3 points which we look for clarifyuntil turning more positive on the stock 1) Does the AI Search product a gain customer engagement with longer term ecosystemlock in? 2) Is the company focused on the right verticals to drive brand partner engagement with sufficient eCPM / ad rates todrive a sufficient ROI? 3) what kind of monetization ad products are there going to be to ensure no loss in customer experience -ie will putting ads in short video reels work?DETAILS FROM EARNINGS CALLTopline beat on strong AI Cloud revenue, despite bottomline was heavily guided down:Baidu core revenue reachedRMB25.5Bn +7% YoY beating est of -2.6%YoY driven by strong AI Cloud growth of 42% YoY. Online marketing Search wasweaker at RMB16Bn with -6% decline YoY. AI Cloud grew 42% YoY to RMB6.7Bn. Non GAAP operating margin came out to19% driven by weaker ads business.•Baidu core revenue grew +7%YoY in 1Q25 to RMB25.5Bn. Marketing revenue fell -6% to RMB16Bn, AI Cloud revenuereached RMB6.7Bn growing +42% YoY and other non cloud revenue grew by 32% to 2.7Bn.•Online Marketing revenue fell -6% from higher search traffic diversion away from ads to Gen AI.Gen AI searchnow takes up 35% of total search traffic up from 22% in January in mobile MAU with multimodal search results andseeing increase in retention and usage- MAU increased 7% YoY.•AI Cloud revenue grew 42% reaching RMB6.7Bn driven by strong demand on enterprise subscription cloudservices.Enterprise subscription cloud drove the strong AI cloud revenue, taking a majority of revenue and is sustainablein nature. Mgmt has alluded to a triple digit growth in Gen AI within this space. The company has taken an applicationbased approach on AI, providing a full stack E2E solution with highly efficient and scalable AI infrastructure, being popularamong N