3q25预告：期待新企业带来的直接结果和更多更新

3Q25 preview: expecting inline results andmore updatesfrom new businessesx Target PriceUS$148.40(Previous TPUS$132.00)Up/Downside23.7%Current PriceUS$119.94 For3Q25E, weexpect Baidu Core business revenue could reach RMB24.6bn,down 7% YoY, owing to ongoing transformation in ads business, while partlyoffset by solid cloud revenue growth, which we anticipateto be20% YoY. Weare looking for RMB2.1bn non-GAAPOPfor Baidu Core in3Q25E, inline withBloombergconsensus.Recoveryin core ads likely still takes time, in our view,while new ads growth drivers, such as agent-related ads and digital human, arein the making. Core ads business and cash in hand are key factors to supportvaluation, in our view, while further valuation rerating opportunities could arisefrom: 1) morevisibilityon operating metricsof cloud business; 2) more updateson Robotaxi andAI-related new businesses; 3) potentialoptimization in use ofcashon handto further enhance shareholder return. We lift ourSOTP-basedtargetprice to US$148.4 (was US$132.0) to reflectamore positive developmentoutlook of cloud business. Maintain BUY. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFAfranktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Public cloud to sustain solid growth momentum.We are anticipatingBaidu Cloud revenue growth of 20% YoY in3Q25E(3Q24:11%; 2Q25:27%),driven by robust public cloud revenue growth boosted by the AI-related demand. We expect morevisibilityon operating metrics of bothpersonal cloud (such as NetDisk and Wenku) and public cloud business topropel valuation rerating for cloud business in the coming quarters. Joanna Ma(852) 3761 8838joannama@cmbi.com.hk Stock Data Recovery incore ads likely still takes time, while new growth driversare in the making.Within Baidu Core business, we are looking fora22.5%YoYrevenuedecline for ads business in3Q25E, owing to theongoingbusiness transformation, while expecting the decline to narrow to 16.5%YoY in 4Q25E due to the gradual kick-off of monetizationfor Gen-AI relatedsearch results andincrementalads revenue generated from new ads formatsuch asagent-related ads anddigital human. In 2Q25, revenue generatedby agents for advertisers/ digital human-related ads grew 50/55% QoQ andcontributed 13/3% of Baidu Core’sonlinemarketing revenue, and we expectthe contribution to continue ramping up in the coming quarters.Weighedbybusiness adjustments in the near term, we estimate Baidu Core hasachieved non-GAAPOPof RMB2.1bn in3Q25E (3Q24: RMB6.7bn),in linewith consensus. Potential optimization in use of cash to provide further valuationsupport.Asof end-2Q25, Baidu hadcash, cash equivalents, restrictedcash and short-term investment of RMB124.2bn,and the cash, cashequivalents, short-term investment,long-term deposits and held-to-maturityinvestment for Baidu Core was RMB229.7bn. The potential disposal of non-core assets, as well as optimization in use of cashin handto enhanceshareholder return should help provide further valuation support, in ourview. Source: FactSet Changes in forecast To account forthe mixed impact from slightly lowered forecast for core ads business in the near term andraisedforecastfor cloud business over 2026-2027E, we nudge down total revenue forecast for Baidu by 1.0/0.3% for 2025E/2026E,but lift forecast by 0.4% in 2027E. Along with the cut in revenue in the near term, and with the fine-tunedestimatesfor other non-operating items (such asforecast for foreign exchange gainsor losses), we cut non-GAAP NP forecast by 2-8% for Baidu over 2025-2027E. SOTP valuation of US$148.4per ADS OurnewSOTP-based target price comprises, per ADS: 1) US$33.2for Baidu Core (mainly including the core ads business,excluding Apollo and Baidu Cloud), based onanunchanged5.0x2025E non-GAAP PE(wasUS$35.3based on 5.0x 2025E non-GAAP PE); 2) US$0.3for Apollo ASD(unchanged), based on 2.0x 2030E revenue, and discounted backto 2025Eusing a 13.0%WACC. 3) US$60.3for Baidu Cloud, based on5.5x 2025E PS(was US$38.3 based on3.4x 2025E PS).The lift invaluationwasmainly due to more positive market sentiment on the back of solid cloud revenue growth outlook, which is inline withthevaluation rerating trend with other cloud peers under our coverage; 4) US$54.6fornet cash,iQIYI and other investments(was US$58.2), with a 30% holding discount applied to thevaluationofUS$78.0per ADS. We expect more visibility on operating metrics of both personal cloud (such as NetDisk and Wenku) and public cloudbusiness to propel valuation rerating for cloud business in the coming quarters.In addition, the potential disposal of non-core assets, as well as optimization in use of cash in hand to enhance shareholder return should help provide furthervaluation support, in our view. Risks 1)Slower-than-expected ramp-up in revenue generation from Gen-AI related business.2)Slower-than-expected margin expansion. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the con