OP很可能触及了低谷；与AI相关的新举措有更高的可见度

have more visibility OP likely hit trough; AI-related new initiativeshave morevisibility Target PriceUS$150.70(Previous TPUS$148.40)Up/Downside28.6%Current PriceUS$117.14 Baidu announced(18 Nov)better-than-feared 3Q25 results:Baidu Corerevenue wasRMB24.7bn,down7.0% YoY,inline with our forecastbut was1.5%better than Bloomberg consensus estimates;non-GAAP OP of Baidu Corereached RMB2.2bn,down67% YoY, but was6% ahead ofboth our forecastandconsensus.Management noted that c.70% of mobile search result pagescontained AI-generated content by end-Oct 2025, and believes this representsanoptimaland sustainable level. Atthe sametime, management shared moreupdates regarding AI-powered businessdevelopment: 1) AI-native marketingservicesrevenue grew 262% YoY and accounted for 18% ofBaidu Core onlinemarketing revenue; and 2) AI-cloud infrastructure revenuetotalledRMB4.2bn in3Q25 and inked YoY growth of 33%.With management guidance to drive China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFAfranktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Joanna Ma(852) 3761 8838joannama@cmbi.com.hk Cloud revenueagaindelivered solid growthwith AI-related revenuegrowingat a fasterpace.Baidu’s AICloud revenue reached RMB6.2bn in3Q25, up21% YoY.Within AI Cloud, revenue from AI Cloud Infra, whichrefers to AIinfrastructureand platform services serving enterprises and thepublic sector, reachedRMB4.2bn, up 33% YoY. Meanwhile,subscription- Stock Data Apollo Go sawacceleration in order volume growth.Apollo Go provided3.1mn fully driverless ridesin3Q25, up212% YoY (2Q25:148%;3Q24:20%),driven by the expansion in vehicle fleets.As of Oct 2025, Apollo Go’s globalfootprint has covered 22 cities. To date,Apollo Go fleets have accumulated240mnautonomous kilometers, including 140mnfully driverless autonomous AI-native marketing services revenue growth an emerging area offocus.In3Q25, Baidu Core’s online ads revenue was RMB15.3bn,down18% YoY,but was 5% better thanconsensus,whichin our view can beattributed to the rapid ramp-up in AI-native marketingservicesrevenue,which primarily consists of revenuegenerated from Digital Humans andAgents. AI-native marketing services revenuetotalledRMB2.8bn in 3Q25.Management noted that the 70% ofmobile search result pagescontaining Source: FactSet OPM should bottom out from 3Q25 onwards.Non-GAAP OPM for BaiduCore was9.0%in3Q25,down16.1ppts YoY but was0.4ppts better thanconsensus.We expect OPM to bottom out driven by recovery in adsrevenue and the initiatives to drive operating efficiency improvement.Weestimate4Q25E non-GAAP OP of RMB2.5bn (4Q24: RMB4.6bn) for Baidu Quarterly results andestimates Changes in forecast and valuation SOTP valuation of US$150.7per ADS OurnewSOTP-based target price comprises, per ADS: 1) US$37.8for Baidu Core (mainly including the core ads business,excluding Apollo andBaidu Cloud), based on anunchanged5.0x2025E non-GAAP PE(was US$33.2 based on 2) US$0.3for Apollo ASD(unchanged), based on 2.0x 2030E revenue, and discountedback to 2025E using a 13.0% WACC. 3) US$61.8for Baidu Cloud, based on5.5x 2025E PS(was US$60.3 based on5.5x 2025EPS); 4) US$50.8fornet cash,iQIYI and other investments(was US$54.6), with a 30% holdingdiscount applied to thevaluationofUS$72.5per ADS. Source: Company data, CMBIGM estimatesNote: American depositary share (ADS); iQIYI (IQ US); Trip.com Group (TCOM US); Uxin (UXIN US); HAND EnterpriseSolution (300170CH);Kuaishou (1024 HK); Yusys Technologies (300674CH) Risks 1)Slower-than-expectedramp-up in revenue generation from Gen-AI related business. Disclosures& Disclaimers Analyst Certification The research analyst who is primary responsible for the content of thisresearch report, in whole or in part, certifies that with respect to the securities or issuerthat the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the codeof conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s)covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of theHongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM Ratings BUY: Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCM