Baidu Q4 Earnings: Short-term Profitability Under Pressure, AI Cloud Maintaining Promise

TradingKey – On Tuesday, February 18th, Baidu released its fourth-quarter financial report for 2024. The robust growth of its AI cloud drove total revenue above expectations. However, the lackluster growth in other business areas and the decline in profitability still disappointed investors. As a result, Baidu shares (BIDU.US) plummeted by 7.5%.

Key Financials

Revenue: The company achieved total revenues of ¥34.1 billion for Q4 2024, surpassing the estimated ¥33.32 billion due to the strong growth of the AI Cloud business, especially the widespread application of the ERNIE model. Despite this revenue beats estimation, Baidu's revenue declined by 2% year-over-year, reflecting challenges in certain business segments, particularly in online marketing.

Adjusted EBITDA: Baidu’s adjusted EBITDA for Q4 2024 was ¥6.95 billion, 23% lower YoY and below the estimated ¥7.87 billion, indicating rising operational pressures. The adjusted EBITDA margin was 20%, significantly below the expected 23.53%, reflecting tighter margins and increased costs, driven by investments in AI and autonomous driving.

Adjusted EPS: Baidu reported an adjusted EPS of ¥19.18 for Q4 2024, which exceeded analysts' expectations of ¥14.13, particularly driven by high-margin AI-related business contributions. However, this represents a 12% decline year-over-year, indicating a reduction in profitability.

Segment Performance

Baidu Core: Baidu Core’s revenue grew 1% YoY to ¥27.7 billion, indicating stability amid advertising market pressures. Online marketing revenue declined 7% YoY to ¥17.9 billion, while non-online marketing revenue rose 18% YoY to ¥9.8 billion, driven by AI cloud and autonomous driving. The adjusted EBITDA margin decreased to 24%, down from 30% last year, due to lower profitability in online marketing and higher costs in strategic investments.

iQIYI: iQIYI, Baidu's streaming platform, saw its revenue drop 14% YoY to ¥6.6 billion, reflecting ongoing challenges in the competitive Chinese online entertainment market.

AI Cloud: Baidu’s AI Cloud experienced strong growth, with revenue increasing 26% YoY, driven by the rising demand for AI-driven cloud services. Additionally, the number of daily ERNIE API calls reached 1.65 billion in December 2024, a 178% QoQ increase, showcasing the growing adoption of Baidu’s AI technologies by external developers.

Intelligent Driving (Apollo Go): Apollo Go, Baidu’s autonomous driving service, provided 1.1 million rides in Q4, marking a 36% YoY increase. Baidu also reached a significant milestone by launching fully driverless operations in China in February 2025 and obtained autonomous driving testing permits in Hong Kong in November 2024, paving the way for expansion into new markets.

Mobile Ecosystem: Baidu’s mobile ecosystem showed steady growth, with the Baidu app reaching 679 million monthly active users in December 2024, up 2% YoY. Additionally, Managed Pages contributed 48% of Baidu Core’s online marketing revenue, reflecting the growing importance of this feature in the company’s advertising strategy.

Investment Outlook

Baidu is shifting towards an AI-first strategy, with strong growth in AI Cloud and advancements in autonomous driving positioning it for future success. While the online marketing business faces near-term challenges, its AI, cloud, and autonomous driving segments provide a solid foundation for long-term growth. In the near term, the drop in profitability and negative free cash flow is concerning, but heavy investments in its future-oriented businesses largely drive these. Despite short-term pressures and intense competition, Baidu’s strategic transformation offers significant upside potential for investors in the coming years.