Baidu Inc. announced a $5 billion share buyback after reporting better than expected revenue, reflecting how its cloud computing service is offsetting an advertising lull during China's economic downturn.
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Its shares gained 6% in pre-market US trading. Sales fell to 33.1 billion yuan $4.8 billion for the three months ended December, compared to expectations of 32.1 billion yuan. During the quarter, net income came in at nearly 5 billion yuan when China made a U-turn on its Covid Zero policy that disrupted parts of the world s No. Baidu is anticipating an economic rebound as China's giant internet sector emerges from a two-year drought underscored by a steady stream of regulatory investigations and far-reaching pandemic curbs. In December Xi Jinping s government dismantled most of its Covid restrictions and opened the Chinese borders for travelers a month later. Consumer spending fell slightly as China recorded 3% growth for 2022, while consumer spending fell for the second time in a row.
China s Big Tech firms may be back in spending mode after a year of cost cuts and cautious expansion to shore up the bottom line. Baidu is leading a race to create China's answer to OpenAI's red-hot ChatGPT. The Beijing company is planning to roll out Ernie Bot and integrate AI into its flagship search services in March, while partners from automakers to news sites declare that they will use Baidu's tool in their businesses.
It is too early to tell whether Ernie could rise to the level of Tencent Holdings Ltd.'s ubiquitous WeChat or Alibaba Group Holding Ltd.'s dominant Taobao before considering censorship or content quality on China s internet. While Baidu sank billions of dollars into AI technology over the years, its bigger rivals dominated the mobile era with more consumer-friendly products.
Baidu still relies on the bread-and- butter online marketing service to generate cash in the near term. Its still-nascent cloud unit is targeting clientele, including smart-city projects and industrial groups to find a niche against bigger foes such as Huawei Technologies Co. and Alibaba.
In a note before the results, analysts at Daiwa Capital wrote that Baidu aims to maintain faster growth for its marketing business than China's GDP. The above-GDP growth will be supported by pocket share gains in ecommerce and retail advertisers. None of the staged bomb scare that Backfired on Mumbai's Notorious Cops.