Source: Company reports/Fung Global Retail & Technology  

Baidu reported 1Q17 revenues of ¥16.9 billion, a 6.8% year-over-year increase and in-line with consensus. Non-GAAP EPS was ¥6.85 in 1Q, beating the consensus estimate of ¥6.15, primarily driven by cost control in sales and marketing spend, which was down 29% year over year.

1Q17 Results Review

Total revenues in 1Q17 were ¥16.9 billion, a 6.8% increase from 1Q16. Mobile revenues represented 70% of total revenues, compared to 60% in 1Q16.

• Online marketing revenues for 1Q17 continued to be pressured, declining 1.3% year over year to ¥14.7 billion. Baidu had approximately 451,000 active online marketing customers in 1Q17, a decline of 23.2% from 1Q16.
• Revenue per online marketing customer for 1Q17 was approximately ¥32,200, up 26.8% year over year.

Selling, general and administrative expenses (SG&A) was ¥2.817 billion, a decrease of 28.6% from the corresponding period in 2016, primarily due to a decrease in promotional spending for transaction services. Operating profit in 1Q17 dropped by 9.3% year over year to reach ¥2.0 billion, dragged down by the Transaction Services segment, which includes Baidu Nuomi, and by iQiyi, its online video platform. The decrease was partly offset by lower promotional spending in marketing expenses. Non-GAAP net income attributable to Baidu in 1Q17 was ¥2.390 billion, an increase of 1.3% year over year. Non-GAAP diluted earnings per ADS was ¥6.85, beating the consensus estimate of ¥6.15.

CFO Steps Down to Lead Baidu Capital

Baidu announced that Jennifer Li would be stepping down from her role as CFO to become CEO of Baidu’s investment firm Baidu Capital. Li will remain in her current role, a position she has held for nine years, until a successor has been appointed, to ensure a seamless transition of her responsibilities.

Outlook and Strategy

Baidu expects 2Q17 revenues to be in the range of ¥20.47–¥20.98 billion, representing a year-over-year increase of 12.1%–14.9% and a quarter-over-quarter increase of 21.2%–24.2%. The company is at a transition stage of its core development strategy, with a new focus on the artificial intelligence (AI) industry. Baidu will continue to invest and research in related areas to capture the AI opportunity in China.