Source: Company reports/FGRT

Baidu reported 3Q17 revenues of ¥23.5 billion, a 28.7% year-over-year increase and in line with the consensus estimate. Non-GAAP diluted earnings per ADS was ¥25.94 in 3Q, up 161.5%, beating the consensus estimate of ¥13.48, primarily driven by investment gains from the disposal of its food delivery business Baidu Deliveries, as well as revenue growth and improvement in the operating margin.

3Q17 RESULTS REVIEW

Total revenues in 3Q17 were ¥23.5 billion, a 28.7% increase from 3Q16. Mobile revenues represented 73% of total revenues, compared to 64% for 3Q16.

• Online marketing revenues for 3Q17 grew by 22% year over year to ¥20.1 billion. Baidu had approximately 486,000 active online marketing customers in 3Q17, falling 7% from 3Q16.
• Revenue per online marketing customer for 3Q17 was approximately ¥40,900, up 31% year over year.

Selling, general and administrative expenses (SG&A) was ¥3.7 billion in 3Q17, an increase of 4% year over year. Operating profit in 3Q17 increased by 69% year over year to reach ¥4.7 billion. On a non-GAAP basis, operating profit increased by 73% year over year to reach ¥5.5 billion. Non-GAAP net income attributable to Baidu in 3Q17 was ¥7.9 billion, an increase of 156% year over year. Non-GAAP diluted earnings per ADS was ¥25.94, up 161.5% year over year, beating the consensus estimate of ¥13.48.

Outlook and Strategy

Baidu expects 4Q17 revenues to be in the range of ¥22.23–¥23.41 billion, representing a year-over-year increase of 22%–29%, or a year-over year increase of 28%–34%, excluding disposed businesses, i.e., mobile games and Baidu Deliveries. Baidu spun off Baidu Deliveries as a part of a strategy to free up resources and management attention to focus on artificial intelligence (AI). Baidu will focus on developing open platforms, which include the conversational AI virtual assistant for smart devices, DuerOS, and the self-driving vehicle operating system, Apollo.