Chinese search giant Baidu’s online marketing business stable, streaming surges

BEIJING (Reuters) – Chinese search engine operator Baidu Inc beat market estimates for fourth-quarter revenue and profit on Thursday, as its core online marketing business stayed resilient and revenue surged in its Netflix-like streaming service iQiyi.

FILE PHOTO – A Baidu sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 4, 2017. REUTERS/Aly Song/File Photo

The online marketing business, which includes search, news feeds and a video app and accounts for more than three quarters of the company’s revenue, grew 10 percent to 21.2 billion yuan ($3.15 billion) in the quarter ended Dec. 31.

Revenue from iQiyi jumped 55 percent to 7 billion yuan.

Baidu has invested heavily in new content for iQiyi, which competes fiercely with Alibaba Group Holding Ltd service Youku. The service gained 36.6 million subscribers last year.

Content costs, mostly for iQiyi, nearly doubled to 7.3 billion yuan.

Baidu’s U.S.-listed shares rose 3 percent in extended trading.

Total revenue rose 22 percent to 27.2 billion yuan, beating estimates of 26.3 billion yuan, according to I/B/E/S estimates from Refinitiv.

The company, which had previously flagged a hit from stricter Chinese regulations and the Sino-U.S. trade problems, forecast first-quarter revenue between 23.5 billion yuan and 24.7 billion yuan. Analysts had expected 24 billion yuan,

Despite the better-than-expected fourth-quarter results, Baidu’s online ad business is showing signs of pressure amid a wider slowdown in China’s tech industry.

While online marketing revenue rose 10 percent in the December quarter, spending per customer slipped 4 percent.

Chief Executive Robin Li warned last month that the company was facing challenges, but said he remained optimistic about its push into artificial intelligence (AI).

Apart from entertainment, Baidu has focused on AI research in a bid to diversify away from search.

Fourth-quarter net income attributable to the company fell to 2.08 billion yuan in the quarter, from 4.16 billion yuan a year earlier.

Excluding items, the company earned 13.18 yuan per American depositary share, beating estimates of 11.83 yuan per ADS.

Reporting by Cate Cadell in Beijing; Additional reporting by Akanksha Rana in Bengaluru; Editing by Shinjini Ganguli and Stephen Coates

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