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China’s Baidu beats earnings expectations, shares rally

(Reuters) – Chinese internet search giant Baidu Inc beat quarterly earnings estimates on Monday, after being signed by more and more people to its video streaming service, sending shares higher in a relief rally.

FILE PHOTO: Baidu’s logo is displayed at the end of 2018 Baidu World conference and exhibition for the presentation of its new AI technologies, Beijing, China, on November 1, 2018. (REUTERS photo/Jason Lee/File Photo

Baidu reported a small 1% bump in sales and a 62 percent drop in net income for the second quarter, but the results were welcomed by investors who had feared worse and worse, in the midst of a slowdown in the Chinese economy and stiff competition from rivals such as ByteDance the TikTok.

Baidu’s profit update, followed the reports, Alibaba and JD.com just last week, which also beat expectations, which shows how some of the tech giants’ diversification strategies, it may be able to refer to macro-economic pressures.

Baidu’s video service, iQiyi, was a key driver of the sales bump as well as the 100 million-subscriber mark in June, there were a number of concerns about the rising cost of the unit is to be connected to the gain and maintain of the viewers.

Baidu’s total revenues for the three months to end-June rose to 26.33 billion yuan ($3.7 billion) of 25.97 billion yuan, a year earlier, beating a forecast 25.77 billion yuan, according to IBES data, Refinitiv.

Baidu earned 10.11 yuan per American depositary share, compared with expectations of a 6.12 yuan per ADS.

“It is obvious that the Baidu beats estimates, as analysts have lowered their expectations to the minimum,” said Connie Gu, an analyst at BOCOM International, adding that the market should be, and the better-than-expected results for several consecutive quarters, for continuing to trust.

Baidu’s Nasdaq-listed shares rose more than 9% in after-hours trading. The stock has fallen by more than 50% over the last year.

However, there were a number of red flags on its own Netflix-like iQiyi, which is where the shares have tumbled by the same amount after a 20% jump in its costs, given that the company has been on content to entice subscribers, the undercut, a 15% increase in sales of 7.11 billion yuan.

THE STRUCTURAL PRESSURE

Baidu, whose search engine dominates the market in China, has been under pressure due to factors such as the US-China trade tensions and more stringent regulations have been weighted on key revenue contributors, such as advertising.

Analysts said Baidu was confronted with a long-term, systemic problem, especially with the advent of new media, is looking to lure away customers.

“The competition in the recently rising major traffic platforms, it is becoming more and more fierce, and advertisers are shifting budget to those platforms,” he said, Natalie Wu, an analyst at China International Capital Corporation limited.

While Baidu has been expanding into other lines of business such as cloud services and the ‘mini’ in the Baidu App to make the most of her opportunity to step out in iQiyi.

Sales in its core search-engine business, christened 2% in the quarter, while Baidu’s net income more than halved to 2.4 billion yuan.

FILE PHOTO: A sign of Baidu is seen at the glass in his booth at Digital China, exhibition in Fuzhou, Fujian province, China, May 5, 2019. REUTERS/Stringer

Baidu Chief Executive Robin Li warned employees in an internal letter sent Tuesday that “serious challenges of the external environment, and in a weak macroeconomic environment necessitated changes in the personnel of the company and the strategy of the company.

“These changes are going to bring the pain passes, but you will also have a positive and far-reaching consequences, for it is to allow Baidu to have a more even, longer and longer,” he said in the letter seen by Reuters.

The company said that no layoffs are planned, and when the question was asked for the money to complete the restructuring.

Report by Ayanti Berra, Bengaluru and Yingzhi Yang in Beijing; Editing by Brenda Goh and Jane Wardell

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