Baidu profits jump as ad revenue increases
Baidu profits jump as ad revenue increases
BEIJING: Bitter confidence in China's economy and regulatory repression in the private sector could create problems for the future
Income, warned the executives of the search engine company.
It is another sign that the world's second largest economy faces headwinds in the midst of a trade dispute between the United States and Baidu's business, whose revenues are driven by announcements from Chinese companies in the medical, retail and retail industries. others, it is a barometer for China's health. private sector.
"On the possible massive slowdown, at this moment, what we have been saying is that the level of confidence of the private sector, of the businessmen, is not so high," Baidu CEO Robin Li told analysts when the company reported third-quarter earnings. Tuesday in New York
"If, say, during the next few months, the level of confidence changes, things will change in the positive direction," Li said. "But we do not know exactly what's going to happen."
For the third quarter ended September 30, Baidu exceeded analysts' estimates and registered 28.2 billion yuan, or $ 4.11 billion, in revenue, 27% more than in the same period last year. . The growth was driven in part by an increase in users and in the time spent on Baidu's application, the company said. Analysts polled by FactSet predicted $ 4.03 billion in revenue.
Its quarterly net profit was 12.4 billion yuan, 56% more than the previous year.
But Baidu said its revenue growth will likely slow down for the rest of the year. According to forecasts, revenues for the fourth quarter will grow between 15% and 20% over the same period of the previous year, compared to the increase of 27% recorded in the period July-September.
US deposit receipts from Baidu rose 0.9% to close at $ 183.37 on Tuesday and fell 0.75% in after-hours trading after the results were published. Shares have fallen more than 20% so far this year, similar to other Chinese technological giants.
Mr. Li said that while the current period could remind some people of the global financial crisis a decade ago, he sees it differently. "At the moment, it's more about the traditional industry, more about the entrepreneur's confidence, and that can change very quickly," he said. "In the longer term, I am still very optimistic about the future of Baidu and the future of China."
China's economic expansion has slowed to its weakest pace Since the financial crisis. An official indicator of activity in China's manufacturing sector fell to a minimum of more than two years in October.
Raymond Feng, an analyst at Pacific Epoch research firm in Shanghai, said that while the macroeconomic impact is already affecting China's general advertising market, online advertising is somewhat safer than traditional ads.
Still, given the macroeconomic slowdown and emerging competitors, including new online video platforms, Baidu will likely face fiercer competition in online advertising, he said.
Another factor that could affect the company's profits is the tightening of Chinese government regulations in various sectors, said Baidu Chief Financial Officer Herman Yu.
The policies that affect sectors such as video games, real estate, financial services and online commerce could affect customers who advertise on Baidu platforms, Yu said in the earnings call. While Baidu does not depend on any particular industry for advertising, he said, the cumulative impact in several industries, "a little here and there, added together, makes it likely that we will not grow as quickly as we would like as before."
In the video game industry, regulators have not approved the sale of new titles since March, when a government reorganization began. Uncertainties still persist over which agency will regulate the industry.
-Micah Maidenberg in New York contributed to this article.
Write to Yoko Kubota in yoko.kubota@wsj.com
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