(Bloomberg) — Baidu Inc. plunged its most in more than two months after the company reported a decline in revenue, adding to concerns about the impact of China’s weakening economy on the private sector.
Most Read from Bloomberg
The Chinese search leader’s sales slumped 5% to 29.6 billion yuan ($4.3 billion) for the April-June period, just above the average of analysts’ forecasts. Its shares slid 6.5% in New York.
China’s tech giants have made peace with a new reality of low growth and cautious expansion, more than a year after Beijing’s crackdown on internet businesses from e-commerce to edtech and social media. A deepening economic malaise, coupled with strict Covid Zero measures, has crippled consumer demand in the world’s largest mobile app arena.
Most have pulled back on spending to tide them over and shore up the bottom line. Baidu reported a net income of 3.6 billion yuan, surpassing the 2.2 billion yuan expected. Baidu’s Netflix-like video service iQiyi Inc. reported revenue a shade weaker than estimates. But it also unveiled improving margins and a deal to place $500 million of convertible notes with Hong Kong private equity firm PAG.
Baidu’s reliance on digital marketing leaves the Beijing-based company vulnerable to the same economic shocks that’ve laid low its bigger rivals. Alibaba Group Holding Ltd. and Tencent Holdings Ltd. both reported their first-ever sales contractions for the June quarter. Online marketing sales declined a better-than-feared 12% while Baidu’s AI cloud revenue grew 31%, slowing from 45% in the prior quarter.
Baidu Falls as Challenging Environment Hits Results: Street Wrap
Baidu’s shares had nonetheless fared better than many of its rivals despite growing economic uncertainty. Beijing and Washington last week reached a preliminary deal allowing American officials to review audit documents of US-listed Chinese stocks including Baidu, in a move toward keeping the companies listed on US exchanges. Its shares surged after news of the agreement emerged.
Baidu is trying to reinvent itself as a supplier of deep technology by expanding into self-driving systems, cloud computing and chips. This month, it won approval to deploy the first fully autonomous taxis on Chinese roads. It also unveiled a self-made quantum computer, saying its resources will be open to the public.
Baidu’s nascent AI cloud division is now its fastest growth engine, but it faces an uphill battle against market leaders including Alibaba and Huawei Technologies Co.
While waiting for these efforts to evolve into meaningful revenue, Baidu depends on its flagship news-search app to win advertising dollars and users from online entertainment platforms operated by Tencent and TikTok-owner ByteDance Ltd.
Most Read from Bloomberg Businessweek
©2022 Bloomberg L.P.