Baidu, China's leading search engine, announced on Thursday that it has not observed any significant changes in advertising spending or consumer expenditure, despite recent government stimulus initiatives. The company reported a 3% decline in revenue for the third quarter.
With over half of its revenue derived from online advertising, Baidu is particularly vulnerable to the economic slowdown and reduced consumer spending, which have compelled many businesses, especially small and medium-sized enterprises, to limit their advertising budgets.
In recent months, Chinese authorities have introduced various measures aimed at revitalizing the world's second-largest economy, which has been struggling with deflation. Baidu indicated that it may take time for these initiatives to positively impact offline retailers.
During a post-earnings call, Baidu CEO Robin Li informed analysts, "As of the fourth quarter, we have not seen a significant improvement in advertising spending trends, and consumer spending continues to be weak." He added, "We maintain a cautiously optimistic outlook regarding the recovery trajectory."
Baidu's online marketing revenue decreased by 4% to 18.8 billion yuan ($2.6 billion) in the quarter, slightly below analysts' expectations of 18.89 billion yuan.
The company has managed to mitigate some of the decline in advertising revenue through growth in its non-online marketing sectors, particularly its AI Cloud division.
In addition to its core business, Baidu, like other technology companies, has expanded into autonomous driving and artificial intelligence, with its Ernie large-language model supporting various products, including a chatbot similar to ChatGPT and enhancements to its search engine.
Baidu's Ernie platform now processes 1.5 billion user queries and interactions daily, a significant increase from 600 million in August.
However, the company cautioned that its profit margins would enter a "period of adjustment" in the short term, as it focuses on enhancing user experience, particularly within its AI search operations, rather than on immediate monetization.
The initiatives in AI and autonomous driving are crucial for maintaining its status as a leading technology innovator in China, according to the company.
In total, Baidu's revenue for the quarter ending September 30 reached 33.56 billion yuan, slightly above the average estimate of 33.43 billion yuan from 20 analysts surveyed by LSEG.
Net income rose by 14% to 7.63 billion yuan, surpassing the consensus estimate of 4.67 billion yuan.