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Chinese internet giant Baidu used its first quarter earnings statement to talk up its transition toward an artificial intelligence-first company as it revealed a drop in profits.

Operating profit fell 9.3 per cent to Rmb2bn ($290m), while net income fell 10.6 per cent to Rmb1.78bn.

Baidu’s total revenues in the March quarter rose 6.8 per cent from a year ago to Rmb16.89bn, with revenue from mobile now representing 70 per cent of that take, up from 60 per cent a year ago.

As a proportion of total revenue, content costs experience the biggest jump, rising to 15.6 per cent from 8.7 per cent a year ago, mainly due to the increased cost of content associated with its video streaming service iQiyi. Earlier this week, Netflix inked a deal with iQiyi that would see a number of the US company’s popular series such as “Stranger Things” and “Black Mirror” – among other dramas, animated series and documentaries – streamed to the Chinese site.

Robin Li, Baidu’s chairman and chief executive, described the company’s performance during the three months ended March as “solid” and said its shift toward AI was starting to “bear fruit” across existing platforms.

“In the quarters ahead, we will intensify our efforts in applying AI to improve existing products and to accelerate the development of AI-enabled new business initiatives,” Qi Lu, Baidu’s vice chairman said.

The company also revealed that Jennifer Li, the chief financial officer, was stepping down and would take on the role of forming Baidu Capital, an investment firm, and become its chief executive officer.

During a call with analysts, Ms Li said that the sale of the company’s mobile games unit would be finalised by mid-May. Earlier this month, the company revealed it would sell Baidu Mobile Game for $173m, a steep discount to the $1.85bn it paid for the company, formerly known as 91 Wireless, in 2013.

Baidu said it expected to generate total revenues of Rmb20.47bn to Rmb20.98bn in the second quarter, representing a year-on-year increase of between 12.1 per cent and 14.9 per cent. The consensus estimate is for revenue of Rmb20.9bn.

Analysts at Jefferies said Baidu’s first quarter revenues were largely in line with market forecasts, while profit was a bit better than expected.

Baidu shares closed 0.6 per cent higher in New York on Thursday, but were down 3.8 per cent during after-hours trading on the Nasdaq.

Copyright The Financial Times Limited 2017. All rights reserved.
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