Baidu Inc.(NASDAQ:BIDU) stock fell over 4% on August 13th, 2021 (as of 11:21:12 AM UTC-4 · USD; Source: Google finance) after the company gave conservative outlook for the current quarter as a resurgent pandemic outbreak in China overshadowed the internet search giant’s push into newer arenas like cloud and smart devices. The company has reported Q2 2021 net loss of RMB 0.6 billion, including a RMB 3.1 billion fair value loss from long-term investments, compared to a fair value gain of RMB 23.7 billion in Q1 2021, both mainly related to a mark-to-market adjustment on Kuaishou Technology.
The company has beaten the topline estimates in the second quarter as the company benefited from a rebound in advertising sales and higher demand for its artificial intelligence and cloud products. Meanwhile, the company is facing heightened scrutiny from Beijing’s regulators who have raised concerns over data security and user privacy, targeting the country’s tech giants.
The company had reported the adjusted revenue growth of 20 percent to 31.35 billion yuan in the second quarter of FY 21, beating the analysts’ estimates for revenue of 30.96 billion yuan, according to IBES data from Refinitiv. The demand for the company’s rapidly growing autonomous driving service and artificial intelligence-powered cloud products, in which it has been investing heavily, has helped diversify revenue sources and offset competition from giants such as Alibaba and ByteDance in its core advertising business. Baidu spent about 15.9 billion yuan ($2.45 billion) in the quarter to ramp up its products, which represents a 21% increase compared with a year earlier. Baidu’s video streaming affiliate, iQIYI, posted a 15% increase in advertising revenue and subscribers grew to 106.2 million by June, on the back of more original content.
Additionally, the company has returned US$566 million to shareholders under the 2020 Share Repurchase Program this year, bringing the cumulative repurchase to $2.5 billion since 2020.
The company expected sales to be in the range of 30.6 billion yuan to 33.5 billion yuan for the September quarter, versus the 33.1 billion yuan seen by analysts, saying that the recent increase in Covid-19 cases across large parts of China left business visibility “limited.”
On the other hand, the company has signed with Geely Holding, a leading automotive manufacturer, to provide private cloud solution and other cloud applications, to enable Geely to leverage Baidu’s AI to optimize its manufacturing capabilities and provide cloud services to its automotive suppliers and customers.