Citi: Baidu's advertising revenue declines but AI cloud unexpectedly strong; negative impact of search transformation may have bottomed out; maintains buy rating

Zhitong
2025.02.19 01:07

Baidu reported a decline in revenue for the fourth quarter of last year, leading to a sharp drop in ADR overnight. Citigroup stated in its report that Baidu's artificial intelligence cloud revenue was unexpectedly strong, but core online advertising revenue fell year-on-year, partially offsetting this growth; looking ahead, the negative impact of the generative AI search transformation may have bottomed out, and search advertising revenue is expected to gradually improve starting from the second quarter of this year. Citigroup analyst Alicia Yap noted in the report that Baidu's management is confident that strong cloud momentum will continue until 2025, and operating profit margins will improve. By integrating DeepSeek into Baidu's large model platform Qianfan, Baidu believes it offers a wider variety of model options to support businesses of various sizes. The buy rating on Baidu is maintained, with the ADR target price unchanged at $139

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