Search engine giant and artificial intelligence developer Baidu reported a widened RMB 16.6 billion (USD 2.5 billion) net loss in the third quarter. This was brought on by long-term investment losses, according to the latest financial results released on Wednesday.
The net loss increased by 2,700% compared with the previous quarter, as the company went RMB 18.9 billion (USD 3 billion) in the red, the report said. This was mainly due to a slump in the market value of short video platform Kuaishou.
China’s regulatory campaign has already spooked investors and sent the market caps of traded tech companies into freefall this year. When the clampdown hit short video platforms in August, Kuaishou’s stock price shrank nearly 80% since its Hong Kong IPO and dropped to a low point. Baidu holds a roughly 3.8% stake in Kuaishou.
Baidu reported RMB 31.9 billion (USD 4.95 billion) in quarterly revenue, up 13% year-over-year and beating market estimates. Its robust AI business has balanced out sliding advertising revenue as a result of a crackdown on the tech sector in China, and the company is planning to lean on this new growth engine.
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The “Baidu Core” segment, which includes its AI Cloud service, Apollo intelligent driving unit, and B2C products like the Baidu App, earned RMB 24.7 billion (USD 3.83 billion), up 15% from the same period last year. This growth was mainly driven by a 76% YoY surge in cloud and other AI-powered businesses, the company said.
Baidu put its proprietary processor Kunlun AI into mass production in 2020, sending the company steps ahead of other tech giants in chip development while a global shortage takes hold. Boosted by its AI development, autonomous driving unit Apollo is now the largest autonomous ride service provider in the world, Baidu’s CEO Robin Li said in a separate letter.
Li expects non-advertising business to make up more than half of Baidu’s revenue in the next three years, Li said.
The largest revenue source of Baidu—online marketing—made up around 79% of Baidu Core and generated RMB 19.5 billion (USD 3.02 billion) in Q3, remaining flat with the previous quarter. Diminished needs from industries like education and real estate have dragged down Baidu’s advertising performance, chief strategy officer Herman Yu said during the earnings call.
Baidu expects its advertising business to remain soft in the next few quarters. Yu said the company’s growth rate may slow in Q4 due to market uncertainties. It also cut back expectations for full-year revenue growth, and expects a 2% to 12% YoY growth rate, down from the 8% to 19% expectation in Q2.
Regulatory woes have weighed down the growth of China’s major internet firms. Tencent, the most valuable tech company in China, posted its slowest quarterly revenue growth since it went public in 2004. One of the world’s largest ad sellers, ByteDance, will report 60% growth in 2021, a rate lower than normal, according to The Information.