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2026-10-22 13:15:35 Nomura published a research report stating that BIDU-W (09888.HK)'s advertising business remained weak in 3Q, while AI cloud growth was strong. The broker expected quarterly revenue to be broadly in line with expectations, but earnings to come in below market forecasts, reflecting soft advertising performance and increased investment in foundation model R&D. The broker maintained its Buy rating on Baidu, Inc. (BIDU.US) and cut its TP by 28.6% from USD154 to USD110. Nomura expected Baidu Core revenue, excluding iQIYI, to rise 1% YoY, broadly in line with latest market expectations. Among this, advertising revenue was forecast to decline another 23% YoY to RMB11.9 billion, accounting for 48% of Baidu Core revenue, while AI cloud infrastructure revenue was expected to surge 93% YoY to RMB8.1 billion, representing 33% of revenue. Against this backdrop, the broker forecast non-GAAP operating profit to fall 31% YoY to RMB1.5 billion, 28% below the market forecast of RMB2.1 billion, while non-GAAP operating margin was expected to narrow 2.8 ppts YoY to 6.2%. The broker said the IPO timetable for Baidu's chip subsidiary Kunlunxin (KLX), which has drawn significant market attention, remained unclear pending approval from Chinese regulators. It believed the delay had weighed on investor sentiment, with Baidu shares currently trading near net cash valuation levels. To restore confidence, Nomura believed Baidu should consider increasing capital returns. The company has already announced plans to declare an annual dividend for the first time by end-2026, which the broker viewed as a potential near-term catalyst together with the expected KLX listing. Nomura lowered its FY2026 and FY2027 non-GAAP EPS forecasts for Baidu by 12% and 8%, respectively, to reflect a weaker advertising outlook and increased AI investment. It also cut its sum-of-the-parts-based TP from USD154 to USD110, equivalent to 16x forecast FY2027 P/E ratio, down from 20x previously, to reflect rising execution risks. The stock is currently trading at 11.6x forecast FY2027 P/E ratio, and the broker maintained its Buy rating due to the undemanding valuation. (ad/da)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |