Baidu 2017 Q4 Earnings Up 29 percent

Baidu has released their Q4 2017 financial report and unaudited 2017 annual financial report. In Q4, Baidu earned RMB 23.6 billion ($3.62 billion), up 29 percent year-over-year. The revenue growth rate in Q4 was the same as that in Q3. Mobile revenue accounted for 76 percent of the total revenue.

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Baidu‘s Q4 operating profit of RMB 4.8 billion ($756 million) represented a year-over-year increase of 118 percent. Non-GAAP operating profit of RMB 5.8 billion ($914 million) was up 104 percent. Net profit of RMB 4.2 billion ($661 million) was a year-over-year growth of 1 percent. Non-GAAP net profit was RMB 5.2 billion ($850 million).

iQIYI, Baidu‘s streaming-video subsidiary, has applied to the U.S. Securities and Exchange Commission for listing. Baidu will still be the dominant shareholder of iQIYI after their potential listing. iResearch data showed that in December 2017, desktop and mobile iQIYI users were 76 million and 158 million, respectively. The average monthly time online was 408 billion minutes, up 22 percent.

After the financial report release, Baidu shares rose 4.64 percent.

Baidu CFO Yu Zhengjun said that Baidu’s Q4 earnings surpassed expectations. “In 2018, we will continue to phase out non-core operations, and further invest in the Baidu mobile and new AI business. We firmly believe that this strategy will continue to strengthen Baidu‘s leadership in the technology industry, and lay a solid foundation for Baidu to usher in autonomous driving, conversational AI, and smart home technologies.”

However, their net profit growth rate had declined significantly. The net profit in Q3 soared when Baidu sold Waimai, its takeout delivery subsidiary, for more than RMB 4 billion ($630 million). Baidu’s Q4 operating profit rose more than 100 percent year-over-year. The high profit growth rate was due to revenue growth despite slowly increasing costs. Reports showed that the growth rate of all types of costs fell except for content cost, which rose from 14.1 percent in Q4 2016 to 15.9 percent in Q4 2017.

Baidu online promotions earned RMB 20.4 billion ($3.2 billion), up 26 percent year-over-year, accounting for 86 percent of the total revenue in Q4.

Baidu‘s 2017 revenue of RMB 84.8 billion ($13.03 billion) was up 20 percent. Operating profit was RMB 15.7 billion ($2.47 billion), up 56 percent. Non-GAAP operating profit was RMB 18.9 billion ($2.98 billion), up 60 percent. Annual net profit was RMB 18.3 billion ($2.88 billion), up 57 percent. Non-GAAP net profit was RMB 22.3 billion ($3.51 billion), up 68 percent.

In Q4, high quality videos accounted for 15 percent of search results. Daily volume of data flow increased by more than 20 percent from that in Q3. The total time of Baidu app usage grew by 30 percent year-over-year. The number of original content providers in Baijiahao rose from 200,000 in early 2017 to 1 million.

Baidu reported that as of January 2018, over 50 million smart devices and 10 million active devices have embedded DuerOS, its conversational AI platform. DuerOS currently has over 130 partners and 50 intelligent products on the market.

In Q4, Apollo 2.0 was launched with four modules: cloud services, software platform, hardware platform, and vehicle platform. Apollo 2.0 supports autonomous driving on simple city roads. Apollo currently has over 90 partners. Baidu and its partners will mass-produce L3 vehicles (semi-autonomous and conditional upon human intervention) by 2019, and L4 vehicles (fully autonomous) by 2021.

Baidu expects that its Q1 2018 net income will be between RMB 19.86 billion ($3.05 billion) and RMB 20.97 billion ($3.22 billion), a year-over-year increase of 25 percent to 32 percent. The year-over-year growth rate will be 29 percent to 36 percent excluding Baidu‘s mobile gaming and takeout delivery service. This preliminary forecast is based on the current situation and does not preclude the possibility of future adjustments.

Since January 1, 2018, Baidu has adopted new accounting standard ASC 606, which reclassifies value-added taxes. With value-added tax adjusted accordingly, the 2017 fiscal year revenue will be 5.6 percent lower than the figures listed above. The 2018 revenue forecast is calculated according to ASC 606. According to the 2017 accounting criteria, the Q1 2018 revenue would be RMB 21.05 billion ($3.24 billion) to RMB 22.23 billion ($3.42 billion), up 25 percent to 32 percent year-on-year.