China's Baidu beats earnings estimates as chatbot awaits government approval
China's economy is reviving after Covid-19 curbs were lifted. Consumers and companies are spending again.
The search engine giant Baidu beat its first-quarter revenue estimates and profit expectations on Tuesday, as businesses increased their advertising spending in China after the post-Covid reopening. It also said that it was waiting for regulatory approval to launch Ernie, a ChatGPT-like bot.
China's business momentum is growing after the country dropped many of its strict Covid-19 restrictions late last year. Both consumers and businesses are reviving their spending.
According to the latest data, China's economy grew faster than expected by 4.5% on an annual basis in the three-month period ending March.
Baidu CEO Robin Li stated on Tuesday that the economic recovery was quick after the Lunar New Year, which took place in late January. This was especially beneficial to the company's offline advertisers in sectors like travel and healthcare.
Li stated that "some of these verticals are already recovering to levels above those before the pandemic, showing solid signs of recovery."
According to Refinitiv, Baidu's revenue grew 10% in the third quarter of 2014 to 31.14 billion Yuan ($4.54 Billion), exceeding analysts' expectations of 29.97 billion Yuan.
The revenue from Baidu Core grew by 8%, to 23 billion Yuan. This includes advertising sales based on search, cloud services and autonomous driving initiatives.
This was a 6% increase in revenue for Baidu's biggest segment, Online Marketing.
The revenue of its streaming service iQIYI grew 15% to 8,3 billion yuan as a result of a 28% increase in subscribers.
Baidu shares listed in the U.S. rose 3% intraday on Tuesday.
It reported a net profit of 5.83 billion Yuan, as opposed to a net loss the previous quarter. It earned 16.10 yuan for each American Depository Share excluding items. This was higher than Wall Street’s estimate of 1246 yuan.
Ernie Bot to be rolled out in large numbers
Ernie bot, the company's highly-anticipated rival to ChatGPT has not yet been officially launched. It was partially revealed to the public mid-March.
In a Tuesday press release, Baidu CEO Li stated that the company intended to "steadily integrate" the AI-driven chatbot generating all the search engine giant’s businesses. He did not give a timeline.
Li said in a later call with analysts that his company had submitted Ernie Bot for government approval and review. It would then roll out the bot on a large scale as soon as it received the "greenlight" from regulators.
Li stated that "during our testing of Ernie Bot, we engaged in close discussion with the regulators."
Li said that, despite many new players entering the Chinese generative AI industry and the large-language models market, there is a very high barrier of entry. Baidu expects a highly concentrated market where "probably 2-3 major players will emerge in the end."
Li stated that "to establish a significant market presence... substantial upfront investment is required, as well as expertise in AI and vast data to train models."
The Baidu CEO responded to concerns that U.S. restrictions on China's ability to access certain chips might set back its AI industry. He said the company had acquired "a substantial amount of computing power," which included "the most advanced GPUs" in order to train and improve Ernie bot.