Q3 Ad Demand Remains Soft for Baidu but Long-Term Drivers Remain Intact

We are lowering our near-term forecasts for Baidu in the second and third quarters of 2022 but keep our fair value estimate at USD 183 (HKD 180) and make no changes to our long-term assumptions. We believe that Baidu could guide toward a double-digit decline for its advertising business in the third quarter that could form a buying opportunity if share prices pull back in the near term. Cloud and robotaxis remain the long-term growth drivers and remain intact as headwinds are limited to near-term advertising revenues.