Baidu Ad Revenue Declines in Q2 2022, but Cloud Growth Robust and Intact as Key Long-Term Driver

We maintain our fair value estimate of USD 183 for Baidu as we believe the company’s long-term catalysts and drivers remain intact. Baidu’s share price fell after the company reported second-quarter 2022 revenue of CNY 29.6 billion which was 2% better than our estimate, but represents a 5% decline. The decline was driven by Baidu core’s online marketing revenue, which fell 10% year on year due to lockdown headwinds, which reflects ongoing macro soft demand for advertising in China. In addition, the company did not have visibility into third-quarter advertising revenue and is still seeing softness in the ad industry.