Baidu Forecast Beats Estimates as News, Video Draw Users

(Bloomberg) -- Baidu Inc. forecast second-quarter sales above analysts' estimates as advertisers flock to its news aggregation service and its Netflix-like video service attracts subscribers. First-quarter revenue also surpassed expectations.

China's most popular search engine predicted revenue of 24.91 billion yuan to 26.19 billion yuan ($3.97 billion to $4.17 billion) in the three months ending in June, Baidu said in a statement. That compares to the 24.3 billion yuan average of analyst estimates.

The forecast is a confidence booster for Baidu as it enters a critical year after selling or spinning off non-core businesses including food delivery. The moves are designed to streamline the company so it can focus on artificial intelligence products like driverless cars and personal assistants. Delivering growth is vital for convincing shareholders to stay the course during the intervening years before AI products can yield substantial profits.

“It looks fairly solid, and on the margin the numbers were better. But it doesn't change our evolved view that they have weaknesses in core business,” said Kirk Boodry, an analyst at New Street Research. “The overall growth in content costs was slower than full year guidance would suggest, so that's going to step up.”

The company's American depositary receipts jumped 5.6 percent in extended trading in New York.

Baidu posted first quarter sales of 20.9 billion yuan compared with the 20.2 billion yuan that analysts had predicted. Net income was 6.7 billion yuan, beating expectations of 2.8 billion yuan.

To contact Bloomberg News staff for this story: David Ramli in Beijing at dramli1@bloomberg.net.

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Reed Stevenson

©2018 Bloomberg L.P.

With assistance from David Ramli