$BIDU：Maintain BUY and Increasing PT to $135

$Baidu(BIDU)$ - 3Q25 Preview: Short-Term Search Pressure, Long-Term AI Re-Rating Potential;Maintain BUY and Increasing PT to $135

We are(Tiger Research) maintaining BUY rating and increasing PT to $135 (from $100) as we believe Baidu (BIDU) stands to benefit from accelerating AI adoption in China and its leadership in global robotaxi operations.

That said, we are trimming our near-term revenue and profit forecasts, as monetization from AI-enhanced search results is taking longer than expected to materialize. Specifically, we now expect BIDU’s Search + Feed revenue to decline 20% and 17% y/y in 3Q and 4Q, respectively. Given search remains BIDU’s key profit driver, we also lower our 3Q/4Q Baidu Core non-GAAP EBIT estimates by 46% and 38%.

On a more positive note, we expect strong AI-driven demand in China to support BIDU’s cloud business, with cloud revenue projected to grow 20% y/y in 3Q. Moreover, $Baidu(BIDU)$ remains one of the world’s largest robotaxi operators, a segment that could attract increased investor attention amid growing interest in autonomous mobility.

We also note that BIDU is exploring multiple initiatives to unlock shareholder value, including enhanced AI-related disclosures, robotaxi operating metrics, potential divestment of non-core assets, and new shareholder return programs.

While we remain cautious on the near-term challenges facing BIDU’s search business and the execution risk around its AI transformation, we view the current risk/reward as compelling. The stock trades at just 6.9x 2026E EV/EBITDA—levels that, in our view, already discount weakness in its advertising business. Meanwhile, optionality from AI and robotaxi businesses provides long-term upside potential. We therefore maintain our BUY rating despite near-term headwinds.

Estimates Revisions. Lowering 3Q Baidu Core revenue estimate by 1%, and decreasing Baidu Core Non-GAAP EBIT by 46%. Lowering 4Q Baidu Core revenue estimate by 5%, and decreasing core non-GAAP EBIT by 38%. Decreasing '25E Baidu Core revenue estimate by 2%, and non-GAAP EBIT by 20%.

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