Shares of Baidu (NASDAQ:BIDU) initially traded lower after posting fresh financials on Thursday afternoon. China's leading search engine is clocking in with revenue of $2.454 billion for the first quarter, 7% ahead of where it was a year earlier. Baidu was targeting revenue of $2.374 billion to $2.453 billion for the period, so it nearly made a perfect landing at the high end of its range.
Baidu's online advertising revenue -- representing the lion's share of Baidu's top-line production -- took a 1% hit, as a 23% plunge in active online-marketing customers was almost nearly offset by those still spending 27% more, on average. The sharp drop in advertisers may seem jarring at first, but most of this is Baidu's own vetting.
Regulators forced Baidu and smaller search engines to revamp the way they display medical-related sponsored listings, and Baidu has been cleaning up its own Rolodex in the process. There are still roughly 451,000 marketers relying on Baidu to generate online leads.
Adjusted earnings clocked in at $1.00 a share. Baidu doesn't offer up bottom-line guidance, but this is below the $1.06 a share it posted a year earlier. However, we're translating things into U.S. dollars for our sake. On a yuan basis, adjusted earnings actually rose 1% since the prior-year's first quarter.
The world keeps turning
Baidu should return to double-digit growth for the first time in a year for the current quarter. Baidu's guidance for the second quarter -- initiated in Thursday's report -- calls for a 12% to 15% increase in revenue.
Accelerating growth isn't a surprise. Baidu's marketing makeover took place during the second quarter last year, resulting in a hit to its revenue-generating potential. We'll be back to an apples-to-apples basis during the third quarter of this year, giving us the best portrait for growth at Baidu.
If you're left wondering why the stock slipped -- off by roughly 5% in the first hour of after-hours trading on Thursday afternoon -- on a seemingly reasonable report, the dagger could be that CFO Jennifer Li is stepping down.
Li won't be going far. She's been tapped to serve as CEO of Baidu Capital. She's staying within the Baidu family, but some may find it unnerving to see a long-tenured executive leave. Li was CFO at Baidu for nine years before Thursday's announcement.
The stock had risen 14% year to date through Thursday's close, something that can also be playing a factor in the market's reaction. Baidu's rallying shares could have heightened expectations beyond merely landing at the high end of top-line expectations and offering guidance calling for revenue growth in the low teens during the second quarter. It's not easy to impress every quarter when you're a dot-com darling.