Shares of Baidu (NASDAQ: BIDU) hit fresh 52-week highs in intraday trading on Thursday, only to blast through to new heights in after-hours action after delivering another round of blowout financial results. China's leading search engine is clocking in with revenue of $3.079 billion for the first quarter, 14.3% ahead of where it was a year earlier.
Baidu's top-line growth is in line with the 12% to 15% gain that it was forecasting three months ago. This may be a far cry from Baidu's historically heady growth, but it's the first time in a year that the dot-com darling cranked out double-digit revenue growth.
Search and destroy
Baidu's revenue has been held back since regulators forced Baidu and its smaller rivals to scale back the aggressive display tactics used with medical-related sponsored listings. The requirements that kicked in last May have now been in place for more than a year, so growth is starting to benefit from the sandbagged results -- at least during the latter half of the second quarter.
Online marketing revenue -- accounting for 86% of Baidu's revenue -- rose a modest 5.6%, but there's more to that metric than meets the eye. Baidu's active online-marketing customers have declined 21%, to 470,000, over the past year, mostly by Baidu's choosing. It has opted to cull its Rolodex to improve the overall quality of its platform. And it's working. The number of marketers on Baidu have fallen sharply, but the average customer is spending 32% more on Baidu than a year earlier.
Adjusted net income nearly doubled, to $2.36 a share. Baidu doesn't offer up guidance for its bottom-line results, but this is Baidu's strongest showing on that front since late 2015. After years of sacrificing margins for the sake of diversifying into new tech niches, Baidu is acting like a growth stock again.
The comparisons should get easier from here, now that we've fully lapped last May's medical-related search restrictions. Baidu is targeting $3.412 billion to $3.503 billion in revenue for the current quarter, which is 27% to 30% growth. Exclude the mobile games that are no longer relevant to Baidu's financials, and the guidance represents organic growth of 29% to 33%.
Paid search continues to pay the bills at Baidu, but it's once again boasting of its prospects in artificial intelligence (AI). Baidu sees AI playing a starring role in elevating its core products in mobile and search.
Armed with nearly $13.6 billion in cash and short-term investments, Baidu certainly has the money to throw at new initiatives the way that Western dot-com darlings do. Things are finally back to the point where comparisons can be made on an apples-to-apples basis, and Baidu is upbeat about its growth potential.