Growth is still on the menu at Baidu (NASDAQ:BIDU). China's leading search engine posted mixed financial results after Tuesday's market close. Total revenue rose 32%, clocking in at the dollar equivalent of $3.93 billion. Baidu's top-line results are on the high end of the 26% to 33% growth that it was targeting back in late April. The $3.93 billion it recorded in revenue for the second quarter is actually below the range that Baidu was forecasting at the time, but only because the dollar has appreciated sharply against China's yuan. It's not a miss.
Baidu's bottom line is growing even faster. Net income rose 45% to $2.74 a share, or up 57% to $1.12 billion or $3.18 a share on an adjusted basis. Baidu's been unloading many non-core or unprofitable businesses over the past two years, something that's weighing on the top line but boosting its bottom-line results.
It's a search party
Online marketing continues to be Baidu's bread and butter, accounting for 81% of the total revenue. Online marketing revenue rose 25%, a combination of a 9% uptick in advertisers -- Baidu's Rolodex is now 511,000 accounts thick -- and a 16% surge in revenue per online marketing customer.
Baidu's core revenue rose 28% for the quarter. The reported 32% top-line increase includes a boost from the 51% spike in revenue coming from its share of iQiyi (NASDAQ:IQ). Baidu spun off iQiyi last year, but the fast-growing and deficit-saddled streaming video platform remains a factor in Baidu's financial results.
Artificial intelligence or AI continues to be a focus of the businesses that Baidu is keeping. AI is playing a starring role in search as it leans on tech enhancements to improve monetization and filter out bad ads. Baidu has been burned by bogus ads before. However, Baidu is also developing an AI chip that would be used in data centers, public clouds, and autonomous vehicles. Self-driving cars remain a big focus at Baidu.
Baidu's guidance for the current quarters calls for $4.02 billion to $4.23 billion in revenue, a 23% to 30% increase from the prior year's showing. Back out the businesses that Baidu has sold off since the start of the third quarter of last year and revenue would climb by 26% to 33%. The targeted growth may seem lower if we go by where it landed on a dollar-basis last year or even where analysts are presently perched, but these are the dynamics of currency moves over the past year. Baidu itself is growing and is expected to grow at its reported rates.
These are interesting times for Baidu. It has grown its cash, equivalents, and short-term investments balance to $19.4 billion through asset sales and its search cash cow. There is no master plan to deploy its growing bank balance, but the focus on search and AI continues to deliver modest growth on both ends of the income statement. Revenue growth is accelerating for the second year in a row, coming off of 2016's depressed results. These may not be the heady percentage gains that Baidu was posting a few years ago, but it's doing more than enough things right to keep growth investors rewarded.