Shares of Chinese search engine powerhouse Baidu (BIDU -2.33%) traded down by nearly 3.5% on Thursday despite an encouraging fourth-quarter earnings release.
For the quarter, the company earned 30.26 billion yuan ($4.67 billion), which was 5% higher than the Q4 2019 tally. Non-GAAP (adjusted) net income, on the other hand, declined 25% to 1.05 billion yuan ($162 million), or $3.08 per American Depositary Share (ADS) of Baidu.
On average, analysts tracking the stock had estimated the company would post revenue that equated to $4.65 billion. Despite the notable bottom-line erosion, they were modeling a per-ADS adjusted net profit of only $2.61.
Baidu has been devoting resources to next-generation artificial intelligence (AI) solutions, which it says should provide significant growth in the near future.
"As we enter 2021, Baidu is well positioned as a leading AI company with strong internet foundation to seize the huge market opportunities in cloud services, autonomous driving, smart transportation, and other AI opportunities," CEO Robin Li said in the earnings announcement.
Baidu is opening its wallet to develop such offerings. Selling, general, and administrative expenses shot 29% higher during the quarter (to 5.1 billion yuan, or $788 million), while spending on research and development rose 19% to 5.7 billion yuan ($880 million). These were major factors in the bottom-line slide.
Baidu proffered revenue guidance for its current Q1. It believes revenue will grow at least 15% on a year-over-year basis to between 26 billion yuan and 28.5 billion yuan ($4.02 billion and $4.40 billion). It did not publish any profitability forecasts, nor did it offer any estimates for the full year.