Will Baidu, Inc. (ADR) Earnings Keep Investors Satisfied?

Baidu (BIDU -0.26%) will release its quarterly report on Wednesday, and investors once again have high hopes for the Chinese online search leader after a crisis of confidence in 2012 and early 2013. Yet even as fears of rising competition from Qihoo 360 (QIHU.DL) have subsided, Baidu has taken on Youku (NYSE: YOKU) in the fast-growing streaming-video space, creating massive power plays throughout the Chinese Internet space.

Baidu has long been the leader in Internet search, relegating Sohu.com (SOHU 0.26%) and other industry players to far smaller market shares. But Qihoo's aggressive moves forced Baidu to raise its game a level, and Baidu has answered with action that not only has cemented its search share but also sought to expand into other areas. Let's take an early look at what's been happening with Baidu over the past quarter and what we're likely to see in its report.

Stats on Baidu

Source: S&P Capital IQ.

How far can Baidu earnings grow this quarter?
In recent months, analysts have been slightly downbeat about the prospects for Baidu earnings, cutting their fourth-quarter estimates by about 2% and their full-year 2014 projections by 1%. The stock has nevertheless gained another 6% since mid-November.

Baidu's third-quarter report showed the same general mix of strong revenue growth and far less impressive profit growth that investors expect to see this time around as well. Sales jumped 42% from the year-ago quarter, but net income was up just 1%. Combined with favorable guidance for the fourth quarter, though, the report was solid enough that investors sent shares sharply higher after the news.

Part of Baidu's success has come from aggressively moving in new directions and exploring profit opportunities. Last month, for instance, Baidu completed its acquisition of group-buying website Nuomi, buying the remaining minority stake that it didn't already own from Renren (RENN). Nuomi represented one of Renren's best performers, and Baidu hopes to keep reaping growth from the unit.

Still, Baidu's competitors are working hard to dethrone Baidu. Youku, Sohu, and Tencent joined a team of industry players in accusing Baidu of failing to respect copyrights on video by allowing users to access websites that encourage pirating video clips or play unauthorized videos. Yet it's unlikely that Baidu's competitors have completely unblemished records on these fronts as well, raising the question of how Baidu should best respond to these allegations while working at establishing broader leadership over the entire Internet industry. Moreover, in search, Qihoo is still growing faster than Baidu as it keeps working at squeezing more money from its own search platform.

Nevertheless, Baidu isn't allowing challengers in any single area to keep it from trying to establish a broadly integrated presence across the Internet industry. Even though some initially thought that Baidu's foray into security software was merely a knee-jerk response to security software specialist Qihoo's incursion into search, Baidu Antivirus actually won accolades for its performance. Similarly, Baidu's moves to capture more revenue from video, mobile apps, e-commerce, and other areas aren't designed for immediate profits but rather to establish a market presence that could lead to eventual domination.

In the Baidu earnings report, watch to see where the company sees itself focusing its attention next. With so many strategic opportunities, the sky's the limit for Baidu's growth in the future.

Click here to add Baidu to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.