Key Takeaways:
Baidu Inc.’s artificial intelligence businesses are positioned to contribute more than half of the company’s total revenue by the end of 2026, according to a new forecast from Goldman Sachs.
“We expect Baidu’s AI-driven business to grow by more than 30 percent year-over-year,” the bank said in a research report, citing momentum from the company’s first-quarter results. Goldman noted that this growth is supported by solid expansion in AI cloud infrastructure, which it projects will increase by about 50 percent annually.
The bank’s bullish outlook is based on accelerating revenue from cloud services, particularly those using GPUs. Management revealed that the use of computing resources is shifting from training AI models to inference, a move that helps Baidu Cloud expand its customer base. The company is targeting a gross margin of 35 to 40 percent for its GPU cloud business, compared with 25 to 30 percent for legacy CPU and memory services.
The forecast reinforces the AI growth narrative for Baidu, though other analysts remain cautious. Susquehanna recently raised its price target on Baidu to $140 from $120 but kept a Neutral rating, pointing to a 22 percent year-over-year decline in the legacy online marketing business that offsets the AI cloud surge. Still, Baidu’s AI-powered business revenue grew 49 percent in the first quarter, exceeding half of its general business revenue for the first time.
Baidu's management aims to reduce the company's holding company discount by having AI-driven business account for over 50 percent of total revenue. A key part of this strategy involves revitalizing the Ernie AI model to drive "Model-as-a-Service" revenue.
The focus on AI monetization reflects a broader market trend where companies central to the AI supply chain are being re-evaluated. While Baidu's stock has risen just two percent year-to-date, the successful scaling of its AI cloud and stabilization of its legacy advertising business will be critical for investors. The next catalyst will be the company's second-quarter earnings report, where the market will look for continued AI momentum.
This article is for informational purposes only and does not constitute investment advice.
