Lyon's research report indicates that baidu (BIDU.US) continues to face macroeconomic and ai search transformation pressures in the third quarter, with core revenue expected to drop by 1% to 26.3 billion Renminbi annually, and adjusted EBIT to drop by 3% to 6.5 billion Renminbi. Online marketing revenue may decrease by 4.5% annually, as ai search contributes more than total search results, but with limited monetization capabilities. Cloud revenue seems to increase by 12% annually, mainly due to management changes in the personal cloud sector, while enterprise cloud business is expected to achieve strong growth due to the demand for generative artificial intelligence (GenAI), a trend that may continue this year.

As for the fourth quarter, the bank expects core revenue and adjusted EBIT to remain flat year-on-year, with a 3% decrease in marketing revenue. It has lowered the adjusted net profit for 2024 and 2025 by 3% and 8% respectively, reducing the target price from $145 to $120, with a rating of 'outperform'. (vc/u)

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