Morgan Stanley predicts that Baidu (BIDU.US) will see a year-on-year decline of 0.6% and 3.8% in core revenue and non-GAAP operating profit in the third quarter. Core advertising revenue is expected to drop by 4% to 5% year-on-year due to weak macroeconomic conditions and the impact of ai transformation, continuing to affect the monetization of ai. The bank expects ai cloud revenue to rise by 14% year-on-year, similar to the second quarter, but not meeting management's guidance for accelerated growth.

The bank has lowered its forecast for the company's core and non-GAAP operating profit for the current and next year by 1% to 4% and 2% to 4% respectively. The bank continues to monitor Baidu's market share loss, with limited visibility on revenue reversal, and maintains a cautious view on the stock. The bank also mentioned that ai and autonomous driving offer long-term options, but the visibility on timing and scale of monetization remains uncertain.

The bank maintains a 'Market Perform' rating for Baidu, setting its target price of American Depositary Shares at $105.