BofA Securities has released a research report reiterating its "Buy" rating on Baidu (09888), but lowered its target price by 6.57% from HK$137 to HK$128 to reflect the negative impact of the company's continuously weakening advertising business, while simultaneously cutting its adjusted net profit forecasts for 2026 to 2028 by 12%.
BofA Securities expects Baidu's adjusted net profit for 2026 to be RMB 12.011 billion. The firm believes that the company's long-term investment logic remains solid, primarily underpinned by its full-stack cloud and AI platform advantages, as well as the unlocking of deep value. The key focus for future performance lies in whether and when the profit growth of the cloud business will be sufficient to offset the decline in the advertising business.
Regarding the upcoming third-quarter results, BofA has adjusted its core financial expectations for Baidu. Draged by factors such as the low monetization rate of AI search, profitability metrics have been downgraded, with the latest forecast for single-quarter adjusted operating profit at RMB 1.7 billion, representing a year-on-year decline of 25%. On the revenue side, however, thanks to the performance of certain businesses, Baidu's third-quarter core revenue has reversed from a previous year-on-year decline of 1% to a slight year-on-year increase of 1%, reaching RMB 24.9 billion.
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