China's Baidu profit jumps as focus on mobile, AI narrows

By Cate Cadell (Reuters) - Chinese internet search engine provider Baidu Inc has reported a jump in quarterly earnings, recovering from a string of regulatory investigations last year, as sharpened focus on mobile and artificial intelligence (AI) services drives growth. The result comes as Baidu narrows its attention to just a handful of areas outside its core business, while the other two of China's big-three tech firms - Tencent Holdings Ltd and Alibaba Group Holding Ltd - spend billions of dollars expanding into sundry sectors in multiple markets. Baidu said net profit hit 4.41 billion yuan ($654 million) in the three months through June, 83.5 percent more than a year earlier when profit dropped by a third in what was the firm's weakest result since listing in New York in 2005. Last year's profit drop coincided with investigations into how third parties used Baidu's advertising service, prompted by the death of a cancer patient who found ineffectual treatment via ads placed with Baidu. The probe in turn led to restructuring at Baidu which diverted resources from less-profitable ventures into AI, big data, cloud and video services - all of which contributed to its second-quarter profit jump. The firm expects further growth with third-quarter revenue as much as 30 percent over the same period last year. Baidu stock rose 6.9 percent in extended trade on Thursday. "It's done what it needed to do to make itself less dependent on search," said Mark Natkin, managing director of Beijing-based Marbridge Consulting. "[Tencent and Alibaba] have multiple other segments beyond their core that they're developing whereas Baidu's current strategy seems to be quite focused." The firm has pulled resources from areas including group-buying service Nuomi in a reshuffle that prioritizes the integration of AI into its ads business as well as its video site, autonomous driving platform and financial services. "Last year we went through some significant changes," said head of subsidiary Baidu Capital Jennifer Li. Its latest change in financial services is a strategic deal announced on Thursday with U.S. payment service provider PayPal Holdings Inc, to give Chinese customers access to PayPal merchants using Baidu's digital wallets. Breaking down second-quarter results, Baidu said revenue rose 14.3 percent to 20.87 billion yuan. That compared with the 13.8 percent average estimate drawn from 13 analysts polled by Thomson Reuters. The mobile division - which covers ads, video, games and other services used via mobile devices - contributed the most to revenue with 72 percent of the total, from 62 percent last year. Baidu also said active online marketing customers fell 21 percent from the same period a year earlier, but revenue per customer rose 32 percent. Baidu expects third-quarter revenue of 23.13 billion yuan to 23.75 billion yuan, with growth coming from ads and video as financial services and cloud computing, said Baidu Capital's Li. (Reporting by Cate Cadell in BEIJING and Laharee Chatterjee in BENGALURU; Editing by Christopher Cushing)