Near-term catalysts intact: Management aims to complete Kunlunxin IPO and secure primary listing in Hong Kong this year; maintain Buy

研报英文原文证据摘录

Global Markets Research

Baidu BIDU.OQ BIDU US

19 August 2026

EQUITY: INTERNET & NEW MEDIA

Near-term catalysts intact

Rating

Remains

Management aims to complete Kunlunxin IPO and secure

primary listing in Hong Kong this year; maintain Buy

Target price

Reduced from

USD 170.00

USD 154.00

Maintain Buy on approaching Kunlunxin IPO despite near-term headwinds

Closing price

17 August 2026

USD 104.12

Implied upside

+47.9%

Baidu General Business (BGB) reported 2Q26 revenue and non-GAAP operating profit (OP),

largely in line with lowered market expectations. However, reported non-GAAP net profit

missed Bloomberg consensus estimates due to reduced non-operating income. BGB’s revenue

declined 4% y-y, while OP contracted 13% y-y. As highlighted in our preview note , Baidu’s

advertising and AI cloud infrastructure segments continue to exhibit diverging trends:

advertising revenue fell a further 19% y-y, whereas AI infrastructure revenue surged nearly

50% y-y. The growth was primarily driven by a 2.8x y-y acceleration in subscription-based

revenue from the company's AI accelerator infrastructure. Non-GAAP operating profit margin

(OPM) contracted 1.5pp y-y, hampered by softness in the high-margin ad business and

accelerated investments in AI. Management indicated a strategic focus on elevating its

proprietary large language model (LLM), Ernie Bot, back to a top-tier competitive position.

Consequently, Baidu ramped up spending in the second quarter to acquire talent and build out

the requisite infrastructure. This drove quarterly capex to CNY11bn (accounting for 45% of

revenue), up significantly from less than CNY4bn in the prior-year period. However,

management expects the capex run-rate to normalize in the coming quarters and plans to

explore leasing and alternative avenues to secure compute capacity, thus mitigating the strain

on future cash flows. Given the combination of elevated investments and weakening

advertising revenues, we project OPM to moderate further to 9% in the third quarter from 15%

in the second quarter.

While the sustained decline in advertising revenue and elevated AI investments pose near-term

…