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Shares of China’s top search engine, Baidu (NASDAQ:BIDU), which had hit an 18-month low last week on worries of a weakening economy, shot up 5.68 percent this morning after the company overshot expectations in its second-quarter results.
The company posted a 70 percent increase in quarterly profit as net income was up at $436 million, or $1.24 per share, on revenue of $858.8 million. Revenue increased nearly 60 percent over its previous year quarter. Analysts had expected the company to report earnings of $1.12 per share on revenue of $850.78 million.
“We are pleased to announce strong results for the second quarter despite macro headwinds and challenging comparisons with the same period last year,” chief executive Robin Li said in a statement. “Our efforts to expand our customer base continue to make solid progress.”
Baidu accounts for 78.6 percent of China’s online search market, putting its way ahead of rival Google (NASDAQ:GOOG) at 15.7 percent. Google had shifted its local search traffic to Hong Kong in 2010 after a disagreement with Chinese government officials over online censorship, and Baidu has made the most of that move.
Traffic acquisition cost as a component of cost of revenues was RMB453.7 million or $71.4 million, representing 8.3 percent of total revenues, as compared to 7.9 percent in the corresponding period last year. Online advertising was the biggest gainer, growing 59.7 percent year over year. Baidu has been trying to counter the economic slowdown in China and add to its customer base by marketing to smaller companies.
The company said third-quarter sales would be in the range of $983 million and $1.009 billion.
“We once again posted solid growth on the top and bottom lines even as we continued to invest aggressively in expanding our network infrastructure and talent base,” said Jennifer Li, Baidu’s chief financial officer. “Moving forward, this robust investment strategy will be key to achieving long-term, sustainable growth, and strengthening Baidu’s position at the heart of China’s Internet ecosystem.”
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