在推进中，以提供人工智能驱动的业务增长更多可见性并提高股东回报

In progress to provide greatervisibilityonAI-powered business growth and enhance enhance shareholder return Target Price(Previous TPUp/DownsideCurrent Price Baiduannounced 4Q25 results:Baidu General Business revenue wasRMB26.1bn,down5.7% YoY, inline withBloomberg consensus;non-GAAP OPof BaiduGeneral Businessreached RMB2.8bn,down39% YoY, but was12%ahead of consensus.Regarding AI-powered businessdevelopmentin 4Q25: 1)AI-native marketingservicesrevenue grew110% YoYto RMB2.7bn; 2) AI-cloudinfrastructure revenuetotalled RMB5.8bn, with subscription-based revenuefrom AI acceleratorinfrastructure grew 143% YoY; and 3) AI applicationsrevenue reached RMB10.2bn in 2025, up 5% YoY.Key stock price driversforBaidu include: 1) reacceleration in overall ads revenue growth; 2) robust cloud China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk AI-empowered business has morevisibility.BaiduhasredefinedBaiduCore as Baidu General Business in 4Q25, which includes Baidu Core AI-poweredBusiness,Legacy Business(mainly consisting of traditionaladvertisingservicesacrosssearch, feed, and other properties), and Others.Revenue from Baidu Core AI-powered Business, Legacy Business, andOthers wasRMB11.3bn, RMB12.3bn, and RMB2.5bn, respectively, in 4Q25.The combined revenue decline for AI-native marketingservicesand LegacyBusiness was c.16% YoY in 4Q25(3Q25: 18% YoY decline), due to the Solid cloud revenue growth in 2025.In 4Q25, revenue from AI Cloud Infra,which refers to AIinfrastructureand platform services serving enterprisesand the public sector, reachedRMB5.8bn. Meanwhile, subscription-basedrevenue from AI accelerator infrastructure within AI Cloud Infra saw revenuegrowth of143% YoY, acceleratingfrom 128% YoY in 3Q25.For 2025, AICloud Infra revenue (which includes revenue generated from chip business Order volume growthof Apollo Go remained strong.Apollo Go provided3.4mn fullydriverless ridesin 4Q25, up202% YoY (3Q25:212%; 4Q24:36%),driven by the expansion in vehicle fleets. As ofFeb2026, Apollo Go’s globalfootprint has covered 26cities(Oct 2025: 22 cities). To date,Apollo Go fleetshave accumulated300mn autonomous kilometers, including 190mn fully Source: FactSet OPMis recovering from trough.Non-GAAP OPM for Baidu Core was10.9%in4Q25,down5.9ppts YoY but1.1ppts better than consensus,demonstrating a recovery from 9.0% in 3Q25.Weexpectthe recovery inads revenue, as well as Baidu’s initiatives to drive operating efficiency Quarterly results and estimates Changes in forecastand valuation Welower our 2026/2027E revenue forecast by1.4/1.4% to account for the cut in revenueforecastof iQIYI and Baidu’s non-core business. We cut 2026/2027E non-GAAP net profitforecast by9.5/1.1%to account for the increase inestimatesfor SG&A expenses and R&D SOTP valuation of US$161.7per ADS We roll over our valuation window to 2026E,andcombinedwiththe adjustment inexchangerate assumption (from USD:RMB=1:7.2 to 1:7.0),ournewSOTP-based target pricerises 1) US$35.7for BaiduGeneral Business(mainly including the ads business,excludingApollo and Baidu Cloud), based on5.0x 2026E non-GAAP PE(was US$37.8 based on 2) US$0.3for Apollo ASD(unchanged), based on 2.0x 2030E revenue, and discountedback to 2026E using a 13.0% WACC; 3) US$62.9for Baidu Cloud, based on4.6x 2026E PS(was US$61.8 based on 5.5x 2025EPS, which implied 4.6x 2026E PS based on previous forecast); 4) US$62.8fornet cash(was US$50.8),iQIYI and other investments, with a 30% holdingdiscount applied to thevaluationofUS$89.7per ADS.The increase in valuation was mainly Our target price translates into22x/16x 2026/2027E non-GAAP PE, or 12/9x 2026/2027Enon-GAAP PE ex-cash. Baidu's Board of Directors has authorized anewsharerepurchase program in Feb2026,under whichBaidumay repurchase up to US$5bnof its shares, effective through Dec 31,2028. The Board has also approved, for the first time, the adoption of a dividend policy for Source: Company data, CMBIGM estimatesNote: American depositary share (ADS); iQIYI (IQ US); Trip.com Group (TCOM US); Uxin (UXIN US); HAND Enterprise Solution (300170 CH);Kuaishou (1024 HK); Yusys Technologies (300674 CH) Risks 1)Slower-than-expectedramp-up in revenue generation from Gen-AI related business.2)Slower-than-expected margin expansion. Disclosures& Disclaimers Analyst Certification The research analyst who is primaryresponsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuerthat the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about thesubject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst norhis/her associates (as defined in the code of conduct