By Sherry Qin

Baidu's Hong Kong-listed shares fell sharply Thursday after management struck a cautious tone for 2024 amid a challenging outlook, despite reporting in-line results for the fourth quarter.

The Chinese search-engine giant's shares declined as much as 6.5% on Thursday morning before paring some losses. The stock was last down 4.3% at 102.10 Hong Kong dollars (US$13.04). Shares have lost 12% since the beginning of the year. Baidu's U.S.-listed stock fell 8.05% Wednesday after the fourth-quarter results.

The Beijing-based company said Wednesday that fourth-quarter revenue rose nearly 6% from a year earlier to 34.95 billion yuan (US$4.86 billion), as it posted gains for its online marketing and non-online marketing segments.

Net profit fell 48% to CNY2.60 billion, weighed by losses related to an equity method investment, Baidu said. However, adjusted net income, which excludes share-based compensation expenses and fair-value changes to investments, among others, rose 44% to CNY7.76 billion during the quarter.

Despite solid fourth-quarter results, management remains cautious about 2024 as it noted China's still-weak macroeconomic environment. Baidu's ad business, its main source of income, is sensitive to the macro uncertainties amid concerns about China's lackluster consumption and deflation.

"We are closely monitoring significant economic stimulus plans, which we think is essential for achieving this year's goals," Baidu Chief Executive Robin Li said.

However, management believes generative AI and large language models could bring new opportunities in terms of monetization and user engagement. After Baidu introduced its ChatGPT-like Ernie bot last year, it has been betting on the new technology to be the next growth driver.

"We began to generate incremental revenues from Ernie and Ernie Bot," Li said, adding that Baidu earned several hundred million yuan primarily from ad technology improvement and helping enterprises build their own models in the fourth quarter.

"While we are beginning to commercialize Gen-AI and foundation models, we see enormous monetization potential in this groundbreaking technology," Li said.

Li envisions the incremental revenue to multiply to several billion yuan in 2024, mainly driven by the advertising and AI cloud businesses.

Write to Sherry Qin at

(END) Dow Jones Newswires

02-28-24 2224ET