Benchmark analyst Fawne Jiang lowered the price forecast for Baidu, Inc. (NASDAQ:BIDU) from $130 to $120 while keeping a price forecast of a Buy rating.

On Wednesday, the company reported fiscal first-quarter revenue of $4.47 billion, up 3% year over year, topping the analyst consensus estimate of $4.30 billion. 

Adjusted earnings per ADS of $2.55 beat the analyst consensus estimate of $1.96.

The analyst writes that Baidu's first quarter results were strong, and AI Cloud was a standout, growing 42% year over year and delivering margins that outperformed key peers.

Jiang writes that, despite some expected variability tied to project-based revenue, the solid performance has led them to raise the full-year cloud forecast to 25% (from 20% prior), with room for further upside.

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Also, generative AI (GenAI) search is gaining traction faster than anticipated, adds the analyst.

Jiang views management’s target of over 50% of search queries to be powered by GenAI by mid-year as both a strategic and responsive shift.

Baidu's GenAI-driven search represents a significant departure from traditional models, with promising long-term potential, says the analyst.

Given ongoing uncertainty around monetization timing and effectiveness, the analyst revised the FY25 core advertising revenue forecast to -8% year-over-year (from flat) and adjusted the EPS estimates.

Investors can gain exposure to the stock via MicroSectors FANG ETNs due January 8, 2038 (NYSE:FNGS) and Invesco Golden Dragon China ETF (NASDAQ:PGJ).

Price Action: BIDU shares are down 1.23% at $84.43 at the last check on Thursday.

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