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Why Baidu Stock Gained 10% Today

What happened

Shares of Chinese search provider Baidu (NASDAQ: BIDU) surged on Friday following the company's second-quarter report. Baidu reported double-digit revenue growth and beat analyst expectations for earnings, prompting an analyst upgrade and a 9.5% jump in the stock price.

So what

Baidu reported second-quarter revenue of $3.08 billion, up 14.3% year over year. Online marketing revenue accounted for the bulk of total revenue, coming in at $2.64 billion and growing by 5.6% year over year. Other services accounted for the rest of the company's revenue, growing by 125% year over year.

Image source: Getty Images.

Net income came in at $651 million, corresponding to $1.67 per share, $0.16 better than analysts were expecting. The company expects to produce between $3.41 billion and $3.50 billion of revenue during the third quarter, up around 30% year over year.

Baidu's strong results led Cantor Fitzgerald to upgrade the stock from "underweight" to "overweight." The firm's price target on the stock was raised from $156 to $260, reflecting a dramatic shift in sentiment.

Now what

Baidu's strategy going forward is to strengthen its mobile business while investing in artificial intelligence. CEO Robin Li provided some details:

We will use AI as a fundamental driver to elevate our current core business, specifically our core products of Mobile Baidu, search and feed. In parallel, we will continue to build out our newer AI-enabled initiatives through an open platform and ecosystem approach to capture long term economic opportunity.

Baidu's guidance calls for an acceleration of revenue growth, suggesting that the core advertising business will pick up in the third quarter. With a solid second quarter in the bag, investors will be expecting even better results a few months from now.

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Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Baidu. The Motley Fool has a disclosure policy.