Baidu's Aggressive Reinvestment Strategy

Baidu's Aggressive Reinvestment Strategy

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Shares of Baidu closed with healthy gains today after the Chinese search giant put up envious top-line growth last quarter -- revenue was up 42% to $1.5 billion. Most of those gains didn't make it to the bottom line, though, as both operating and net profit only increased by a little over 1%. That's because Baidu sees the market moving toward mobile, and is likewise investing in the future. Baidu has made multiple acquisitions this year, mostly related to its mobile ambitions. Meanwhile, mobile monetization continues to steadily improve.

Internet penetration and smartphone adoption are still in the early stages in China, underscoring Baidu's continued opportunities. Baidu is also planning to expand into Thailand, Egypt, and Brazil, but will leave the U.S. market to Google. Taking a short-term hit to invest in future growth is absolutely the right move here, considering that mobile is here to stay. Baidu also expects fourth-quarter sales to also grow over 45% from a year prior to more than $1.5 billion.

In this segment of Tech Teardown, Erin Kennedy discusses Baidu's earnings report with Evan Niu, CFA, our tech and telecom bureau chief.

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Erin Kennedy owns shares of Apple. Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple, Baidu, and Google. The Motley Fool owns shares of Apple, Baidu, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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