Chinese tech stocks lower even as Baidu's strong earnings fail to offset worries
Kevin Frayer

Chinese tech stocks fell on Tuesday, reversing earlier gains, even as tech conglomerate Baidu (NASDAQ:BIDU) reported second-quarter results that topped expectations.
Baidu (BIDU) shares fell more than 6% to $137.93, reversing a 3% gain from earlier in the session. Other Chinese tech stocks, such as Pinduoduo (NASDAQ:PDD), JD.com (NASDAQ:JD), and Alibaba (NYSE:BABA), saw more modest declines. 
On Monday, Pinduoduo (PDD) shares jumped nearly 15% after reporting second-quarter results that beat estimates, thanks to consumer strength.
For the period ending June 30, Baidu (BIDU) said it earned the equivalent of $2.36 per share, excluding one-time items. Revenue fell 5% to $4.43B, as China's COVID-19 related lockdowns and a slowing global economy hurt demand and ad revenue.
Delving deeper, Baidu (BIDU) said revenue from its core operations fell 4% year-over-year to $3.46B, hampered by a 10% decline year-over-year in online marketing revenue. However, non-online marketing revenue rose 22% year-over-year to $906M, thanks to cloud and other AI-powered businesses.
Revenue attributed to iQIYI (IQ), of which Baidu (BIDU) owns a significant stake in, fell 13% year-over-year to $994M.
Analysts were expecting earnings of $1.57 per share on $4.2B in revenue.
"Despite a challenging macro environment caused by Covid-19, Baidu Core generated RMB23.2 billion in revenues in the second quarter, while Baidu AI Cloud revenues maintained rapid growth momentum of 31% year over year and 10% quarter over quarter," said Robin Li, Co-founder and CEO of Baidu, in a statement.
The company kept costs down during the period, as it generated $1.05B in adjusted EBITDA -including $985M for Baidu Core - and its adjusted EBITDA margin was 24%. 
Free cash flow during the period was $823M, and $826M excluding iQIYI.
"Baidu Core delivered a non-GAAP operating margin of 22% in the second quarter, up from 17% in the first quarter of 2022, as we continued to optimize our costs and enhance operational efficiency," said Rong Luo, CFO of Baidu. "Going forward, we remain committed to quality revenue growth and sustainable business models."
Baidu (BIDU) recently launched its first superconducting quantum computer that fully integrates hardware, software, and applications.