Renewed optimism about improved cooperation between the United States and China had brought life back into Chinese tech stocks like Baidu (BIDU) which has been under pressure for most of the year. Aside from concerns about being delisted from U.S. exchanges, Baidu has fallen victim to increased regulatory scrutiny from the Chinese government.

Each of these issues, however, could be a thing of the past. Investors are now reconciling the value of Baidu which still has fast growing businesses. The Chinese tech giant will report third quarter fiscal 2023 earnings results before the opening bell Tuesday. Last week, during a meeting at the G-20 Summit in Bali, President Joe Biden and Chinese President Xi Jinping said that the two nations would have more frequent communications. While acknowledging that the U.S.’s One China policy has not changed, Biden said the U.S. is not looking for conflict with the world’s most populous country.

In response, among other Chinese stocks, Baidu stock rose 9%. But the shares are still down 33% year to date, while falling 40% over the past year, trailing the S&P 500 in both spans. China’s own regulatory crackdown on tech companies has been the main reason for Baidu’s decline. China’s SAMR has demanded better corporate governance, anticompetitive practices and improved political posturing, all of which sparked fears among U.S. investors that Baidu’s core marketing business won’t grow as expected, nor will it be able to accelerate its growth in the cloud.

Currently trading at around $95, Baidu stock has not delivered the returns that investors have expected. The shares remain heavily discounted relative to its long-term potential, especially amid improved relations between China and the U.S. For any of this perceived value to matter, on Tuesday the company must speak positively about its growth potential for the next year and beyond.

In the three months that ended September, Wall Street expects the Beijing-based company to earn $2.16 per share on revenue of $4.48 billion. This compares to the year-ago quarter when earnings came to $2.30 per share on revenue of $4.44 billion. For the full year, ending in January, earnings are expected to rise 10% year over year to $8.19, while full-year revenue of $17.41 billion would rise about 0.6% year over year.

Often referred to as the “Google of China,” the company’s two main business segments are Baidu Core and iQiyi (IQ). The former accounts for roughly two-thirds revenue. The remaining revenue comes from iQiyi which in 2013 Baidu bought a 56% stake. The market is waiting for signs that China’s regulatory crackdown, which also forces companies to increase its investments in the country, will have minimal impact.

So far, Baidu has shown a willingness to comply with the new regulations and do so while still meeting its operating objectives. In the second quarter, Baidu reported a top and bottom line beat, posting adjusted earnings of $2.36 per share which beat consensus estimates by 72 cents. Although Q2 revenue of $4.43 billion declined 11.3% year over year it still surpassed estimates by $42 million. Aside from a slowing global economy that hurt demand and ad revenue, the company was adversely impacted by China’s COVID-19 related lockdowns.

Baidu continues to rely on the strength in its core business, particularly non-online marketing and cloud services. The company’s AI Cloud revenues momentum reached 31% year over year and 10% sequentially. Just as impressive, non-online marketing revenue rose 22% year over year to $906 million, offsetting the 13% decline in revenue attributed to iQiyi. On Tuesday investors will want to see whether these positive metrics can continue.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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