Shares were up 8% after hours, following release of the results, after rising 2% in the regular session to a new all-time high.
Baidu continues to grow, capitalizing on the world's largest and fastest-growing Internet market — a year after top rival Google (GOOG) bowed out of China because of governmental censorship Baidu has really benefited from being by far the largest search player (in China)," said Ryan Jacob, portfolio manager of the Jacob Internet Fund. "Once Google left the playing field, Baidu's financials went to another level." Jacob's fund owns shares of both Baidu and Google.
In the quarter, Baidu said per-share profit more than doubled to 72 cents from 35 cents in the year-ago quarter. Analysts polled by Thomson Reuters had expected 66 cents.
Revenue rose 87% to $528.4 million. Analysts had expected $502 million.
Baidu Bullish On Q3
For the current quarter, Baidu expects revenue of $611.1 million to $626.6 million, up 66% from Q3 2010 at the midpoint. Analysts predicted $567.6 million.
"Baidu had another excellent quarter, as we benefited from strong traffic growth and improved monetization," said CEO Robin Li in a statement. Baidu planned to hold a conference call with analysts at 8 p.m. ET Monday.
The company continues to benefit as more companies buy its ads that appear near search results, says Scott Kessler, an analyst for Standard & Poor's equity research services. "Baidu continues to grow organically at a very rapid pace," he said.
Baidu said it ended the quarter with 298,000 advertisers, up 17.3% from Q2 2010 and up 8.8% from the first quarter.
The company's revenue per online advertiser was $1,779, up 53% from the year-ago quarter and up 29% from Q1.
Baidu's share of China's search market inched up in Q2 to 75.9% from 75.8%, says research firm Analysys International. Google's share fell to 18.9% from 19.2%, it says.
Baidu said traffic acquisition costs — commission it pays other sites to carry its ads — fell to 7.9% of total revenue from 9.7% in the year-earlier quarter. That's another sign that Google's pullback has clearly made an impact, Jacob says.
"When you don't have competition with any significant market share, it allows you much better economics," he said.
Baidu has had an active month.
Last week, it reached a licensing deal with U.S.-based record companies to provide legal access to copies of songs on its search site. Baidu also launched an Internet browser to compete directly with alternatives from Microsoft (MSFT) and Google.
In June, Baidu said it would invest $306 million in Qunar, China's No. 1 travel-related search service.
But Baidu's new initiatives won't add much revenue yet, says Kessler. "In some cases, those things aren't going to have an impact this quarter and probably not even next," he said.