Baidu Files For Chip Unit IPO, Eyes "Special Dividend" While Slashing 15% Of Workforce
In the current landscape of Chinese tech giants pivoting toward hardware independence, Baidu, Inc. (百度) has emerged as a focal point for institutional analysts. In a research note released today, January 5, 2026, Nomura analysts led by Jialong Shi have reiterated a "Buy" rating on the search giant, aggressively raising their target price from 140to140to178.
The catalyst? A mix of classic financial engineering and hard operational pivots: a spin-off IPO for its chip subsidiary, a promised special dividend, and a massive 15% reduction in headcount to preserve margins.
For investors tracking the sector, the note highlights a critical shift: Baidu is no longer just selling ads; it is attempting to monetize the silicon powering the AI revolution.
Unlocking Hidden Value: The Kunlunxin IPO
The core of Nomura’s bullish thesis revolves around Kunlunxin (KLX), Baidu’s chip subsidiary. On January 2, 2026, Baidu filed with the Hong Kong Stock Exchange to list KLX separately. While no specific timeline was given in the filing, Nomura estimates a completion within the first half of this year.
Nomura views the current window as an arbitrage opportunity for investors to gain exposure to China's domestic chip sector through the parent company.
"Based on the stock performance of those recently-listed domestic chip designers, we believe KLX’s upcoming IPO will also likely be well-received by investors. As such, between now and the completion of the IPO, the Baidu stock could be traded as a proxy by investors for one of its most valuable assets, KLX, in our view."
The valuation implication is significant. Analysts now value the subsidiary at $32 billion. This figure is derived from a comparative valuation against peers like Cambricon, implying a 19x multiple on projected fiscal year 2027 sales.
The revenue projections for the chip unit are equally ambitious, driven by the insatiable demand for Large Language Model (LLM) inference hardware. Nomura estimates KLX’s revenue will reach RMB 6.6 billion yuan (US$916 million) in 2026, noting that "domestic chips are good enough to replace foreign-imported ones" in inference scenarios.
The Carrot: A Special Cash Dividend
Beyond the structural separation of the chip unit, Baidu is preparing to sweeten the pot for shareholders. The company has signaled intentions to deploy a cash dividend to attract income-oriented capital, supplementing its existing share repurchase program.
Nomura believes the liquidity event from the IPO will be the trigger:
"We think a good timing for it to declare its first-ever cash dividend is upon the completion of KLX’s IPO, with proceeds raised from the partial reduction of its latest 69% stake in the subsidiary."
With a net cash balance of roughly $22 billion on the books, the removal of the "conglomerate discount" combined with a capital return program presents a compelling case for value unlocking.
The Stick: "Efficiency" Through Cuts
However, the path to profitability is being paved with aggressive cost-cutting measures. Following a meeting with Baidu management on December 17, Nomura confirmed media reports of significant workforce reductions executed through the fourth quarter of 2025.
The scale of the cuts is substantial.
"We estimate its total headcount would likely drop ~15% in 2026F, which could help beef up the profitability that is pressured by weak ads business and continued investments in AI."
While this bodes well for 2026 margins, the immediate impact is a hit to the bottom line. Nomura forecasts a 46% year-over-year drop in non-GAAP operating profit for Baidu Core in 4Q25, largely driven by severance costs associated with the layoffs.
Valuation Adjustments
Despite the short-term earnings pressure from severance payouts, the long-term thesis remains tied to the successful capitalization of the chip unit and improved operational leanness.
Nomura has adjusted its Sum-of-the-Parts (SOTP) valuation to reflect the higher appraisal of KLX and the company's massive cash pile.
"We maintain Buy with SOTP-based TP raised to USD178... on the back of: 1) our increased valuation for KLX; and 2) removed discounts (30%) for the net cash balance of USD22bn backed by improving capital return outlook."
With the stock currently trading at approximately 16x its 2026 estimated P/E, Nomura sees an implied upside of over 18%, betting that the market will eventually reward the company for shedding weight and monetizing its most strategic asset.