Baidu shares fell around 5% in US premarket trading Tuesday after the Chinese search and artificial intelligence company reported second-quarter earnings and revenue that missed analyst expectations.
Baidu reported earnings per share of RMB7.22, below the analyst estimate of RMB9.84.
Revenue fell 4% year over year to CN¥31.3 billion (approx. $4.5 billion), compared with analyst expectations of around CN¥31.9 billion (approx. $4.6 billion).
Net income fell to CN¥2.3 billion (approx. $333 million), while Baidu’s adjusted operating income came in at CN¥3.8 billion (approx. $550.3 million), with an adjusted operating margin of 12%.
Adjusted EBITDA was CN¥6.2 billion (approx. $897.8 million), representing a 20% margin.
The results marked a fifth consecutive quarterly decline in year-over-year revenue, as continued weakness in online marketing offset rapid growth in Baidu’s AI businesses
AI cloud growth accelerates
Baidu’s AI Cloud Infrastructure business remained a key source of growth during the quarter.
Revenue from the segment rose 50% year over year to CN¥7.3 billion (approx. $1.1 billion).
GPU Cloud revenue within the segment surged 283%, accelerating from 184% growth in the previous quarter.
AI Applications revenue increased 3% to CN¥2.5 billion (approx. $362 million), while revenue from AI-native marketing services was roughly flat year over year at CN¥2.6 billion (approx. $376.5 million).
“With AI-powered Business now firmly established as the core of Baidu, we are strengthening the foundations for our next phase of AI-driven growth. AI Cloud Infra sustained strong momentum this quarter, with GPU Cloud growth accelerating further off an already high base,” Baidu co-founder and CEO Robin Li said.
“While our online marketing business remains under pressure, the growing momentum in our core AI-powered Business reaffirms Baidu’s transition from an internet-centric company to an AI-first company, and strengthens our confidence in our long-term growth potential,” Li added.
Baidu has overhauled its reporting structure since the December quarter to separately report businesses spanning AI cloud, applications and marketing.
The AI-powered business accounted for more than half of Baidu’s core sales for the first time in the March quarter.
Advertising business remains under pressure
Baidu’s traditional search and advertising operations remain a challenge as the company competes for users with social media platforms and a growing number of AI chatbot services.
The company’s Ernie AI model has also faced competition from open-weight models developed by Chinese rivals, including Moonshot AI.
Li is betting that the next phase of the AI market will increasingly center on AI agents and applications, potentially creating new demand for Baidu’s cloud computing infrastructure.
Beyond software, Baidu is also expanding into autonomous driving and hardware.
Its robotaxi service continues to expand in China and overseas, while the company plans to spin off its Kunlunxin chip unit through a dual listing in Shanghai and Hong Kong.
Baidu’s robotaxi operations have also faced regulatory scrutiny. A high-profile fleet outage in Wuhan in April prompted an industry-wide safety review.
China subsequently resumed issuing new robotaxi permits following a three-month freeze.
Baidu’s robotaxi operations in Wuhan, which were suspended during an investigation into the incident, have started to resume, based on social media posts by local residents.
For investors, the pace at which AI-related businesses can expand while Baidu’s traditional revenue base continues to contract will remain central to the company’s growth outlook.
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