Baidu's AI gains not enough as Q2 revenue misses analysts estimates

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Baidu (NASDAQ: BIDU) missed Wall Street’s second-quarter revenue estimate on Tuesday, August 18, reporting 31.3 billion yuan ($4.62 billion) for the three months to June, which is a 4% drop from a year earlier.

Analysts at LSEG had expected about 31.96 billion yuan, and Baidu came in under that mark. 

The company recorded a quarterly net income of 2.3 billion yuan ($324 million), which was a decline of 68% from the same time last year. The diluted earnings per American depositary share fell to $0.85, a decline of almost 72% from June 2025. Operating income also slipped to $446 million.

Investors have reacted to the development as well, as Baidu’s US-listed shares fell between 3.5% and 4.35% in pre-market trading in New York after the release.

Where did Baidu struggle?

The pressure came from Baidu’s oldest business. Online marketing revenue dropped 19% to 13.1 billion yuan, as advertisers held back spending in a weak Chinese economy.

Two forces squeezed that segment. A drawn-out slump in China’s property market and soft consumer demand pushed companies to trim marketing budgets. 

On top of that, the country’s mid-year 618 shopping festival worked against Baidu, because e-commerce platforms shifted promotional money toward user subsidies instead of buying search and feed traffic.

The AI side Baidu wants investors to watch

Revenue from Baidu’s AI-related operations, which covers cloud, applications, and marketing services, rose 25% to 12.5 billion yuan, cushioning the advertising fall.

Its AI Cloud Infra revenue climbed 50% to 7.3 billion yuan, and within it, GPU Cloud revenue jumped 283% year-on-year, accelerating from 184% growth the prior quarter, according to Baidu’s earnings statement. AI application revenue grew a slimmer 3% to 2.5 billion yuan, while AI marketing services were flat at 2.6 billion yuan.

“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,” Robin Li, Baidu’s co-founder and CEO, said in the earnings statement.

Robotaxis, a Hong Kong listing, and payouts

Beyond the balance sheet, Baidu used the quarter to push its Apollo Go robotaxi service into new markets. The unit began open-road testing in London with Uber and Lyft, started fully driverless commercial rides in Dubai, and won Hong Kong’s first permits for driverless testing. It also ran open-road tests in Switzerland with operator PostBus.

Baidu’s chief financial officer (CFO) Haijian He said their operating cash flow stayed positive for a fourth straight quarter at 3.4 billion yuan and that the company is moving toward a dual-primary listing in Hong Kong that it expects to complete this year. 

The company has returned $259 million to shareholders through buybacks since the start of the first quarter, the release stated.

How Wall Street sees Baidu

Baidu shares traded near $103.67 ahead of the release, down about 28% for the year. Bank of America (BofA) analyst Miranda Zhuang kept a Buy rating but cut her price target to $165 from $180, citing falling advertising revenue and higher AI infrastructure spending. 

The three-month analyst view sat at a Moderate Buy, with three Buy ratings, two Holds and no Sells.

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