Baidu (BIDU) Stock: Revenue Drops 7% as Advertising Slump Offsets Cloud Growth

TLDR

• Baidu’s third quarter revenue dropped 7% to 31.17 billion yuan ($4.38 billion), though it still beat analyst estimates of 30.7 billion yuan.
• The company’s online advertising business fell 18% to 15.3 billion yuan as weak consumer spending forced companies to cut marketing budgets.
• Cloud and AI services grew 21% to 9.3 billion yuan, driven by demand for large language models and AI development tools.
• Baidu reported a net loss of 11 billion yuan compared to a profit in the same quarter last year, mainly due to asset write-downs.
• The company posted earnings per share of 11.12 yuan, beating analyst expectations of 8.37 yuan by 2.75 yuan.

Baidu reported mixed results for the third quarter as its traditional advertising business continued to struggle while its cloud and AI operations showed strength. The Chinese search engine giant posted total revenue of 31.17 billion yuan ($4.38 billion), a 7% decline from the previous year.

The revenue figure still managed to exceed analyst expectations of 30.7 billion yuan. Baidu’s U.S.-listed shares remained relatively flat in premarket trading following the announcement.

The company’s core online advertising business took a hit during the quarter. Revenue from marketing and ads fell 18% to 15.3 billion yuan. This decline reflects the broader economic challenges facing China, where a struggling property sector and ongoing trade tensions with the U.S. have dampened consumer spending.

Baidu, Inc., BIDU

Companies across China have responded to these conditions by cutting their technology and advertising budgets. Baidu’s heavy reliance on its search engine platform for ad revenue makes it particularly vulnerable to these spending pullbacks.

The company’s non-marketing revenue told a different story. This segment, which includes cloud services, jumped 21% to 9.3 billion yuan. The growth stems from Baidu’s push into artificial intelligence, which has attracted businesses looking to develop AI agents and deploy large language models.

Cloud and AI Services Drive Growth

Baidu has been working to position itself as China’s leading AI search platform. The company continues to invest heavily in its Ernie large language model, developing reasoning capabilities and rolling out enhanced versions.

Last week, Baidu unveiled new AI chips designed for model training and inference. The move comes as demand for AI computing power continues to grow across the industry.

The company faces stiff competition in China’s AI market. Rivals Alibaba and DeepSeek are also pursuing both consumer and enterprise customers. This competitive pressure has pushed Baidu to accelerate its AI investments.

Financial Performance and Outlook

Despite beating revenue estimates, Baidu reported a net loss of 11 billion yuan for the quarter. The company had posted a profit in the same period last year. Asset write-downs were the primary cause of the loss.

On a per-share basis, Baidu delivered earnings of 11.12 yuan. This beat analyst expectations of 8.37 yuan by 2.75 yuan. The earnings beat suggests the company’s cost management and high-margin cloud business are helping offset weakness in advertising.

Baidu’s stock has performed well over the past year. Shares are up 32.66% over the last 12 months and have gained 30.25% in the last three months.

The company’s strategy centers on using AI and cloud growth to compensate for the ongoing weakness in online advertising. Economic conditions in China remain challenging, with the property crisis and trade tensions showing no signs of quick resolution.

Baidu’s third quarter saw 10 negative EPS revisions and zero positive revisions from analysts over the 90-day period leading up to the earnings release.

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