Baidu's AI Push May Cut 2025 Ad Revenue by 7%

John Choi, an analyst at Nomura, has released a research report indicating that as Baidu accelerates the penetration of its AI search capabilities, the tech giant's advertising business may face sustained pressure. Choi notes that Baidu's AI search penetration rate could exceed 50% by the end of the second quarter, but the commercialization progress may lag behind.

Nomura has adjusted its forecast for Baidu's 2025 advertising revenue, predicting a year-on-year decline of 7%. This adjustment is due to temporary trade-offs related to the transition to AI search over the next two quarters. Choi emphasizes that proving the effective commercialization of new products will be crucial for Baidu. He states that the commercialization of AI products remains a key factor in the revaluation of Baidu's stock.

Despite the potential challenges, Nomura maintains a "stronger than market" rating on Baidu's stock, with a target price of 93.00 Hong Kong dollars, unchanged from the previous assessment. The report highlights the potential challenges Baidu's advertising business may encounter as the company focuses on advancing its AI search technologies. The analyst's perspective underscores the need for Baidu to balance its innovative AI initiatives with the commercial viability of its advertising segment to ensure sustained growth and market competitiveness.