Baidu's Q2 Earnings Miss Estimates, Revenue Down 4% YoY

Baidu (BIDU) shares fell 2.59% after Q2 earnings, with revenue down 4% YoY to 32.7 billion yuan ($4.55 billion), missing consensus. AI Cloud business showed growth, but overall profitability declined with a 35% drop in non-GAAP net income to 4.8 billion yuan ($668 million). Baidu's stock price is $86.76, and it is considered "Modestly Undervalued" with a GF Value of $110.83. Despite revenue headwinds, Baidu offers potential investment appeal with a low PE ratio of 8.62 and PB ratio of 0.8.

Baidu Inc. (BIDU) reported its second-quarter 2025 earnings, with shares falling 2.59% after the announcement. Total revenues for the period were RMB32.7 billion ($4.57 billion), representing a 4% year-over-year (YoY) decrease, missing analysts' consensus estimates. The AI Cloud business showed robust growth, but overall profitability declined, with a 35% drop in non-GAAP net income to RMB4.8 billion ($668 million).

The company's AI Cloud segment continued to drive revenue growth, supported by its full-stack AI capabilities and comprehensive end-to-end AI products and solutions. This performance helped mitigate the near-term pressure on online marketing business, as Baidu intensified the AI transformation of Baidu Search to elevate user experience and establish a stronger foundation for long-term growth.

Baidu Core's non-online marketing revenue exceeded RMB10 billion for the first time, delivering 34% year-over-year growth. This growth was primarily driven by new AI initiatives, which resulted in a more balanced and diversified revenue mix. However, the company's overall financial performance was negatively impacted by a 15% decline in online marketing revenue and a 13% decrease in research and development expenses.

Baidu's stock price, currently trading at $86.76, is considered "Modestly Undervalued" with a Graham Fair Value (GF Value) of $110.83. Despite the revenue headwinds, the company's low price-to-earnings (PE) ratio of 8.62 and price-to-book (PB) ratio of 0.8 make it an attractive investment opportunity for value investors.

The company remains focused on its AI initiatives, which offer significant long-term value creation potential. Baidu's AI Cloud was ranked the No.1 AI cloud provider for the sixth consecutive year, and its autonomous ride-hailing service, Apollo Go, provided over 2.2 million fully driverless rides in the second quarter, representing a 148% YoY increase.

In conclusion, while Baidu's Q2 2025 earnings show mixed performance, the company's focus on AI initiatives and its strong market position in AI cloud and autonomous driving sectors present potential investment appeal. Investors should closely monitor Baidu's progress in these areas to gauge its long-term growth prospects.

References:
[1] https://ir.baidu.com/news-releases/news-release-details/baidu-announces-second-quarter-2025-results