Baidu Earnings Miss, Shares Drop Amid Weak Advertising Revenue

Baidu (BIDU) reported Q2 2025 revenue down 4% YoY to RMB 32.7 billion ($4.57 billion), with adjusted net income dropping 35% to RMB 4.8 billion ($669 million). AI Cloud revenue surged 34% to RMB 10 billion, while online marketing revenue declined 15%. EPS estimates have dropped 10% in the past 90 days, and the topline is expected to come in flat under $18.5 billion.

Title: Baidu's Q2 2025 Earnings: Mixed Performance with AI Cloud Growth

Baidu (BIDU) reported mixed performance in its Q2 2025 earnings, with revenue declining 4% year-over-year (YoY) to RMB 32.7 billion ($4.57 billion) and adjusted net income dropping 35% to RMB 4.8 billion ($669 million). The company's AI Cloud business, however, experienced robust growth, with revenue surging 34% to RMB 10 billion, while online marketing revenue decreased by 15%. EPS estimates have dropped by 10% in the past 90 days, and analysts expect the topline to come in flat under $18.5 billion.

The core online advertising business, which accounts for 60% of total revenue, saw a 15% YoY decline, driven by broader macroeconomic challenges in China. Despite this, Baidu's AI Cloud segment showed significant growth, reaching RMB 10 billion in revenue, driven by cost-competitive models like ERNIE 4.5 Turbo and X1 Turbo. These models are priced 40% lower than OpenAI's GPT-4 and have attracted over 10,000 enterprises and 50,000 developers via the Qianfan MaaS platform [1].

Baidu's autonomous driving initiatives also demonstrated substantial growth. The Apollo Go robotaxi service delivered 2.2 million fully driverless rides in Q2, a 148% YoY increase, and has expanded to 15 Chinese cities. The company's partnerships with Uber and Lyft signal ambitions to become a global mobility-as-a-service leader [2].

Investors are evaluating Baidu's valuation, which currently stands at a trailing P/E of 9 and a P/S of 1.70. While the company's stock appears undervalued relative to its long-term growth potential, the valuation reflects skepticism about near-term ad revenue recovery and geopolitical risks.

Baidu's strategic risks include intense competition in the AI cloud market and the capital intensity of AI R&D. However, the company's open-sourcing of the ERNIE 4.5 model and its AI Open Initiative could accelerate adoption. The 30,000-card AI cluster provides a competitive edge in large model training.

For forward-looking investors, Baidu offers a compelling case: a cash-rich balance sheet, a leading AI Cloud business, and a global autonomous driving strategy. However, patience is key, as the path to profitability in AI and robotaxi will require years of R&D and market adoption.

References:
[1] https://www.ainvest.com/news/baidu-q2-earnings-navigating-ad-revenue-declines-ai-cloud-drives-future-growth-2508/
[2] https://www.ainvest.com/news/baidu-ai-driven-transformation-era-revenue-diversification-long-term-growth-2508/