TLDR
- Baidu reported Q2 revenue of $4.55 billion, down 3.6% year-over-year, missing analyst expectations
- Net profit surged 33% to $7.32 billion, crushing analyst expectations of $3.66 billion
- Online marketing revenue dropped 15% during the quarter, hurting the core advertising business
- AI cloud business showed strong growth, helping offset advertising weakness
- Company expanded robotaxi partnerships with Uber and Lyft for global deployment
Baidu delivered mixed second quarter results that tell two very different stories about the Chinese search giant’s business. Revenue declined while profits soared past expectations.
The company reported Q2 revenue of $4.55 billion, down 3.6% from the same period last year. This fell short of Wall Street’s expectation of $4.57 billion.
Net profit painted a brighter picture entirely. Earnings jumped 33% to $7.32 billion, crushing analyst expectations of $3.66 billion by a wide margin.
The profit beat demonstrates Baidu’s improving cost management capabilities. However, the revenue decline reveals ongoing challenges in the company’s traditional stronghold.
Online marketing revenue dropped 15% during the quarter. This division represents Baidu’s largest revenue source and traditional cash generator.
The advertising weakness wasn’t a complete surprise to market watchers. Citi analysts had previously forecast this double-digit decline in their research reports.
Baidu Core’s main business segment saw overall revenue decline 1.6%. The marketing division’s poor performance was the primary factor dragging down these numbers.
The iQIYI video streaming unit also struggled during the period. Revenue from this division fell approximately 11% compared to last year.
AI Cloud Division Delivers Growth
CEO Robin Li highlighted AI cloud as a standout performer during the quarter. The division continued delivering what he called “robust and healthy revenue growth” in company statements.
This AI strength helped offset some of the marketing business struggles. Li explained that Baidu is transforming its search platform with AI technology to improve user experiences.
Deutsche Bank analyst Leo Chiang noted that advertising revenue recovery might take considerable time. The company is still developing monetization strategies for AI-generated search traffic.
Benchmark analyst Fawne Jiang expects continued pressure on the Core advertising business. She reduced her full-year ad growth forecast to negative 13% year-over-year.
Jiang pointed to market share challenges and faster GenAI content rollout as key headwinds. She believes a near-term recovery in search advertising remains uncertain.
Global Robotaxi Expansion Takes Shape
Baidu made progress in autonomous driving during the quarter. The company partnered with Lyft to bring Apollo Go robotaxis to Europe starting in 2026.
Germany and the United Kingdom will serve as the first European markets for deployment. The companies plan to roll out thousands of vehicles across Europe in subsequent years.
A separate partnership with Uber will bring Apollo Go to Asia and the Middle East later this year. This deal specifically excludes the U.S. and mainland China markets.
These robotaxi agreements represent Baidu’s strategic push into new revenue streams. The autonomous driving market could provide future growth opportunities as advertising faces ongoing pressure.
Jiang views the Uber partnership as an important development for the company. She maintained her Buy rating with a $120 price target on BIDU stock.
Options traders expect a 5.71% move in either direction following the earnings release. This suggests moderate volatility expectations among market participants.
American depositary receipts traded down 1% in premarket sessions following the results. The mixed earnings left investors weighing strong profit performance against revenue concerns.
Baidu plans to launch Ernie 5.0, a new version of its foundation model, in coming months. By late August, the company expects to roll out a new reasoning model designed for complex tasks.
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