TLDR
- Baidu Q2 revenue fell 3.6% to $4.55 billion, hurt by 15% drop in online marketing revenue
- Net profit jumped 33% to $7.32 billion, beating analyst expectations
- AI cloud business showed strong growth, helping offset advertising weakness
- Company partnered with Uber and Lyft to deploy Apollo Go robotaxis globally
- Stock down 1% in premarket trading despite profit beat
Baidu delivered a classic tale of two businesses in its second quarter results. The Chinese search giant saw revenue slip while profits soared.
The company reported Q2 revenue of $4.55 billion, down 3.6% year-over-year. This decline came despite strong performance in newer business areas.
Net profit told a different story entirely. Earnings jumped 33% to $7.32 billion, crushing analyst expectations of $3.66 billion.
The profit beat shows Baidu’s cost management is working. But the revenue picture reveals deeper challenges in the company’s core business.
Online marketing revenue dropped 15% during the quarter. This represents Baidu’s traditional cash cow and biggest revenue source.
The advertising weakness wasn’t unexpected. Citi analysts had forecast this double-digit decline in their previous reports.
AI Cloud Business Powers Growth
CEO Robin Li pointed to AI cloud as a bright spot. The division continued delivering “robust and healthy revenue growth” according to his statement.
This AI strength helped balance out the marketing business struggles. Li said the company is transforming Baidu Search with AI to improve user experience.
The iQIYI video streaming unit also faced headwinds. Revenue from this division fell about 11% during the quarter.
Baidu Core’s main business segment saw revenue decline 1.6% overall. The marketing drop was the primary drag on these numbers.
Deutsche Bank analyst Leo Chiang noted that advertising revenue recovery might take time. The company is still working on monetization strategies for AI-generated search traffic.
Robotaxi Partnerships Expand Global Reach
Baidu made moves in autonomous driving during the quarter. The company partnered with Lyft to bring Apollo Go robotaxis to Europe starting in 2026.
Germany and the U.K. will be the first European markets. The companies plan to deploy thousands of vehicles across Europe in following years.
A separate deal with Uber will bring Apollo Go to Asia and the Middle East later this year. This partnership excludes the U.S. and mainland China markets.
These robotaxi deals represent Baidu’s push into new revenue streams. The autonomous driving market could provide future growth as advertising faces pressure.
Benchmark analyst Fawne Jiang sees the Uber partnership as a key step. She maintained her Buy rating with a $120 price target on the stock.
Jiang expects continued pressure on Core advertising business. She cut her full-year ad growth forecast to -13% year-over-year.
The analyst cited market share challenges and faster GenAI content rollout as headwinds. A near-term recovery in search advertising remains uncertain.
Options traders expect a 5.71% move in either direction following the earnings release. This suggests moderate volatility expectations for the stock.
American depositary receipts traded down 1% in premarket sessions. The mixed results left investors weighing profit strength 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 for complex tasks.
