Baidu sales slide most since 2022 in fierce Chinese AI contest
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China’s internet search leader is betting big on generative AI, but it faces competition from open sourced models like DeepSeek as well as a wave of AI-native apps.
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BEIJING - Baidu’s quarterly revenue fell its most in about three years, hurt by an economic downturn that is capping its ability to fight bigger rivals in artificial intelligence and make inroads in newer areas.
The Ernie chatbot creator’s sales in the June quarter fell 4 per cent to 32.7 billion yuan (S$5.9 billion), weighed down by a slowdown in its core internet search operations.
Net income rose 33 per cent, versus projections for a decline, helped by a boost from long-term investments.
China’s internet search leader is betting big on generative AI to drive future growth, but it faces mounting pressure from open-sourced models like DeepSeek as well as a wave of AI-native apps encroaching on its turf.
The company will continue to invest in AI even as margins and revenue come under pressure in the near term, chief financial officer Henry He said, as its mainstay search business loses ground to social video platforms like Xiaohongshu and TikTok’s Chinese twin Douyin.
Online advertising revenue declined 15 per cent.
But non-marketing revenue grew a better than expected 34 per cent, aided by demand for its cloud unit.
“Since the AI search monetisation is still in the very early stages and has yet to scale, our revenue and margins are under considerable pressure in the near term with the third quarter expected to be especially challenging,” Mr He said.
“We see potential for margin improvement as our core advertising business recovers and stabilises.”
Baidu is counting on Ernie to underpin an AI ecosystem and drive demand for its cloud division, whose sales have grown by double digits in recent quarters.
It is also accelerating an overseas push by its Apollo Go robotaxi service, through partnerships with Uber Technologies and Lyft.
Baidu’s driverless rides in the June quarter more than doubled to 2.2 million, with cumulative rides passing 14 million in August, it said.
Baidu plans to take its fleet of self-driving robotaxis – common in Beijing, Guangzhou and Wuhan – to Singapore and Malaysia as early as 2025, Bloomberg reported.
The company is now running trials in Hong Kong.
But in China’s increasingly crowded AI arena, Baidu faces rivals Alibaba Group Holding and Tencent Holdings – both with far more firepower and larger global footprints – as well as nimble upstarts.
Baidu’s stock price is up around 6 per cent in 2025, trailing both of the bigger internet leaders.
“We are not yet at the stage for large-scale monetisation,” co-founder Robin Li told analysts on a call.
“While our AI transformation is progressing rapidly, it is still in the early stages, with considerable room for optimisation before reaching its full potential.”
Baidu’s Ernie was one of the first chatbots to launch in the world’s biggest internet arena, but it has since lost ground to apps from ByteDance and Tencent as well as open-sourced models like Alibaba’s Qwen.
The company has had to abandon its paid subscription model as well as open source its proprietary Ernie models.
Meanwhile, Baidu’s Netflix-style subsidiary iQiyi reported an 11 per cent revenue drop.
The embattled streaming platform is seeking to raise US$300 million (S$387 million) for a listing in Hong Kong in 2025, Bloomberg News has reported. BLOOMBERG
