Baidu's Revenue Dips Ahead of Intensifying Chinese AI Contest
The Ernie chatbot creator's sales in the June quarter came to 32.7 billion yuan ($4.6 billion), in line with the average of analyst estimates for a 4% decline to 32.74 billion yuan. Net income came to 7.3 billion yuan, versus the projected 3.7 billion yuan.
China's internet search leader is betting big on generative AI to drive future growth, but it faces mounting pressure from rising open-sourced models like DeepSeek as well as a wave of AI-native apps eating into its turf.
That's while its core search business is losing ground to social-video platforms like Xiaohongshu and TikTok's Chinese twin Douyin, while its advertising revenue remains vulnerable to the ups and downs in China's economy.
Baidu is counting on Ernie to underpin a cloud-to-app AI ecosystem and drive demand for its cloud division, which has expanded sales by double-digits in recent quarters. It's also planning to accelerate its Apollo Go robotaxi service's overseas expansion in its hunt for new revenue.
'We remain focused on AI initiatives,' co-founder Robin Li said in a statement.
But in China's increasingly crowded AI arena, Baidu faces rivals Alibaba Group Holding Ltd. and Tencent Holdings Ltd. — both with far bigger firepower and global footprint — as well as nimble upstarts. Baidu's stock price is up around 6% this year, trailing both of the bigger internet leaders in a market buoyed by optimism for Chinese AI competitiveness.
Baidu's Ernie was one of the first chatbots to launch in the world's biggest internet arena, but it's since lost ground to apps from ByteDance Ltd. 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.
A push to commercialize AI is gaining traction in autonomous driving, however. Baidu plans to take its fleet of self-driving robotaxis — common in Beijing, Guangzhou and Wuhan — to Singapore and Malaysia as early as this year, Bloomberg reported. The company is now running trials in Hong Kong.
What Bloomberg Intelligence Says
Baidu faces a difficult future, with its AI ventures set to lose money for at least the next three years. We expect its search-engine profit to stay under sustained pressure due to rising uncertainty in China's corporate sector and competition from contemporary social media platforms.
- Robert Lea, senior analyst
Click here for the research.
More stories like this are available on bloomberg.com
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