Baidu's AI Cloud And Robotaxis Become Growth Engines As Ad Business Slows

Baidu (NASDAQ: BIDU) stock gained on Wednesday after it reported fiscal second-quarter results.

The company reported quarterly revenue of $4.57 billion, a decline of 4% year-on-year (Y/Y), slightly missing analysts’ consensus estimate of $4.60 billion.

Despite the revenue shortfall, Baidu’s adjusted earnings per American Depositary Share (ADS) came in at $1.90, exceeding the forecast of $1.32.

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Baidu’s core revenue fell 2% Y/Y to $3.66 billion. Online marketing revenue dropped 15% Y/Y to $2.27 billion.

However, non-online marketing revenue posted a strong gain, increasing 34% Y/Y to $1.40 billion, driven largely by its AI Cloud business, which has become a critical growth engine.

Revenue from Baidu’s streaming platform, iQIYI IQ, was $925.3 million, falling short of the analyst consensus estimate of $1.00 billion, representing an 11% Y/Y decline.

In terms of expenses, Baidu reported a 5% Y/Y increase in Selling, General, and Administrative (SG&A) expenses, totaling $832 million. This rise was largely attributed to higher spending on marketing and channel-related activities.

Meanwhile, the company’s Research & Development (R&D) expenses decreased by 13% Y/Y to $715 million.

Baidu’s adjusted EBITDA margin dropped 700 basis points to 20%, while its core adjusted EBITDA margin saw a more significant decline of 800 basis points, falling to 24%.

As of June 30, 2025, Baidu maintained a solid cash position with $17.34 billion in cash and equivalents. However, free cash flow was a notable concern, posting an outflow of $653 million.

Excluding the iQIYI business, Baidu’s free cash flow outflow was slightly less, at $648 million. The negative cash flow was primarily driven by the company’s ramped-up investment in its AI business.

Robin Li, Co-founder and CEO of Baidu said the company’s AI Cloud business delivered strong revenue growth in the second quarter, powered by its expanding full-stack AI capabilities and end-to-end solutions.

He explained that this momentum eased short-term pressure on online marketing as Baidu accelerated the AI transformation of its search business to improve user experience and build long-term growth.

Li added that Apollo Go advanced its global footprint and tested new business models, reinforcing Baidu’s leadership in both left-hand and right-hand drive robotaxi markets worldwide.

Baidu stock gained 6% year-to-date as it grappled with intense AI technology competition from Alibaba Group BABA.

Price Action: BIDU shares are trading higher by 0.99% to $89.95 premarket at last check Wednesday.

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