Baidu (NASDAQ: BIDU) missed Wall Street’s second-quarter revenue estimate on Tuesday, August 18, reporting 31.3 billion yuan ($4.62 billion) for the three months ended June, down 4% from a year earlier.

Analysts surveyed by LSEG had expected about 31.96 billion yuan, putting Baidu below the consensus forecast.

The company reported quarterly net income of 2.3 billion yuan ($324 million), down 68% from the same period last year. Diluted earnings per American depositary share fell to $0.85, a decline of nearly 72% from June 2025. Operating income also decreased to $446 million.

Baidu’s US-listed shares fell between 3.5% and 4.35% in pre-market trading in New York after the release.

Online marketing weakness weighs on results

The pressure came from Baidu’s longest-standing business. Online marketing revenue fell 19% to 13.1 billion yuan as advertisers reduced spending in a weak Chinese economy.

Two major factors affected that segment. A prolonged downturn in China’s property market and softer consumer demand pushed companies to cut marketing budgets.

In addition, the country’s mid-year 618 shopping festival worked against Baidu, as e-commerce platforms redirected promotional spending toward user subsidies rather than search and feed traffic.

Baidu has also been rebuilding its flagship search product around AI-generated answers, which the company has said are not yet fully monetized with advertising — a product overhaul unfolding alongside the cyclical pressures.

AI revenue continues to grow

Revenue from Baidu’s AI-related operations, which includes cloud, applications, and marketing services, rose 25% to 12.5 billion yuan, helping offset the decline in advertising.

Baidu was among the first major Chinese tech companies to chase the generative AI wave, launching its Ernie chatbot in March 2023 months after ChatGPT’s late-2022 debut, and it has spent the time since building out the computing infrastructure those models need.

AI Cloud Infra revenue increased 50% to 7.3 billion yuan. Within that segment, GPU Cloud revenue jumped 283% year on year, up from 184% growth in the prior quarter, according to Baidu’s earnings statement. The GPU cloud growth points to demand for computing power to train and run AI models, a force driving an infrastructure spending race across China’s tech sector — Alibaba alone has pledged more than 380 billion yuan over three years for cloud and AI infrastructure. AI application revenue rose 3% to 2.5 billion yuan, while AI marketing services were unchanged at 2.6 billion yuan.

“While our online marketing business remains under pressure, the growing momentum in our core AI-powered business reaffirms Baidu’s transition from an internet-centric company to an AI-first company,” Robin Li, Baidu’s co-founder and CEO, said in the earnings statement.

Apollo Go expands overseas

Baidu also used the quarter to expand its Apollo Go robotaxi service into new markets. The unit began open-road testing in London with Uber and Lyft, started fully driverless commercial rides in Dubai, and received Hong Kong’s first permits for driverless testing. It also carried out open-road tests in Switzerland with operator PostBus.

The overseas push extends a service that already runs fully driverless rides in Chinese cities such as Wuhan, and follows a multiyear agreement announced in July with Uber to deploy Apollo Go vehicles on Uber’s platform in markets outside the US and mainland China.

Chief financial officer Haijian He said operating cash flow remained positive for a fourth straight quarter at 3.4 billion yuan, and that the company is moving toward a dual-primary listing in Hong Kong that it expects to complete this year. Baidu’s Hong Kong shares have traded as a secondary listing since 2021, and a dual-primary structure could open the door to inclusion in Stock Connect, the trading link that lets mainland Chinese investors buy Hong Kong-listed stocks — the route Alibaba took after its own conversion in 2024.

The company said it has returned $259 million to shareholders through buybacks since the start of the first quarter.

Wall Street response

Before the earnings release, Baidu shares traded near $103.67, down about 28% for the year. Bank of America analyst Miranda Zhuang kept a Buy rating on the stock but lowered her price target to $165 from $180, citing weaker advertising revenue and higher AI infrastructure spending.

The three-month analyst consensus stood at a Moderate Buy, with three Buy ratings, two Holds, and no Sells.