(Bloomberg) – Baidu Inc.'s revenues have slipped slightly, hurt by a slump that has been fighting bigger rivals in AI and suppressed its ability to invade in new growing regions.
Ernie Chatbot Creator's sales fell in June quarter to 32.7 billion yuan ($4.6 billion) from 4%, which saw a decrease in weight due to slowing down core internet search operations. Net income rose 33% to a surprise of 33% against forecasts of a decline that will help increase from long-term investments.
While China's internet search leaders have made a big bet on generative AI to drive future growth, they face pressure from open source rising models such as Deepseek and waves of AI-Native apps infiltrating the grass.
That's while its flagship search business has lost ground to social video platforms such as Xiaohongshu and Tiktok's Chinese twin Douin. Online advertising revenues fell 15% in line with estimates. Non-market revenues were 34% better than expected, depending on the demand for cloud units.
Baidu relies on Ernie to support the AI ecosystem of apps from the cloud and drive demand for the cloud sector. It also plans to expand its overseas expansion of its Apollo Go Robotaxi services in search of new revenue. Baidu's unmanned rides more than doubled to 2.2 million in the June quarter, with cumulative rides passing 14 million in August.
“We continue to focus on AI initiatives,” co-founder Robin Lee said in a statement.
However, in China's increasingly crowded AI arena, Baidu faces rivals Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Baidu's stock price has risen about 6% this year, dragging both the larger internet leaders in the market, backed by China's optimism about AI's competitiveness.
Baidu's Arnie was one of the first chatbots to be launched in the world's largest internet arena, but it got lost in the Bytedance Ltd. and Tencent apps, as well as open source models like Alibaba's Qwen. The company had to abandon its paid subscription model and open source its own Ernie model.
This is as Baidu's Netflix-style subsidiary IQIYI Inc. reported a 11% decline in revenue. The struggling streaming platform is looking to raise $300 million for its list in Hong Kong this year, according to Bloomberg News.
However, the push for commercialization of AI has gained traction through autonomous driving. Baidu will take a fleet of self-driving Robotaxis, common in Beijing, Guangzhou and Wuhan to Singapore and Malaysia. The company is currently conducting trials in Hong Kong.
What Bloomberg Intelligence says
Baidu faces a difficult future, and AI Ventures is set to lose money for at least the next three years. We expect the growing uncertainty in the Chinese corporate sector and competition with modern social media platforms to expose the profits of its search engines to be subject to sustained pressure.
– Robert Lee, Senior Analyst
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(Updated with details of the revenue statement.)
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