Baidu, Inc. (NASDAQ: BIDU) shares slipped after the company reported a decline in revenue and negative free cash flow, underscoring how its aggressive push into AI is reshaping the business, even as core advertising weakness persists.
The company reported quarterly revenue of $4.38 billion, a decline of 7% year-on-year (Y/Y), topping analysts’ consensus estimate of $4.31 billion.
Despite the revenue shortfall, Baidu’s adjusted earnings per American Depositary Share (ADS) came in at $1.56, exceeding the forecast of 91 cents.
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Baidu’s core revenue fell 7% Y/Y to $3.46 billion. Online marketing revenue dropped 18% Y/Y to $2.16 billion.
However, non-online marketing revenue posted a strong gain, increasing 21% Y/Y to $1.31 billion, driven largely by its AI Cloud business.
Revenue from Baidu’s streaming platform, iQIYI (NASDAQ:IQ), was $938.70 million, falling short of the analyst consensus estimate of $932.66 million, representing an 8% Y/Y decline.
In terms of expenses, Baidu reported a 12% Y/Y increase in Selling, General, and Administrative (SG&A) expenses, totaling $924 million. This rise was primarily due to an increase in expected credit losses and channel spending expenses.
Meanwhile, the company’s Research & Development (R&D) expenses decreased by 3% Y/Y to $728 million.
Baidu’s adjusted EBITDA margin dropped to 14% from 26% Y/Y. The core adjusted EBITDA margin saw a decline to 18%, down from 31% Y/Y.
As of September 30, 2025, Baidu maintained a solid cash position with $41.64 billion in cash and equivalents. However, free cash flow was a notable concern, posting an outflow of $302 million.
Excluding the iQIYI business, Baidu’s free cash flow outflow was slightly less, at $261 million. The negative cash flow was primarily driven by the company’s ramped-up investment in its AI business.
CEO Robin Li highlighted strong momentum in AI Cloud as more enterprises adopt Baidu’s AI products and solutions. He noted that Apollo Go rapidly expanded its fully driverless ride-hailing operations — including its move into Switzerland — while maintaining top-tier safety performance. He also pointed to fast revenue growth from AI-native monetization tools such as agents and digital humans.
CFO Haijian He said AI Cloud’s healthy expansion helped offset weakness in online marketing. He reported that Baidu’s strategic investments in AI are paying off, with revenue from AI-powered businesses rising more than 50% year-over-year to about 10 billion Chinese yuan in the third quarter of 2025.
Price Action: BIDU shares were trading lower by 0.87% to $113.12 premarket at last check Tuesday.
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