Baidu will release its Q2 2025 earnings report on August 20, disclosing progress in its AI strategy and financial performance. While its intelligent cloud and autonomous driving businesses sustain rapid growth, Baidu faces headwinds from its traditional ad business transformation and short-term profit pressures. Nevertheless, its full-stack AI blueprint and global expansion strategy underpin long-term value.
Market Expectations
Consensus estimates forecast Baidu’s Q2 2025 revenue at RMB 32.693–34.521 billion (YoY: -3.6% to +1.7%). Net profit is projected at RMB 3.014–4.111 billion (YoY decline: 25.1%–45.1%), while non-GAAP net profit is expected to be RMB 3.956–6.290 billion (YoY change: -46.5% to -15.0%).
Previous Quarter Recap
In Q1 2025, Baidu’s total revenue reached RMB 32.452 billion (YoY +3%), with Baidu Core revenue at RMB 25.5 billion (YoY +7%). Adjusted EPS stood at RMB 18.54. Highlights included:
Intelligent Cloud: Revenue surged 42% YoY.
Autonomous Driving: Apollo Go (“Luobo Kuaipao”) provided over 1.1 million rides globally by end-Q1, with Q1 orders hitting 1.4 million (YoY +75%).
Ads: Revenue fell 6% YoY to RMB 16 billion, reflecting pressure on traditional search. Baidu emphasized AI’s role in search transformation, with AI-generated content now powering 35% of search results (vs. 22% last quarter). However, this shift temporarily dampened monetization efficiency.
Current Quarter Outlook
Intelligent Cloud: Sustained High Growth
Baidu Intelligent Cloud maintained strong momentum in Q2, driven by ecosystem expansion of its Qianfan platform and enterprise AI adoption. Qianfan now hosts over 100 mainstream AI models and a full lifecycle toolchain. By Q2, it had enabled 33,000 AI agents, attracted 50,000+ developers, and onboarded over 10,000 enterprises.
Technologically, Baidu launched Ernie 4.5 Turbo and X1 Turbo in April, slashing inference costs by 80% and 50% respectively:
Ernie 4.5 Turbo input: RMB 0.8 / million tokens (80% reduction).
X1 Turbo input: RMB 1.0 / million tokens (50% reduction).
In April, Baidu activated its wholly self-developed 30,000-card AI cluster, supporting simultaneous training of multiple 100-billion-parameter models and fine-tuning for 1,000 customers. Training efficiency loss is capped at <5%, providing cost-effective computing power for the industry.
Advertising: Structural Challenges from AI Transformation
Baidu Core online marketing revenue is projected to decline in Q2 due to phased impacts of AI-driven search overhaul. AI-generated content now appears in >20% of search results pages, reaching nearly 70% of Baidu App MAUs. This compresses traditional ad space and alters user interaction. Notably : Users engaging with AI search spend more time on Baidu, make more complex queries, and show higher return rates, but this has yet to boost ad revenue.
Advertising headwinds stem from three factors:
User migration to short-video/social platforms, shifting advertiser budgets.
Channel efficiency decline amid agency restructuring (e.g., Hubei’s lead agent Wuhan Century Baijie Network Tech announced bankruptcy proceedings).
Disruption of traditional ad models (e.g., AI directly answering “best cafes in Beijing” obscures conversion paths).
Baidu is piloting AI Agent ads, which drove 30x YoY spending growth in Q1 and contributed 9% of Baidu Core ad revenue. Despite rapid growth, its small base limits near-term offset to overall ad declines. The new ad-free search app TizzyAI (launched in Q2) may further squeeze monetization but enhances user experience for long-term value.
Autonomous Driving: Global Expansion Accelerates
Apollo Go’s Q1 orders grew 75% YoY to 1.4 million rides, with cumulative rides exceeding 1.1 million by May. Technically, its 6th-gen vehicle features 10-layer safety redundancy and 6-layer MRC strategies, achieving accident rates 1/14th of human drivers. With a unit cost of RMB 204,600 (1/7th of Waymo’s and below Tesla’s planned $30k cybercab), Baidu holds a “high-safety + low-cost” edge.
Globalization accelerated in Q2:
July 15: Partnership with Uber to deploy thousands of vehicles across Asia and the Middle East.
Existing operations in Dubai and Abu Dhabi (building the region’s largest fleet).
Expansion into Switzerland and Turkey under exploration.
Fast Company notes Apollo Go has "outperformed Waymo."
New Growth Driver: Digital Human Tech
The NOVA digital human platform launched in Q2 integrates Ernie 4.5 Turbo for multi-agent collaboration, live-stream decisioning, and realistic voice/expression replication. During 618 shopping festival, Luo Yonghao’s digital avatar generated RMB 55 million GMV, 3x higher interaction vs. human streams, and created 100,000+ AI scripts with 8,300+ actions.
Analyst Views
China Everbright Securities: Maintains "Buy" but cuts target to HK$109.40. Sees smart cloud growth offsetting ad pressure; expects ad recovery as AI search monetization improves.
Soochow Securities: Keeps "Buy" rating, citing stronger-than-expected Q1 and AI agent progress. Believes cloud/autonomous driving create long-term value.
J.P. Morgan: Downgrades to "Neutral" on profit visibility concerns amid macro and GenAI monetization uncertainties. Cuts 2025 ad revenue forecast by 7% and op margin by 6pp but acknowledges long-term AI stack value.
Conclusion
Baidu’s Q2 report will likely reflect accelerating AI commercialization alongside persistent profit pressure. While smart cloud and autonomous driving signal growth, ad declines fuel short-term concerns. Long-term competitiveness stems from its full-stack AI and global strategy, but immediate priorities include: monetizing AI search, improving cloud margins, and stabilizing ads.