Slowing revenue growth, advertising 'disappearing' — can AI become Baidu's 'second curve'?

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On February 26, Baidu released its Q4 and full-year 2025 earnings report. In 2025, its total revenue was 129.1 billion yuan, a year-on-year decrease of 3%, which it attributed mainly to the reduction in traditional businesses, partially offset by the growth of Baidu’s core AI new business. Net profit attributable to Baidu was 5.6 billion yuan, a year-on-year decrease of 76%.

However, excluding the impact of long-term asset impairment, the net profit attributable to Baidu in 2025 was 19.4 billion yuan. In Q3 2025, Baidu recorded a 16.2 billion yuan long-term asset impairment, stating that it is currently accelerating investments in cutting-edge AI computing. Therefore, it conducted a comprehensive review of infrastructure assets. Some existing assets no longer meet today's computational efficiency requirements.

In this earnings report, Baidu highlighted the performance of its core AI new business. In the fourth quarter of 2025, Baidu's core AI new business generated revenue of 11.3 billion yuan, accounting for 43% of Baidu's general business revenue. For the full year, Baidu's core AI new business revenue reached 40 billion yuan, a year-on-year increase of 48%, representing 39% of Baidu's general business.

AI has gradually become a revenue source for Baidu. Can Baidu leverage AI to complete the transformation of its corporate revenue?

Advertising business continues to decline

Baidu has consistently divided its business into core revenue, including online marketing revenue and non-online marketing revenue, as well as iQIYI revenue. In the third quarter of 2025, Baidu continued with this business segmentation.

In this earnings report, Baidu stated thatStarting from this quarter, the company has redefined its core operations as Baidu's general business. Baidu's general business includes Baidu's core AI new business, traditional business, and others. Traditional business mainly consists of traditional advertising services covering search, information flow, and other product lines.In the fourth quarter of 2025, revenues from Baidu's core AI new business, traditional business, and others were 11.3 billion yuan, 12.3 billion yuan, and 2.5 billion yuan, respectively.

Baidu stated in its earnings report that the decline in traditional business revenue impacted overall revenue growth. In fact, according to previous business divisions, Baidu's online marketing revenue has declined for several consecutive quarters.

In the second quarter of 2024, Baidu's online marketing revenue was 19.2 billion yuan, a year-on-year decrease of 2%. Thereafter, this business revenue continued to decline, with the rate of decline continuously expanding: from the third quarter of 2024 to the third quarter of 2025, Baidu's online marketing revenue was 18.8 billion yuan, 17.9 billion yuan, 16 billion yuan, 16.2 billion yuan, and 15.3 billion yuan, with respective year-on-year decreases of 4%, 7%, 6%, 15%, and 18%.

In the view of external observers, the decline in Baidu's advertising revenue is attributed to the diversion of traffic. According to QuestMobile data, China’s internet advertising market continues to maintain moderate growth, with a forecasted market size of 793 billion yuan for the whole of 2025, a year-on-year increase of 4.6%; and an estimated market size of 836.26 billion yuan for the whole of 2026, a year-on-year increase of 5.4%.

With the rise of applications like Xiaohongshu, Douyin, and WeChat, Baidu's 'search + advertising' model has been impacted. According to ByteDance’s Jumeng Engine, by the end of 2024, over 80% of Douyin's monthly active users had performed search actions, initiating searches more than 100 times per month. According to Xiaohongshu's official data, as of October 2025, 73% of Xiaohongshu's monthly active users exhibited search behavior, with 90% of search actions initiated proactively by users, averaging over six searches per person daily. Meanwhile, data shows that WeChat Search experienced a 200% year-on-year increase in daily average search volume.

Meanwhile, according to Statcounter data, in January 2026, Baidu's share of the Chinese search engine market was 46.68%, after having once dropped below 30%.

In QuestMobile's TOP list of commercial value advertising platforms for 2025, Tencent Ads, Alibaba Mama, and ByteDance’s Jumeng Engine ranked in the top three, with Baidu Marketing ranking fourth. Clearly, the model of relying on search engines to generate advertising revenue can no longer bring more commercial potential to Baidu.

AI gradually supports revenue growth

During the Q3 2025 earnings call, Baidu revealed that since launching the Wenxin large language model in March 2023, Baidu has cumulatively invested over 100 billion RMB in AI. Such high investment places pressure on Baidu, whose traditional advertising business continues to decline.

Pursuing the commercialization of AI businesses has become Baidu’s key focus. Starting from Q3 2025, Baidu began disclosing AI business performance in its financial reports.

In Q3 2025, revenue from Baidu’s intelligent cloud infrastructure (AI infrastructure and platform services within smart cloud serving enterprises and public sectors) reached 4.2 billion RMB, a 33% year-on-year increase, with subscription revenue from AI high-performance computing facilities growing by 128%. Revenue from AI applications (AI-native and AI-enabled products targeting specific use cases for individuals and enterprises, including Baidu Docs, Baidu Netdisk, and digital employees) reached 2.6 billion RMB, a 6% year-on-year increase. Revenue from AI-native marketing services (AI-native online marketing products and services, including intelligent agents and digital humans) reached 2.8 billion RMB, a 262% year-on-year increase.

According to Baidu’s earnings report, in the full year of 2025, core AI new business revenue reached 40 billion RMB, a 48% year-on-year increase. Among this, intelligent cloud infrastructure revenue reached 19.8 billion RMB, a 34% year-on-year increase; AI application revenue reached 10.2 billion RMB, a 5% year-on-year increase; AI-native marketing services revenue reached 9.8 billion RMB, a 301% year-on-year increase.

In the financial report, Baidu stated that 2025 is a pivotal year for AI to become Baidu's new core. Intelligent cloud infrastructure demonstrates strong momentum, with differentiated full-stack end-to-end AI capabilities gaining increasing recognition from more enterprises. The AI application portfolio continues to expand, meeting the diverse needs of enterprise and individual users. Luobo Kuai Run further consolidates its global leading position through industry-leading scale operations while accelerating the expansion into overseas markets. Meanwhile, AI-native marketing services continue to grow, unlocking new potential for long-term development.

Baidu's co-founder and CEO Robin Li stated: 'As our AI-first strategy becomes increasingly clear, we are confident in creating lasting value in the AI era.'

To drive the development of its AI business, Baidu is undergoing corresponding organizational adjustments from 2025 to 2026.In November 2025, Baidu established a Fundamental Model Research and Development Department and an Applied Model Research and Development Department. The Fundamental Model Research and Development Department is responsible for developing highly intelligent and scalable general-purpose artificial intelligence large models, led by Wu Tian; the Applied Model Research and Development Department focuses on optimizing and exploring specialized models tailored for business application scenarios, headed by Jia Lei. Both report directly to Robin Li.

In January 2026, Baidu formed the Personal Super Intelligence Business Group (PSIG), which encompasses Baidu Wenku and Baidu Netdisk services. Vice President Wang Ying serves as the head of this group and also reports to Robin Li.

Clearly, Robin Li is concentrating his efforts on structuring the AI business.

Additionally, Baidu is pushing for the independent listing of its AI chip unit. In January 2026, Baidu announced that Kunlun Chip had confidentially submitted an application form (A1 Form) to the Hong Kong Stock Exchange via its joint sponsors, seeking approval for the listing and trading of Kunlun Chip shares on the Main Board of the Hong Kong Stock Exchange. Currently, Kunlun Chip is a non-wholly owned subsidiary of Baidu. Upon completion of the proposed spin-off, Kunlun Chip is expected to remain a subsidiary.

Data indicates that Kunlun Chip was previously known as Baidu's Intelligent Chip and Architecture Department. In January 2026, Baidu’s Intelligent Cloud division announced that its AI acceleration chips, centered around Kunlun Chip, have been deployed at scale across more than a hundred enterprises and institutions, including China Merchants Bank, State Grid, China Iron & Steel Research Institute, National Pipeline Network, and Geely Auto. In 2025, Baidu Intelligent Cloud activated China's first fully self-developed 30,000-card Kunlun Chip cluster, capable of supporting the training of multiple large-scale models with hundreds of billions of parameters simultaneously, marking a significant milestone in the construction of domestic AI computing power clusters.

Amid the ongoing decline of traditional advertising revenue and the rapid rise of new AI businesses, Baidu is undergoing a profound strategic transformation. Presently, AI has gradually become a key revenue pillar for Baidu, offsetting the gap left by the declining traditional advertising business. However, facing pressure on net profits and the financial burden of long-term AI investments, balancing short-term performance pressures with long-term technological investments remains a critical challenge for Baidu.

Author | Wu Ren

Source | Zhengtan Finance (ID: teccj6)

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