As one of the early pioneers of AI in China, Baidu has faced considerable scrutiny for not achieving a prosperous return on its technological investmentsIndustry peers have surged ahead, and Baidu's operational performances have yet to reverse from a troubling downtrendRecent developments, particularly the emergence of Deepseek, have created a revaluation opportunity for Chinese tech stocks, resulting in price increases for major players like Alibaba and TencentHowever, Baidu seems to have lagged behind in attractiveness and market performance.

Recent quarterly reports reveal that Baidu still has significant challenges to address in order to regain competitive footingDespite slightly beating market revenue expectations for the fourth quarter of 2024, Baidu's total revenue decreased year-over-year by 2%, totaling 34.1 billion yuan (approx. $4.9 billion USD). This marks the third consecutive quarter of revenue decline for the tech giant.

Baidu's holdings in iQIYI, a video streaming service, have particularly weighed down its financial resultsDue to a lack of popular content, iQIYI's key financial metrics have shrunk comprehensivelyIn the fourth quarter, iQIYI reported a 14% drop in revenue to 6.6 billion yuan, with the entire year reflecting declines in both revenue and profit.

In terms of net profits attributable to Baidu, the company recorded around 5.2 billion yuan for the fourth quarter, representing a staggering 100% year-over-year increaseHowever, when evaluated under non-GAAP standards, net profit partially attributed to Baidu saw a decline of 13%, amounting to approximately 6.7 billion yuanAnalysts point out that the profitability issues experienced by Baidu stem from various factors, including pressures on advertising and unexpected expenses related to the closure of Ji Yue Auto (also known as Jiyue), translating into one-time charges of about 1 billion yuan for layoffs and other compensations.

Despite the setback with Ji Yue, industry observers have noted Baidu's proactive approach to tackle issues head-on, showcasing transparency and a willingness to invest in damage control

Advertisements

For the entire year of 2024, Baidu achieved total revenue of 133.1 billion yuan, down 1% year-on-year, while net profit attributable to the company reached 23.76 billion yuan, marking a 17% increaseNon-GAAP net profit attributable to Baidu saw a decline of 6%, standing at 27 billion yuan.

Baidu's cash position appears sound, reporting cash, cash equivalents, restricted funds, and short-term investments totaling 139.1 billion yuan by the end of 2024. Throughout the year, Baidu consistently engaged in share buyback programs, with the total buy-back amount exceeding $1 billionNevertheless, this resulted in a shareholder return yield of only 2.3%, which is relatively low among Chinese concept stocks.

Following the release of its financial results, Baidu's stock price plummetedOn the evening of the report, the company's stock fell by 7.51% in the U.S. marketBy February 19, Baidu's H-shares also opened lower, declining further by 2.38% as of the publication time.

The underlying issue for Baidu's profitability remains its reliance on traditional advertising business, which has not revitalized despite AI-related advancementsThe overall downturn in advertising demand, coupled with intense competition particularly from native AI search innovations, has contributed to mounting pressure on Baidu's advertising revenue streams.

Within the fourth quarter, Baidu’s online marketing revenue dropped to 17.9 billion yuan, representing a decrease of 7% year-on-year, while annual revenue in this particular segment shrank by 3%. Accounting for about 59% of Baidu’s total revenue, online marketing continues to dominate, but is showing ominous signs of vulnerability.

The company's management characterized the advertising performance as highly correlated with small and medium-sized enterprises, which remain particularly sensitive to macroeconomic shifts, compounded by a persistently challenging competitive landscapeAs such, there was no observable improvement in the fourth quarter’s advertising business.

A notable point of concern is the potential decline in active users of the Baidu app

Advertisements

As of December 2024, the monthly active users plummeted to 679 million, down from 704 million in SeptemberThe encroachment of alternative search platforms, such as Douyin (Chinese TikTok), WeChat, and Xiaohongshu, which have harnessed AI-generated content to meet user needs, poses a significant risk to Baidu’s user base.

Nonetheless, glimmers of hope have emerged from Baidu’s ventures into AI, particularly via its intelligent cloud services, which reported accelerated growth in the fourth quarter with a revenue increase of 26%. Non-online marketing revenues reached 9.8 billion yuan, up 18%, primarily driven by cloud services.

The daily API calls for Baidu's Wenxin model reached a staggering 1.65 billion as of December 2024, with external API calls spiking by an impressive 178%. Furthermore, Baidu Wenku (an online document sharing platform) reported an average monthly active user (MAU) count of 94 million, marking a remarkable year-over-year growth of 216% with an 83% quarter-over-quarter increase.

In the realm of autonomous driving, Baidu’s Apollo Go service provided over 1.1 million rides in the fourth quarter of 2024 aloneBy January 2025, it had amassed over 9 million service orders for autonomous ridesFurthermore, the service expanded its operations to nationwide full-scale unmanned driving by February 2025.

According to CEO Robin Li, Baidu has developed its sixth-generation autonomous vehicle, dubbed RT6, which Li terms the most cost-effective robotaxi globallyThis positions Baidu to validate its business model in self-driving, paving the way for further expansion domestically and internationally.

Looking forward to 2025, Li noted that it will be a pivotal year for Apollo Go’s expansion, projecting accelerated growth in fleet size and passenger volumes, as well as increased partnerships with transportation service platforms, taxi companies, and other potential collaborators.

From a competitive perspective, however, Baidu, as a traditional search engine giant and forerunner in China's large model landscape, is experiencing unprecedented competition from emerging players

Advertisements

Advertisements

Advertisements