Chinese Tech Giant Baidu’s AI Business Grows 25%, But Advertising Slump Drags Q2 Revenue

Baidu’s second-quarter revenue fell short of Wall Street expectations as weak advertising demand outweighed growth in its AI-related businesses

Outlook Business Desk

Curated by: Anjali Pal

Published At: 18 August 2026 7:11 pm

Photo: Nikkei Asia

Summary of this article

Baidu’s Q2 revenue fell 4% to 31.33 billion yuan, below the 31.96 billion yuan analyst estimate.
Online marketing revenue dropped 19%, while its Core AI-powered Business grew 25%.
Rising AI spending and growing competition from Chinese rivals are adding pressure on the company.

China’s Baidu reported a 4% year-on-year (YoY) decline in second-quarter revenue to 31.33 billion yuan ($4.65 billion), missing the 31.96 billion yuan average estimate from analysts, according to data compiled by LSEG and cited by Reuters.

The company’s US-listed shares fell 3.5% in premarket trading following the results. Baidu’s core advertising business remained under pressure as weak consumer spending and a prolonged downturn in China’s property sector prompted businesses to reduce their marketing budgets.

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The weakness was also visible during China’s mid-year 618 shopping festival, when e-commerce companies shifted more of their promotional spending towards consumer subsidies instead of efforts to attract traffic, the news agency reported.

Advertising Business Takes A Hit

Baidu’s online marketing services revenue fell 19% YoY to 13.1 billion yuan in the quarter ended June. The decline highlights the pressure on the company’s traditional advertising business as Chinese businesses remain cautious about spending.

At the same time, demand for AI-related services provided some support. Businesses adopting AI are driving demand for Baidu’s cloud infrastructure, helping its newer technology businesses grow.

Revenue from Baidu’s Core AI-powered Business, which includes cloud computing and AI applications, increased 25% from a year earlier to 12.5 billion yuan.

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AI Growth Faces Rising Competition

Baidu has been increasing investments in AI infrastructure and talent as it seeks to expand its position in the sector. However, analysts expect these higher costs could continue to weigh on margins even as AI-related revenue rises.

The company is also facing growing competition from Chinese technology firms including ByteDance and Alibaba, which have continued to develop and launch new AI products.

Baidu’s Ernie large language model has gone several months without a major upgrade, while rival companies have continued to introduce newer versions of their AI models.

The contrasting performance of Baidu’s advertising and AI businesses highlights the challenge facing the company as it tries to reduce its reliance on traditional online marketing while keeping pace in China’s increasingly competitive AI market.