Baidu Earnings Preview (BIDU): What To Expect

Baidu Inc. (NASDAQ: BIDU) is under the microscope as it prepares to release its second-quarter 2025 financial results this morning. The company’s management team will host an earnings conference call at 8:00 AM Eastern Time, offering analysts and investors crucial insights into the tech giant’s performance and future strategy.

The stakes are high, with the market keenly observing whether Baidu's aggressive investments in artificial intelligence and autonomous driving can effectively compensate for the ongoing challenges in its traditional advertising business.

Analysts are projecting EPS of $1.86 (CNY13.33) for this quarter, a substantial decrease compared o the $2.43 EPS (CNY21.02) reported in the same quarter last year. Revenue is expected to come in at $4.58 billion (CNY32.92B), a decline of 2.99% Y/Y. This anticipated decline underscores the market's concerns about the impact of declining advertising revenue and increased investments in AI.

The upcoming earnings release is particularly significant given the mixed performance in the first quarter of 2025. Baidu reported total revenues of RMB32.5 billion ($4.47 billion), a modest 3% year-over-year increase. This growth was largely fueled by the company’s AI Cloud segment, which experienced a robust 42% year-over-year surge, contributing RMB6.7 billion or 26% of Baidu Core’s revenue. However, this positive momentum was partially offset by a 6% year-over-year decline in online marketing revenue, which fell to RMB16.0 billion ($2.21 billion), highlighting the pressures facing Baidu's traditional advertising business.

Baidu’s AI Cloud business, powered by the Qianfan platform, has emerged as a critical growth engine. The Qianfan platform offers an extensive library of models and advanced toolkits designed to train multimodal and reasoning systems. Its competitive pricing strategy has proven successful in attracting enterprises across diverse sectors, including manufacturing and finance. This strategic focus on AI is viewed as essential for Baidu to maintain its competitive edge in the rapidly evolving technology landscape.

The company's autonomous ride-hailing service, Apollo Go, continues to gain traction. In the first quarter of 2025, Apollo Go delivered over 1.4 million rides, marking an impressive 75% year-over-year increase. The expansion of Apollo Go into international markets, such as Dubai and Abu Dhabi, demonstrates Baidu's ambition to commercialize its self-driving technology on a global scale. This expansion is capital intensive, and its long-term profitability remains a key question for investors.

Despite the promising growth in AI and autonomous driving, Baidu faces significant financial challenges. The company reported a negative free cash flow of RMB8.9 billion ($1.23 billion) in the first quarter, primarily due to increased investments in its AI initiatives. This negative cash flow raises concerns about the sustainability of Baidu's investment strategy and its ability to maintain profitability in the short term.

A Bullish View: While the consensus focuses on the challenges in Baidu's advertising business and the high costs of AI investment, the market may be underestimating the long-term value of Baidu's data assets and its strategic position within the Chinese technology ecosystem.

Baidu's vast user base and extensive data collection, combined with its AI capabilities, create a powerful network effect that could generate significant future revenue streams beyond traditional advertising. Furthermore, the company's commitment to autonomous driving, while currently a cash drain, positions it to be a leader in a potentially transformative industry. The current valuation may not fully reflect these latent opportunities.