Baidu in Correction Territory Ahead of Earnings: What to Expect from BIDU

Baidu Inc. (NASDAQ: BIDU) finds itself in correction territory as it approaches its Q3 2025 earnings release, scheduled this morning. Baidu's stock is down 12.6% in the last five days, with markets uneasy ahead of the drop of financials.

Analysts anticipate that Baidu will report an earnings per share (EPS) of 8.37 in its upcoming earnings report, a notable decline from 16.6 EPS recorded in the same quarter last year. Projected revenue is estimated at approximately 30.89 billion, reflecting a year-over-year sales drop of 7.94%. These figures paint a concerning picture of Baidu's profitability in the short term, potentially contributing to the current stock pressure.

Despite the earnings headwinds, Baidu has been making significant strides in key growth areas. The launch of ERNIE 5.0, an advanced omni-modal foundation model, during the Baidu World 2025 conference, showcases the company's commitment to AI innovation. The model's accessibility through ERNIE Bot and Baidu AI Cloud's MaaS Qianfan platform could drive revenue growth in the long run.

Furthermore, Baidu's autonomous ride-hailing service, Apollo Go, continues to expand its reach. With over 17 million rides completed as of October 31st, and plans to deploy hundreds of autonomous vehicles in Abu Dhabi by 2026, Baidu is solidifying its position in the autonomous driving market. Strategic partnerships, such as the collaboration with Lyft to deploy autonomous vehicles across Europe, further enhance its global expansion prospects.

In the second quarter of 2025, Baidu reported total revenues of RMB32.7 billion ($4.57 billion), a 4% year-over-year decline. However, the company's AI Cloud business demonstrated robust growth, with non-online marketing revenue exceeding RMB10 billion for the first time, up 34% year-over-year. This growth reflects Baidu's successful pivot towards AI-driven services amid challenges in its traditional advertising sector.

However, not all news has been positive. The resignation of Jing Kun, CEO of Baidu's smart device subsidiary Xiaodu Technology, in September, has introduced uncertainty regarding the future direction of Baidu's smart device initiatives. This leadership change occurred shortly before Baidu's annual technology event, raising concerns about potential disruptions in the company's strategic plans.

While most analysts remain cautiously optimistic, some warn that Baidu's heavy investment in AI and autonomous driving may take longer to yield substantial returns than initially anticipated. The competitive landscape in China's tech sector is fierce, and Baidu faces intense competition from rivals such as Alibaba and Tencent. Moreover, regulatory pressures and macroeconomic uncertainties in China could further dampen Baidu's growth prospects.

While the market seems focused on the EPS decline and leadership changes, a different perspective emerges when considering Baidu's long-term vision. The company is essentially building the infrastructure for the future of AI in China. ERNIE 5.0 isn't just another AI model; it's a platform upon which countless applications can be built.

Similarly, Apollo Go isn't just a ride-hailing service; it's a testing ground and data-gathering operation that will give Baidu an unassailable lead in autonomous driving. The current earnings dip may be a necessary sacrifice to secure dominance in these crucial sectors. The market may be underestimating the long-term strategic value of these investments, focusing instead on short-term profitability metrics.

Despite the current correction, some analysts remain bullish on Baidu's prospects. Jefferies Financial Group raised its price target for Baidu's stock from $108.00 to $157.00 in September, maintaining a “buy” rating. Up 40% YTD leading in, BIDU is below it's recent support at $120, but firmly outperforming broader markets.