Baidu sales fall for third straight quarter as AI lags

Baidu, posted a revenue decline for the third straight quarter, highlighting weakness in its core advertising and AI businesses.

For the December quarter, revenue fell 4% to 32.74 billion yuan (US$4.8 billion), slightly above the average analyst estimate of 32.66 billion yuan (US$4.7 billion).

Baidu’s core AI-powered business, including its cloud infrastructure, AI applications, and robotaxi division, generated 11 billion yuan (US$1.6 billion), representing 43% of its general business revenue.

Despite ongoing challenges in its ad segment, which remains its main revenue source, weak consumer demand and a prolonged property-sector crisis have affected ad spending.

Baidu has invested heavily in AI, seeking to capture enterprise demand amid a competitive ad market.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Baidu’s AI growth is a race against its legacy ad business

Legacy Business, mainly traditional advertising across Search, Feed, and other properties, brought in 12.3 billion yuan in the fourth quarter 1.
AI-powered business, covering cloud infrastructure, AI applications, and the robotaxi division, nearly matched that at 11.3 billion yuan in the same period 1.
Starting in the quarter ended Dec. 31, 2025, the company changed its reporting by redefining “Baidu Core” as “Baidu General Business” and listing “Baidu Core AI-powered Business,” “Legacy Business,” and “Others” under that structure 1.
Across the full year, AI-powered business expanded 48%, helped by a 301% jump in AI-native marketing services, which are ad products built around AI 1.

Intense local competition is pushing China’s tech giants toward open-source

Domestic rivalry now shapes the AI roadmap as much as the shift away from ads.
Ernie has faced slow adoption amid heavy competition, including the Chinese startup DeepSeek’s R1 model 2.
In response, Baidu plans to open-source its next-generation models, which means releasing the underlying code and weights for others to use and build on, despite a long preference for proprietary technology 2.
The move fits a wider pattern in China where hard local competition pushes incumbents toward open-source to grow ecosystems and keep momentum.