Baidu Grapples with AI-Driven Search Monetization Challenges

As of August 1, 2025, the Chinese tech giant Baidu is grappling with significant challenges in monetizing its AI-driven search results. According to a recent report, AI-generated search queries now account for an estimated 50% of Baidu's total search volume, up from 35% in April.

This shift has had a significant impact on the company's financial performance. Tiger Securities, a research firm, has maintained its "Buy" rating on Baidu's stock but has lowered the price target from $110 to $100. The firm has revised its revenue and profit estimates downward, citing the ongoing drag from the AI-driven changes in search monetization.

Specifically, the report indicates that Baidu's core advertising revenue is expected to decline by 18% year-over-year in the second and third quarters of 2025. Additionally, the company's core non-GAAP operating income is forecast to drop by 45% and 44% year-over-year, respectively, during the same period.

The challenges are not limited to Baidu's core search business. The consolidation of YY, a former top advertising client, is also expected to weigh on the company's advertising revenue. However, the report notes that Baidu's cloud revenue is expected to grow by 25% year-over-year in the second quarter, and the firm has raised its estimate for other revenue to reflect the YY consolidation.

Despite these headwinds, Baidu remains a prominent player in the AI and search engine space in China. The company's investments in artificial intelligence technology and its position as the dominant search engine within the country continue to make it an intriguing investment opportunity for some investors.