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Baidu Pivots to AI Cloud and Autonomous Driving Amid Ad Challenges
27 Aug
Summary
- Baidu's core advertising business declined 15% year-over-year in Q2 2025
- Non-advertising revenue, including AI Cloud and autonomous driving, now accounts for 40% of Baidu Core
- Benchmark analyst lowers price target, but maintains Buy rating on Baidu
As of August 27, 2025, Baidu, the Chinese tech giant, is navigating a period of transition. The company's core advertising business has witnessed a 15% year-over-year revenue decline in the second quarter of 2025, reflecting the challenges it is currently facing.
Despite these headwinds, Baidu's non-advertising revenue continues to gain traction, now accounting for an estimated 40% of Baidu Core. This growth is driven by strong performance in the company's AI Cloud division, which expanded 34% year-over-year in the first half of 2025, as well as subscription-based revenue streams that are providing improved stability.
Furthermore, Baidu's autonomous driving service, Apollo Go, is demonstrating impressive growth, with fully driverless rides up 148% year-over-year and global expansion gaining pace through partnerships with Uber and Lyft. While the combination of soft ad trends and continued AI investment may weigh on margins in the near term, Baidu's management is focused on cost efficiency and disciplined execution to mitigate the impacts.
Benchmark analyst Fawne Jiang has lowered Baidu's price target to $115.00 (from $120.00) while maintaining a Buy rating on the stock. The analyst believes that Baidu's pivot toward a more diversified, innovation-led model, with the upcoming launch of ERNIE 5.0 and rising engagement with AI-powered search, reinforces the company's long-term potential, though execution remains key in this evolving landscape.
