(Reuters) -Chinese search engine giant Baidu on Wednesday reported a drop in second quarter revenue as its core advertising business struggled amid China’s economic slowdown, offsetting strong growth in cloud services.
The company reported total revenue of 32.71 billion yuan ($4.56 billion) during the three months ended June 30, down 4% from the same period a year earlier. Analysts on average estimated second quarter revenue at 32.76 billion yuan, according to data compiled by LSEG.
On an adjusted basis, Baidu posted a profit of 13.58 yuan per American Depositary Share (ADS), beating expectations of 13.12 yuan.
Baidu’s U.S.-listed shares were up 1.3% in premarket trading.
Hit by a property market downturn, weak employment rates and choppy consumer demand, companies in China, the world’s second-largest economy, have reined in advertising spending to cut costs and protect their margins.
The squeeze has spilled over into Baidu, which relies heavily on advertising in its search engine. Its core online advertising business, which typically makes up 60% of overall company revenue, saw revenue decrease 15% to 16.2 billion yuan during the April-June quarter.
That eclipsed upbeat growth at the Beijing-based company’s AI cloud segment, which drove a 34% increase in Baidu’s non-online advertising business.
Baidu has invested heavily in artificial intelligence in recent years. Last month, it launched a redesigned search interface that it called the biggest overhaul in a decade.
It has also expanded AI services, recently launching MuseSteamer, an AI-powered video generator for businesses. It has also open-sourced a version of its flagship Ernie model as it competes with rivals including DeepSeek, which disrupted the global AI industry earlier this year with lower-cost models.
($1 = 7.1784 Chinese yuan renminbi)
(Reporting by Deborah Sophia in Bengaluru, Liam Mo in Beijing; Editing by Shilpi Majumdar and Kate Mayberry)
