By Liam Mo and Zaheer Kachwala
BEIJING (Reuters) -Chinese search engine Baidu reported a 7% fall in quarterly revenue on Tuesday, dragged down by its advertising business amid sluggish demand, although its cloud division posted strong growth. The company reported total revenue of 31.17 billion yuan ($4.38 billion)，compared with estimates of 30.7 billion yuan, according to data compiled by LSEG.
The company’s U.S.-listed shares fell 2.5% in early trading.
Baidu is navigating difficult economic conditions in China, marked by a crisis-hit property sector and a trade war with the U.S. that have dampened consumer spending, prompting companies and advertisers to curb tech budgets.
HIGHLY EXPOSED TO DOWNTURNS IN AD SPENDING
The company is also highly exposed to downturns in ad spending as its core search engine platform is heavily dependent on marketing and ads.
Its cloud business, however, remains a bright spot as Baidu’s artificial intelligence push has attracted companies looking to develop AI agents and utilize large language models in the hopes of boosting growth.
Baidu reported revenue from its online advertising business of 15.3 billion yuan in the third quarter, down 18% from a year earlier. AI cloud revenue reached 6.2 billion yuan for the quarter, up 21%, CEO Robin Li said on a post-earnings call.
The company reported a net loss of 11 billion yuan, compared with a profit a year earlier, largely due to asset write-downs.
Baidu is also heavily focusing on integrating artificial intelligence into its search platform, looking to draw users and establish itself as the dominant force for AI search in China.
The AI market in China is also fiercely competitive with rivals Alibaba and DeepSeek vying for customer and enterprise business.
AI A KEY DRIVER OF FUTURE GROWTH
Despite the intensifying competition, Baidu said it will maintain elevated spending on AI, viewing the technology as a key driver of future growth, though it promised to invest with discipline to preserve capital efficiency.
Baidu said it has invested more than 100 billion yuan in AI since launching its first chatbot service in early 2023.
($1 = 7.1119 Chinese yuan renminbi)
(Reporting by Zaheer Kachwala in Bengaluru, and Liam Mo in Beijing; Editing by Susan Fenton and Conor Humphries)
