Baidu Inc (NASDAQ:BIDU) reported a mixed second quarter for fiscal year 2025. The company delivered $4.57 billion in revenue, which was just shy of the $4.6 billion market expectation, while earnings per share beat analyst estimates. The operating margin for Baidu Core improved to 17% on a non-GAAP basis, a bump from the prior quarter, but it is still a modest margin for a major technology company. The company’s heavy investment in its AI infrastructure continues to strain its financials, as evidenced by a negative free cash flow of approximately $653 million.
A significant concern for the company is the ongoing decline of its online marketing segment. This core business saw a 15% year-over-year decrease in Q2 revenue. This is a difficult trend, especially considering that Baidu is actively promoting its AI model, ERNIE, and other AI-powered tools as valuable for customers and a source of growth. This creates a seemingly contradictory narrative: the company’s core ad platform is not seeing significant gains despite the integration of AI, even as other AI-related businesses are generating increasing revenue. This is a dynamic that will need to be monitored closely.
A bright spot in the report was the performance of Apollo Go, Baidu’s autonomous ride-hailing service. The service continues to expand, providing over 2.2 million fully driverless rides in the quarter. It has also forged strategic partnerships with major global rideshare platforms, including Uber in Asia and Lyft in Europe, to accelerate its global expansion. Despite this progress, the path to profitability for Apollo Go remains uncertain.
For more details, key highlights, and commentary, check out the high-level earnings summary.
