Baidu’s AI surge offsets online ad slump in Q1 2025
AI Cloud momentum drives growth as traditional advertising revenues decline.
AI Cloud revenues surged 42% YoY, significantly outperforming the broader business.
Apollo Go autonomous rides soared 75% YoY to over 1.4 million rides.
Online marketing revenue fell 6% YoY, marking continued pressure on Baidu’s traditional advertising segment.
Baidu Core achieved an adjusted EBITDA margin of 26%, up from 24% in Q4 2024.
ERNIE multimodal and reasoning models launched, bolstering Baidu’s foundation-model ambitions.
Baidu, a bellwether for China’s digital economy, historically relied on its dominant position in online search advertising. Recently, the company has pivoted toward AI-powered products and cloud services, responding to intensified regulatory pressures and declining growth in traditional digital ads.
Baidu entered 2025 after mixed results in Q4 2024, when advertising revenues softened but AI Cloud showed robust growth, setting up critical expectations for a strategic shift towards AI.
Quarter in Focus
Baidu reported total revenue of RMB 32.5 billion ($4.47 billion) in Q1 2025, up just 3% YoY but down 5% sequentially, reflecting lingering softness in core ad markets. However, this modest overall growth masked sharp divergences beneath the surface.
Revenue from Baidu Core increased by 7% YoY to RMB 25.5 billion ($3.51 billion), driven primarily by its expanding AI Cloud business, which jumped 42% YoY. Meanwhile, traditional online marketing revenues declined by 6%, signaling continued structural shifts away from advertising towards diversified, technology-driven income streams.
The standout performance of AI Cloud indicates growing market traction for Baidu’s full-stack AI offerings, particularly its Qianfan Model-as-a-Service (MaaS) platform. Enhanced with broader model libraries and toolkits, Qianfan now supports multimodal and reasoning AI applications—key capabilities essential for complex use cases.
CEO Robin Li emphasized this transition:
The strong performance of our AI Cloud business underscores the growing market recognition of our distinctive strength in providing full-stack AI products and solutions.
On the tech front, Baidu released ERNIE 4.5 and ERNIE X1, its first multimodal and reasoning foundation models, in March. Just a month later, ERNIE 4.5 Turbo and ERNIE X1 Turbo debuted, offering improved performance and significantly lower pricing—a clear bid to scale AI-native application development.
Meanwhile, PaddlePaddle 3.0, Baidu’s upgraded deep learning framework, went live in April, enhancing training support for large-scale models.
The company's investments in autonomous driving technology also bore fruit, with Apollo Go completing 1.4 million rides in Q1, a 75% increase YoY. Baidu expanded internationally, launching autonomous ride-hailing services in Dubai and Abu Dhabi, marking its first significant foray beyond Chinese borders.
Profitability showed mixed signals. Non-GAAP operating income for Baidu Core reached RMB 4.9 billion ($671 million), translating to a healthy non-GAAP operating margin of 19%. Adjusted EBITDA for Baidu Core was RMB 6.7 billion ($925 million), achieving a robust margin improvement to 26%, up from 24% the previous quarter.
However, Baidu's broader financial picture revealed increased operational expenses. Selling, general, and administrative costs rose 10%, driven by higher promotional and channel spending, while R&D expenditures declined 15% due to decreased personnel-related expenses.
Significantly, Baidu’s total other income surged 260% YoY to RMB 4.5 billion ($618 million), driven by gains from investments and valuation adjustments. This financial buffer partially offset higher operational costs and supported net income attributable to Baidu, which jumped 42% YoY to RMB 7.7 billion ($1.06 billion).
Conclusion
Baidu’s Q1 2025 earnings highlight a strategic pivot toward AI and autonomous driving, balancing declining traditional ad revenues with rapid AI-driven expansion.
This shift positions Baidu prominently within China’s evolving digital economy landscape but requires sustained heavy investment and careful navigation of regulatory challenges globally.
Sources: Baidu Q1 2025 earnings press release, May 2025.