Baidu Q4 revenue declines 2%, bets on AI for growth

Baidu’s fourth-quarter revenue declined 2% due to reduced ad spending, which was underlined by the slow Chinese economy. The company reported 34.1 billion yuan ($4.7 billion) in revenue.

According to Tuesday’s Q4 announcement, Baidu’s full-year revenue decreased 1% to 133 billion yuan, or approximately $18 billion.

On the other hand, the Chinese tech giant saw strong profit growth despite the dip in revenue. Net income during the December quarter increased by 100% as compared to the previous year and reached 5.1 billion yuan ($714 million). The company achieved a 17% increase in profits, which reached 23.7 billion yuan ($3.32 billion) throughout the entire year.

CEO Robin Li declared 2024 “a pivotal year” because the company plans to transition from “an internet-centric to an AI-first business.” According to Li, the company’s AI investments will “deliver more significant results in 2025.”

Baidu’s AI cloud growth offsets marketing revenue drop

The company’s core online marketing revenue decreased by 3% to reach 73 billion yuan during the year. However, the company’s AI cloud business’s Q4 growth increased by 26%. According to Baidu’s interim CFO Junjie, the AI cloud business helped offset “the softness in the online marketing business.”

On Tuesday, Baidu stock in the Hong Kong market closed at a 0.39% increase to HK$90.20. The stock market decreased 6.9% a day before, the most significant single-day decline in three months. According to a report by the South China Morning Post, shareholders were uncertain about Li’s absence from Monday’s meeting with Chinese President Xi.

The tech giant faces rising competition from other AI companies in the market. DeepSeek emerged as a notable Chinese startup after releasing its open-source and affordable large language models (LLMs) to the market.

The search platforms of Baidu and Tencent, along with other companies, have added DeepSeek’s models to their services.

Baidu introduced its ChatGPT-like chatbot Ernie Bot to the market in early 2023, becoming one of the earliest Chinese firms to do so. The increasing market competition led Baidu to announce its decision to end fee-based usage of Ernie Bot after a 17-month monetization period.

The company announced its decision to release the upcoming version of its Ernie LLM as an open-source model starting on June 30th while previously maintaining a closed-source AI policy.

Wang Kai from Morningstar, a senior analyst, said Baidu’s free chatbot will not diminish its revenue stream because the company also generates money from its AI cloud services. He suggested open-sourcing Ernie Bot would draw additional users to keep Baidu competitive in the market.