Baidu Q2 2025 Earnings Report

Baidu EPS Results

• Actual EPS: N/A
• Consensus EPS: $2.05
• Beat/Miss: N/A
• One Year Ago EPS: $21.02

Baidu Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $33.58 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Baidu Announcement Details

• Quarter: Q2 2025
• Date: 8/20/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 20, 2025
• Conference Call Time: 8:00AM ET

Baidu (NASDAQ:BIDU) engages in the provision of internet search services in China. It operates through two segments: Baidu Core and iQIYI. The company offers Baidu App to access search, feed, and other services using mobile devices; Baidu Search to access its search and other services; Baidu Feed that provides users with personalized timeline based on their demographics and interests; Baidu Health that helps users to find the doctor and hospital for healthcare needs; and Haokan, a short video app. It also provides Baidu Knows, an online community where users can ask questions to other users; Baidu Wiki; Baidu Experience; Baidu Post; ERNIE Bot, conversational AI bot; Baidu Wenku; Baidu Maps, a voice-enabled mobile app that provides travel-related services; Baidu Drive; Baijiahao; and DuerOS, a smart assistant platform. In addition, it offers online marketing services, which include pay for performance, an auction-based services that allow customers to bid for priority placement of paid sponsored links and reach users who search for information related to their products or services; other marketing services that include display-based marketing services and other online marketing services based on performance criteria other than cost per click; mobile ecosystem, a portfolio of apps, including Baidu App, Haokan, and Baidu Post; various cloud services and solutions, such as platform as a service, software as a service, and infrastructure as a service; self-driving services, including maps, automated valet parking, navigation pilot, electric vehicles, and robotaxi fleets, as well as Xiaodu smart devices. Further, the company provides iQIYI, an online entertainment service, including original and licensed content; other video content and membership; and online advertising services. It has strategic partnership with Zhejiang Geely Holding Group. The company was formerly known as Baidu.com, Inc. Baidu, Inc. was incorporated in 2000 and is headquartered in Beijing, China.

Baidu Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Baidu Core's non-online marketing revenue exceeded RMB10 billion for the first time, up 34% year over year, helping to offset headwinds in online marketing.
• Positive Sentiment: AI Cloud business grew 27% year over year to RMB6.5 billion in revenue, with non-GAAP operating profit also rising, signaling improved profitability.
• Negative Sentiment: Baidu Core's online marketing revenue declined 15% year over year, contributing to a 4% overall revenue drop and expected near-term margin pressure.
• Positive Sentiment: Apollo Go delivered over 2.2 million driverless rides in Q2, up 148% year over year, and secured partnerships with Uber and Lyft for international expansion.
• Neutral Sentiment: AI-powered search now appears on 64% of mobile result pages with richer multimedia responses, boosting MAU by 5% year-over-year, though large-scale monetization remains in early testing.

Presentation

[Operator]

Hello, and thank you for standing by for Baidu's Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

[Operator]

I now like to turn the meeting over to your host for today's conference, Joanne Lin, Baidu's Director of Investor Relations.

[Juan Lin, Director, Investor Relations at Baidu]

Hello, everyone, and welcome to Baidu's second quarter twenty twenty five earnings conference call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website as well as on newswire services. On the call today, we have Robin Li, our Co Founder and CEO Ruiz Rong Luo, our EVP in charge of Baidu Mobile Ecosystem Group, MEG Douxian, our EVP in charge of Baidu AI Cloud Group, ACG and Henry Haijian He, our CFO. After our prepared remarks, we will hold a Q and A session. Please note that the discussion today will contain forward looking statements made under the Safe Harbor provisions of The U.

[Juan Lin, Director, Investor Relations at Baidu]

S. Credit Security Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other filings with the SEC and Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward looking statements, except as required under applicable law.

[Juan Lin, Director, Investor Relations at Baidu]

Our earnings press release and this call include discussions of certain unaudited non GAAP financial measures. Our press release contains a reconciliation of the unaudited non GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Hello, everyone. In Q2, Baidu Core's total revenue was billion. Our AI cloud business continued to gain momentum, growing 27% year over year to RMB6.5 billion. Notably, Baidu Core's non online marketing revenue exceeded RMB10 billion for the first time, that's up 34% year over year. This performance helped offset the near term headwinds in our online marketing business.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

This year marks Baidu's twentieth anniversary as public company. Over the past two decades, we remained grounded in our belief in technology and innovation. Today, technological advancement is unfolding at an unprecedented pace. We've embraced the mega trend with open mind, experimenting boldly, adapting quickly, and engaging deeply with AI frontiers. Amid rapid evolution, we've identified and doubled down on a few directions we believe hold the greatest long term value and are deepening our efforts with increasing clarity and confidence.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Foundation model development remains a key focus area where we are actively exploring the frontier of foundation model research and pushing the boundaries of AI capabilities. With an application driven approach, we steer earnings iteration toward areas with real world application value, such as the fundamental AI transformation of Baidu search and our industry leading digital human technology. Take digital human as a prime example, which represents one of the best applications of our earning models. This quarter powered by EARNIE, our digital human technology reached new levels of realism and capabilities, matching or even exceeding human performance in certain scenarios. A standout case was a live stream featuring the digital human of Luoyunhao, a top influencer in China.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

The seven hour live stream generated tens of millions in GMV, fully powered by Ernie series models. Ernie 4.5 Turbo generated the complete script including dialogue, tone and action cues closely mirroring the real person's communication style. Our multi model capabilities delivered industry leading visual realism with nuanced facial expressions, gestures, and body movements that responded naturally to conversation flow in real time, achieving next level performance that sets new standards in digital human technology. Beyond this flagship case, digital humans are empowering our broader merchant base with performance that already surpasses human live streaming hosts in many scenarios. Going forward, we will continue accelerating foundation model iteration, strategically focusing our efforts on areas with application value where we can maintain our most competitive capabilities.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Beyond the model capabilities, our unique four layer end to end AI architecture has become a core competitive advantage and represents a key focus in our AI cloud bins, where our full stack AI capabilities are driving healthy growth. At the infrastructure layer, we achieved a critical system engineering breakthrough this quarter by completing the large scale stable deployment of pre fill decode separation architecture. This breakthrough significantly improves inference concurrency and resource utilization while substantially reducing inference cost. The achievement was made possible by the end to end optimization enabled by our unique four layer AI architecture, spanning infrastructure, framework, models and applications, which allows us to coordinate improvements across all layers. At the same time, each layer remains open, giving customers flexible choices between Baidu's proprietary and third party options.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

As a result, we are continuously improving the cost effectiveness of our AI cloud products and solutions, reinforcing our position as China's top tier cloud provider in the AI era. Meanwhile, our industry leading mass platform, Xianfeng, continue to evolve to better support enterprise clients in building models and facilitating AI application development. Qianfeng features a comprehensive model library covering nearly all mainstream foundation models on the market. This quarter, we further expanded the library with a range of new models, including our newly open sourced Earning 4.5 series, additional third party multi model models and other leading options, enabling greater flexibility across enterprise use cases. Leveraging our breakthrough in cloud infrastructure, Qianfan delivers enhanced stability, higher concurrency and lower inference costs when running models, maintaining our superior price performance.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

On the tool chain front, tool chains are among the most comprehensive with industry leading reinforcement learning and post training tools for model development. In Q2, Xianpai was further enhanced to support a wider range of AI tools and functions that can be called via MCP or APIs, including Baidu's proprietary capabilities such as Baidu AI Search, Baidu Wiki, Baidu Maps, as well as selected third party capabilities like payment services. These enhancements help simplify AI application development and continue to solidify Qianfan's leadership as one of China's top mass platform. Home striving remains one of the most promising areas we've long invested in, which represents a critical frontier in physical world AI. Following successful validation of our business model at the end of last year, Apollo Go is now scaling rapidly.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

In Q2, Apollo Go provided over 2,200,000 fully driverless rides to the public. That's up 148 year over year, marking our strongest quarterly growth in two years. Also, Apollo Global expansion has gained solid momentum, highlighted by two strategic partnerships with leading global ride hailing platforms. In July, we announced a multi year strategic partnership with Uber. Under this partnership, thousands of Apollo goals fully autonomous vehicles will be deployed on the Uber platform across multiple international markets, with initial rollouts planned for Asia and The Middle East.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

This milestone was followed by our partnership with Lyft in August, which will also bring thousands of our fully autonomous vehicles to key European markets through the Lyft platform, starting with Germany and United Kingdom and scaling across Europe over time. Our expansion into international market is built on a strong foundation. In China, we have already achieved positive unit economics in markets where ride fares are much lower than those in major overseas markets. That's why these global partnerships are both logical and strategic, positioning us to capture greater value in higher fare markets while scaling efficiently. Our partners' global market presence, leveraging our partners' local market presence, we can accelerate market entry across different continents and achieve faster deployment, while maintaining a cost efficient asset light business model.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

In markets we've already entered, we continue to making encouraging progress. In Hong Kong, one of the world's most complex right hand drive cities, We recently expanded our testing coverage to include Dongchong and Southern District, advancing our open node testing into more complex urban scenarios across both commercial and residential areas. Also, we further strengthened our presence in The Middle East. In Dubai and Abu Dhabi, we started open road testing in designated areas in August. Notably, Apollo Go leads the world in right hand drive robot taxi market.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

This is a space where hardly any companies of our kind have entered, and we've made by far the most progress.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

The rapid progress we're making in Hong Kong really shows our global leadership.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

It's proof of how adaptable our technology is and how mature our operations have become across all kinds of environments. Our experience there provide us valuable insights for entering other right hand drive markets, strengthening our confidence in scaling Apollo Go globally. With solid progress quarter by quarter, we are more confident than ever in Apollo Go's international potential. As China's largest autonomous ride hailing service provider and a global leader in this space, ApolloGo continues industry leading technology. ApolloGo combines industry leading technology, extensive operational experience, and extraordinary safety records to bring safe, comfortable, and affordable autonomous ride hailing services to more markets worldwide than anyone else.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

In our mobile ecosystem, transforming our products with AI remains a strategic priority, especially our legacy consumer facing product Baidu Search. Baidu is at the forefront of applying AI to transform search globally. Rather than simply inserting AI summaries into search results, we are fundamentally revolutionizing the search experience by completely replacing static textual hyperlinks with intelligent, structured, structured, and multimodal first AI generated responses. These responses start with relevant multimodal content right at the top, making complex information more to to the step. We half the percent of mobile search result pages by the June, We up from 35% in April By July, 64% of mobile search result pages contained AI generated content, presented in a structured and multi model first format marking the broader rollout of our innovative AI search experience This AI transformation reached over 90% of Baidu App's monthly active users in July, with over 60% of search result pages starting with rich media elements such as images or videos As we advance our AI transformation, the expanding content ecosystem across Baidu provides meaningful support, leveraging ongoing progress in general AI and multi model capabilities, Baidu's AI generated content has grown significantly in both sales and quality, providing more high quality content for search results AI generated multi model content in particular has seen rapid expansion For example, daily AI GC video generation reached millions of units starting from May, and daily AIGC video distribution within Baidu App has grown rapidly We're delighted to see sustained improvements in user metrics In June, Baidu App's MAU reached seven thirty five million, representing a 5% year over year growth The daily average time spent per user in Q2 increased by 4% year over year.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Building on search ability to satisfy user intent, we are expanding its boundaries from providing smart answers to completing tasks and connecting real world services For instance, our agents engage users in multi round conversations, connect them with relevant service providers when needed, and facilitate end to end task completion across multiple verticals We believe this represents a meaningful expansion of what search can achieve, enabling users to seamlessly move from information to action. Now let me review the key highlights of each business sector this quarter. AI cloud revenue reached RMB 6,500,000,000.0 in Q2, up 27% year over year, with non GAAP operating profit achieving year over year growth. The growth was primarily driven by the growing demand for our highly cost business company. Model We to signaling a healthier very and more sustainable revenue structure On the infrastructure layer, we continuously enhanced our resource management capabilities, achieving higher and higher infrastructure utilization Through ongoing end to end optimization across our four layer AI architecture, combined with increasingly refined and efficient GPU resource management capabilities, our large scale key clusters have achieved over 90% utilization rates recently for key tasks. Our enhanced capabilities allow us to deliver better performance at lower costs and provide more competitive pricing for enterprise customers, establishing a virtuous circle where our growing customer base and diversified workloads further improve resource utilization, reinforcing our sustainable revenue model. In Q2, our customer portfolio continued to improve. Existing clients deepened the collaboration and increased spending, while mid tier enterprise clients demonstrated strong growth momentum. Additionally, this quarter marked several strategic partnerships with prominent companies across key verticals, including a leading lifestyle platform and a top tier gaming company in China.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

In the embodied AI industry, we have partnered with 20 companies cumulatively, including Shenzhen Institute of Artificial Intelligence and Robotics for Society. In autonomous driving, we established a partnership with Black Sesame Technologies on AI cloud infrastructure. This partnership reflects the strong recognition of Baidu AI Cloud and affirm our competitive positioning in China's AI cloud market. Building on our full stack AI capabilities, we are not only serving enterprise clients, but also driving internal productivity and mass market AI adoption at the application layer Internally, we've widely adopted our AI coding assistant for developers CallMate's capabilities continue to improve, enabling more agentic and efficient development workflows In July, AI contributed to generating over 45% of our new code, with our developers providing oversight and approval. This has significantly boosted our engineering productivity and meaningfully enhanced our internal R and D efficiency.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Externally, Meowda extends this AI development capabilities to the broader community. Following Meowda's official launch last quarter, we're now delivering true no code capabilities that enable users to create applications from mini games to utility tools and websites through simple natural language conversations with AI. No programming expertise required. As of July, users have created around 200,000 applications on Meida, all built completely without writing a single line of code. We are continuously enhancing long code capabilities as we work toward our mission to democratize AI and empower everyone to innovate.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Moving to intelligent driving. In Q2, Apollo Do provided over 2,200,000 fully driverless rides to the public, up 148% year over year. As of August, cumulative rise provided to the public have surpassed million, underscoring the scale and maturity of our fully driverless operations. As of June, Apollo Gold's global footprint spans 16 cities. To date, our fleets have accumulated over 200,000,000 autonomous kilometers with an outstanding safety record, which is a testament to the ability and safety of our autonomous driving technology.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Beyond global partnerships like Uber and Lyft, we are accelerating the rollout of asset light business models domestically. This quarter, we established new partnerships with HelloRide and T3 Mobility, expanding our collaborative network with leading mobility service providers. Additionally, building on the partnership announced last quarter, Apollo Go's fully autonomous vehicle rental service officially went live on the CarInc app, offering users a new access point to our Apollo Gold fleet. These partnerships enable us to rapidly scale our services while leveraging leading We leading in pleased deliver accelerate our global expansion and capture significant strong value across multiple markets worldwide. For mobile ecosystem, we continue accelerating AI transformation of search in Q2. In today's highly competitive mobile Internet market, where new products and technologies are emerging and evolving faster than ever, user needs and behaviors are constantly shifting, making it essential for us to keep operating at a rapid pace While our AI transformation is progressing rapidly, it is still in the early stages, with considerable room for optimization before reaching its full potential And we are not yet at the stage for large scale monetization Against this backdrop, we began prudent small scale monetization testing in Q2, with user experience remaining our top priority Early results have been satisfying For example, some queries that we previously difficult to monetize are now showing potential. Agents maintained strong performance in driving better conversion efficiency, further validating our effectiveness. In Q2, revenue generated by our agents for advertisers grew 50% year over, quarter over quarter, contributing 13% of Baidu Core's online marketing revenue.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

That's up from 9% in Q2 in Q1. In parallel, Digital Human gained traction as an innovative monetization avenue for our advertising wins, particularly through AI powered live streaming. We've seen steady growth in digital human adoption over recent quarters. Beyond serving live streaming hosts for merchants, they were being adopted at growing scale in healthcare, legal services, education and automotive sectors More advertisers recognize their value in boosting conversion performance through real time user interaction and round the clock availability, leading to increased ad budget allocation toward digital humans In Q2, revenue generated by digital human increased by 55% quarter over quarter, contributing 3% of Baidu Core's online marketing revenue. To sum up, as we look ahead, Baidu will stay anchored in our long term mission and move forward with greater focus and resolve as we continue to translate AI innovation into real world value.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Before we move to Q and A, I'd like to take a moment to welcome Henry, Mr. Haijinghe, who recently joined us as Chief Financial Officer. With that, let me turn the call over to Henry to go through the financial results.

[Haijian He, CFO at Baidu]

Thank you, Robin, and hello, everyone. I'm delighted to join the Baidu team and looking forward to working with all of you. Now let me walk through the details of our second quarter financial results. Total revenues were RMB22.7 billion, decreasing 4% year over year. Revenue from Baidu Core was RMB26.3 billion, decreasing 2% year over year.

[Haijian He, CFO at Baidu]

Baidu Core's online marketing revenue was RMB16.2 billion, decreasing 15% year over year. Baidu Core's non online marketing revenue was RMB10 billion, up 34% year over year, primarily driven by the boost of AI cloud business. Within Baidu Core's non online marketing revenue, AI cloud revenue was RMB6.5 billion, increased by 27% year over year. Revenue from ITE was RMB6.6 billion, decreasing 11% year over year. Cost of revenues was RMB18.4 billion, increasing 12% year over year, primarily due to an increase in costs related to AI cloud business and content costs.

[Haijian He, CFO at Baidu]

Operating expenses were RMB11.1 billion, decreasing 4% year over year, primarily due to a decrease in personnel related expenses, partially offset by the increase in channel spending expenses. Baidu Core's operating expenses was RMB9.7 billion, decreasing 5% year over year. Baidu Core SG and A expenses was RMB5 billion, increasing 6% year over year. SG and A accounted for 19% of Baidu Core's revenue in the quarter, compared to 18% in the same period of last year. Baidu Core R and D expenses were RMB4.7 billion, decreasing 14% year over year.

[Haijian He, CFO at Baidu]

R and D accounted for 18% of Baidu Core's revenue in this quarter compared to 20% in the same period of last year. Operating income was RMB3.3 billion. Baidu Core's operating income was RMB3.3 billion and Baidu Core's operating margin was 13%. Non GAAP operating income was RMB4.4 billion. Non GAAP Baidu Core operating income was RMB4.4 billion.

[Haijian He, CFO at Baidu]

And the non GAAP Baidu Core operating margin was 17%. Total other income, net, was RMB4.9 billion, increasing five thirty one percent year over year, primarily due to an increase in the fair value gain and a pickup of earnings from long term investments, partially offset by increase in the net foreign exchange loss arising from exchange rate fluctuation between RMB and U. S. Dollar. Income tax expenses was RMB881 million compared to RMB1.1 billion in the same period of last year.

[Haijian He, CFO at Baidu]

Net income attributed to Baidu was RMB7.3 billion and diluted earnings per ADS was RMB20.35. Net income attributed to Baidu Core was RMB7.4 billion, and the net margin for Baidu Core was 28%. Non GAAP net income attributed to Baidu was RMB4.8 billion. Non GAAP diluted earnings per ADS was RMB13.58. Non GAAP net income attributed to Baidu Core was RMB4.8 billion and the non GAAP net margin for Baidu Core was 18%.

[Haijian He, CFO at Baidu]

As of 06/30/2025, cash, cash equivalents, restricted cash and short term investments were RMB124.2 billion. And cash, cash equivalents, restricted cash and short term investments, excluding iQIYI, were RMB119.9 billion. As of 06/30/2025, cash equivalents, short term investments and the long term time deposits and head to maturity investments for Baidu Core were RMB229.7 billion. Free cash flow was negative RMB4.7 billion and free cash flow excluding iQIYI was negative RMB4.6 billion, primarily due to the increase of investment in AI business. We define net cash position as total cash, cash equivalents, restricted cash, short term investments, net, long term time deposits, held to maturity investments and others less total loans, convertible senior notes and the notes payable.

[Haijian He, CFO at Baidu]

As of 06/30/2025, net cash position for Baidu was RMB155.1 billion. Baidu Core has approximately 31,000 employees as of 06/30/2025. With that, operator, let's now open up the call for the questions. Thank you.

[Operator]

Ladies and gentlemen, we will now begin with the question and answer session. Your first question comes from Alicia Yap, Citigroup. Please go ahead.

[Alicia Yap, Equity Research Analyst at Citigroup]

Thank you. Good evening, management. Thanks for taking my questions. And also welcome, Henry, as the new CFO. I have a question on your AI model.

[Alicia Yap, Equity Research Analyst at Citigroup]

With the rapid model iteration, how do you view the current landscape? How do you position Ernie strategically in the market and its alignment with Baidu's broader business strategy? And we also have heard that we are planning to launch ERNIE five point o. Could management share plans for ERNIE in the second half this year and also the key focus area for this next version? Thank you.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Hi, Alicia. This is Robin. Let me first give you our take on the current landscape. The the pace of model iteration is faster than ever. We see multiple new models are launched almost every week, and each new generation is, is stronger than the last.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

In recent months, we've seen models grow more capable reaching a stage where their, deeper logic and greater creativity now enable them to propose entirely new solutions we've never seen before. And I believe this is this kind of innovative, ability, is getting stronger. Meanwhile, the foundation model landscape is becoming more diverse and clearly not a one size fits all situation. Especially in China, similar to EVs, you always have a lot of choices. Different models excel at different tasks.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Some are stronger in reasoning, some, in coding, and some in multi modality. So we will continue to see a market where multiple models coexist at very reasonable prices. And the value creation will happen at the application level more than at the model level. Against this backdrop, Ernie's positioning is clear. We take an application driven approach to innovation.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

In fact, we've taken this approach since the launch of Ernie, first launch of Ernie more than two years ago. Rather than spreading efforts, across every possible direction, we stay focused on, the strategic, the important areas, that's valuable to us. We think we can deliver meaningful impact and assisting our leadership. For example, as we advance AI search transformation, we direct, our model capabilities towards generating and selecting multimodal search results. And, our users love it.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Our, cloud customers also love it. They're paying, for our search API for the purpose of, RAC in their machine AI applications. Another, another example is our, hyper realistic, digital human technology, which now matches and even exceeds, real human performance in the live streaming e commerce scenario. Our model is just better at convincing people to buy. Cloud customers are paying for this capabilities too.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

As we move into the second half and beyond, we will, continue this acceleration. We're currently working on the next, flagship version of Earning with, significant improvements across key, capabilities and expect to launch it as soon as we are ready. In the meantime, we will continue to roll out iterations and updates, on an ongoing basis, for our existing existing models. We also keep monitoring industry developments to ensure our technology roadmap, captures the most promising market opportunities. Thank you.

[Alicia Yap, Equity Research Analyst at Citigroup]

Thank you.

[Operator]

Thank you. Your next question comes from Alex Yao from JPMorgan. Please go ahead.

[Alex Yao, Co-Head of Asia Technology, Media & Telecommunications at JP Morgan]

Thank you, management, for taking my question. And Henry, all the best to your new role. So here is my question. How is the AI powered search upgrade progressing in Q2 and Q3? Could management share updates updated metrics on how user behavior is shifting with the new experience?

[Alex Yao, Co-Head of Asia Technology, Media & Telecommunications at JP Morgan]

How should we think about, the end game of AI search in terms of product format, user reach, and lastly, commercial potential? Thank you.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

Hi, Alex. Thank you so much This is Julius. I think Q2 will continue to accelerate AI search transformations. And as Robin has just mentioned, Baidu leads globally in using AI to transfer search, and we are maybe one of the most aggressive in revolutionize the search.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

And we're probably the only company that has completely replaced the traditional links with intelligent AI answers that start with the multi model content. This creates a more efficient, intuitive, like, the use experiences. And unlike the current AI answers or chatbots that remains mostly still as the tech space. Our focus remains delivering the better user experiences beyond the MAUs and the time spent improvements. The user exposed to AI search now shows higher UV and retention, indicating our next generation search experience is driving the stronger users' satisfactions.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

As for the end game of AI search, I think still open question, but our part is quite clear. We are fundamentally restructuring search. First, instead of just indexing or leaking to information, we are delivering the intelligent AI generating answers that began with the relevant content. Multi model content now appears more at the very top of AI answers, with increasing portion being AI generated. As high quality AIGC content expands our platform, it directly enrich the search results and broadens what we can offer to the users.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

And meanwhile, AI is also empowering the people across our ecosystem, from users, content creators, to advertisers, and service providers to produce the more and better content. This includes enabling those who were now traditional content creators to participate and making our whole ecosystems more vibrant. And for example, in July, we have launched our Muse Steamer, our proprietary video generation model to facilitate AIGC video creation at scale. And the latest version of Muse Steamer with significant update will be launched tomorrow afternoon. And just stay tuned, we will moving fast.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

And second, we are also evolving from fighting information to completing tasks and connecting users with the real world services. For example, through the MCPs, we have connected search to external capabilities, like our British Museum and Metropolitan Museum MCPs that can provide exhibition explanations right in search. For more complicated needs, our agents help understand the users intent and connect them with the services provide providers when the offline services are required. What we have done today has only the beginning and such will continue advancing in capabilities and reach over time. In the third place, we're also working towards the shift from the general results to personalized pages.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

While AI search understands the individual contacts, memories, and preference to generate the tailor made responses, delivering a more intelligent and relevant and personalized answers while better matching the users with the tools and services they need. And looking ahead, we will continue to accelerate AI transformation, which in the short term will weigh on our revenue. But over time, we believe that AI search will unlock exciting commercial possibilities and the upside is substantial. Thank you for your question, Alex.

[Operator]

Thank you. Next question comes from Gary Yu, Morgan Stanley. Please go ahead.

[Gary Yu, Equity Analyst at Morgan Stanley]

Hi. Thank you, management, for the opportunity to ask questions. I have a question regarding the AI cloud revenue. Can management provide a breakdown of the current revenue mix and margin profile? What's the split between subscription based and project based revenue?

[Gary Yu, Equity Analyst at Morgan Stanley]

And how do you see them evolving in the coming quarters? And also what's the margin profile looking like in the near term and over the long term? Thank you.

[Dou Shen, EVP at Baidu]

Thank you, Gary. This is Dou.

[Dou Shen, EVP at Baidu]

In Q2, AI cloud revenue grew 27% year over year to RMB6.5 billion. For the 2025, AI cloud revenue increased 34% year over year, accelerating from the low teens growth we saw in the 2024. Enterprise cloud has consistently outgrown our overall AI cloud business and remains the main growth driver. Now within the enterprise cloud, subscription based revenue accounts for more than half of the total, and continued growing steadily in Q2. The growth was driven by strong momentum in subscription based AI infrastructure, which grow over 50% year over year.

[Dou Shen, EVP at Baidu]

We are seeing a good traction with both top tier and mid tier customers. Mid tier customers in particular delivered notable revenue growth as they continue expanding with us, reflecting our broadening customer base. The other part of the enterprise cloud is project based revenue. Project based revenue is typically linked to customer deployments and will inevitably fluctuate from quarter to quarter based on contract timing and project schedules. We are currently conducting a careful review of our project portfolio and aim to gradually reduce the proportion of project based revenue for greater revenue stability.

[Dou Shen, EVP at Baidu]

Turning to a personal cloud, which is a smaller part of our overall AI cloud business. Over the recent quarters, we've integrated Baidu Drive with Fengkoo and launched multiple new AI features. Recently, we opened up select AI features for free to encourage wider adoption. While this may involve some near term trade offs, we believe it helps deepen user engagement and positions us to benefit from a broader AI adoption. On profitability, we achieved year over year growth in non GAAP operating profit and maintained a healthy margin, driven by a healthier revenue mix tilted towards higher value offerings.

[Dou Shen, EVP at Baidu]

While margins can move around from quarter to quarter due to dynamic market environments, we see clear potential for the future improvement over the long run as we scale and optimize our mix. Thank you, Gary.

[Gary Yu, Equity Analyst at Morgan Stanley]

Thank you.

[Operator]

Thank you. Our next question comes from Lincoln Kang from Goldman Sachs. Please go ahead.

[Lincoln Kong, Executive Director at Goldman Sachs]

Thank you management for taking my question. So my question is about the search. So actually, can management share more color on the recent AI search monetization testing? Because following your earlier comments on AI search opening up new monetization opportunity, could you elaborate on that? And how are all advertising format and business model evolving? What will be the margin look like? Thank you.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

Thank you, Lincoln. Let me ask your question. I mentioned about the monetization opportunities earlier, and let me elaborate over here. And from a product perspective, while our AI transformations already covers a large portion of such results, we are still in the early stage with substantial room for improvement. We aim to further increase the penetration of multimodal content in such results and continue building and reaching our AI native ecosystems through MCPen agents.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

And on the foundation, enable the deeper or broader or higher quality connections to the real world services. As the air transformations advance and the user experiences improves, monetization opportunities will naturally follow. And also the AI search brings the native apps that feels intuitive and integrate, enhancing rather than interrupting the user experiences. So the vast majority of keywords that were previously very difficult to monetize now can be monetized under AI search, which should be significant expand our advertisement inventory over time. While initially, we will be very conservative with monetization to ensure we get the user experience right and by the long term upside is much higher.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

And during our AI transformations, we are being from simply generating sales leads to enabling the real world service delivery. This is a shift made possible by AI new new AI native commercial products such as agents or digital humans. These innovative products allow us to better capture and serve the user needs through interactive conversations, while connecting the users with service providers in verticals like healthcare, travel and education, where our agents and digital humans have already proven monetization capabilities. And over the long term, let's see ability to fulfill user needs end to end position us where to drive a gradual transition from CPC to CPS, which offers a much higher ceiling for monetization. And in Q2, we have already begun the early testing of the AI search monetization.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

While it's still in early days, we have seen the very encouraging signals. And we believe this trend will continue over time. That said, we always pull user experiences first. So we drew a very deliberate approach to AI search monetization and large scale monetization has not started yet. And at the same time, we have been aggressively accelerating the AI search transformation, including changing those queries with the highest monetization capabilities.

[Rong Luo, EVP - Baidu Mobile Ecosystem Group at Baidu]

So in the near term, we do expect the revenue and margin will remain under significant pressure. By long term, we believe this positions us well for stronger growth. Thank you.

[Operator]

Thank you. Our next question comes from the line of Miranda Xuang with Bank of America Securities. Please go ahead.

[Miranda Zhuang, Equity Research - Internet at Bank of America Merrill Lynch]

Thank you for taking my question. My question is about cloud and GPU. So how should we assess the sustainability of the AI driven cloud demand, especially against the backdrop of the soft economy and intensifying market competition? And also, with the easing of the h H20 chip restriction, has management seen any meaningful improvement in supply? How do you think about the chip constraint?

[Miranda Zhuang, Equity Research - Internet at Bank of America Merrill Lynch]

Will it remain as a limiting factor for growth going forward? You.

[Dou Shen, EVP at Baidu]

Miranda, I will take your questions. Actually, we were seeing strong and growing demand for AI driven cloud services as China's cloud market continues its shift toward AI centric computing. The adoption of gene AI and foundation models is accelerating and AI has become a strategic focus for more and more companies. From what we've observed, demand is picking up across a wide range of sectors, not only from early adopters like tech and Internet companies, but also from a broader side of industries like utilities, financial services and the public sector, where interest in AI driven cloud solution is rising quickly. Meanwhile, technological advances are filling strong new demand from the emerging sectors such as embodied AI.

[Dou Shen, EVP at Baidu]

We are effectively capturing new opportunities and working with leading players in this field, including 20 of China's promising embodied AI startups, four of which are China's top humanoid robot companies. The reason we were able to capture opportunities so quickly is our unique competitive positioning. What differentiates us is our ability to deliver highly cost effective end to end AI cloud products and solutions, thanks to our full stack AI capabilities. Taking our AI infra as an example, we keep improving utilization and efficiency through our industry leading resource management capabilities. By dynamically allocating computing resources, we can better match workloads with the suitable resources and manage demand fluctuations, delivering better performance at lower costs.

[Dou Shen, EVP at Baidu]

As a result, we can provide cost efficient, reliable and scalable cloud services that makes it really easy for companies to adopt AI with minimal effort and scale it into real business impact. On your question about tips, our focus remains on building a flexible AI architecture that maximizes GPU utilization and supports a variety of tips, including domestic tips. This enables us to better serve customers as the supply environment evolves. Looking ahead, we believe that a self sufficient supply chain together with increasingly major homegrown software stacks will form a solid foundation for sustainable innovation in China's AI ecosystem. And clearly Baidu is well positioned to lead the transition. Thank you.

[Operator]

Thank you. Next question comes from V. Xiong, UBS. Please go ahead.

[Wei Xiong, Equity Research Analyst at UBS Group]

Sure. Thank you, management. Thank you for taking my question. Given the near term headwinds on ad revenue and continued investment in AI, I wonder what are the plans for cost optimization and efficiency improvement that can help protect margins? How should we think about the margin trend in 2026 and beyond? Thank you.

[Haijian He, CFO at Baidu]

Thank you. This is Henry. First of all, on the AI investment, we remain committed to investing in AI and have made substantial investments throughout this year, particularly in the AI transformation of Search. As Julius mentioned earlier, our core legacy product search is undergoing a radical transformation. Over the past several quarters, we have ramped up investments to accelerate this transformation, which we believe is critical to drive long term value.

[Haijian He, CFO at Baidu]

However, since the AI search monetization is still in very early stages and has yet to scale, our revenue and the margins are on the considerable pressure in the near term, with Q3 expected to be especially challenging. To help push in the near term impact, we will actively drive internal efficiency gains. This includes strengthening resource coordination efforts across different business groups and improving overall resource utilization efficiency. But also on the other end, while we are remaining committed to long term AI investment, we'll be very prudent in managing the pace to avoid a future deterioration of fluctuation in margins. Looking further ahead, we see potential for margin improvement as our core advertising business recovers and stabilize and our non advertising business both expand their revenue share and improving their own profitability.

[Haijian He, CFO at Baidu]

We believe our strategic direction and a disciplined execution should support a gradual recovery in profitability over time. Obviously, on the outlook front, I think before or around end of this year, we expect to have a greater visibility into next year. And at that time, we will provide a clear outlook beyond the current quarters for the long term. In parallel, we are carefully assessing different approaches to present and to unlock By doing so, we aim to strengthen our portfolio, create significant long term value for shareholders, but also support sustainable growth over the long term of business. Thank you.

[Operator]

Thank you. The next question comes from Thomas Chong, Jefferies. Please go ahead.

[Thomas Chong, Managing Director at Jefferies]

Hi. Good evening. Thanks management for taking my question. My question is about the global autonomous driving landscape. We see it becomes increasingly competitive.

[Thomas Chong, Managing Director at Jefferies]

How does a protocol assess its long term differentiation against peers? And how do the recent Mubra and NITH partnership fits into your global expansion strategy? And what is the road map, for achieving sustainable profitability? Thank you.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Yeah. I think, autonomous driving is one of the most exciting, frontiers where AI is transforming the physical world. And success in this field requires cutting edge technology, massive sustained investment, and disciplined execution over many years to, achieve commercial operations at scale. One of the earliest entrants, we have built an unparalleled foundation across all these areas and become an undistributed undisputed, global leader in this field. With our business model validated, our current focus is on running real world operations at scale.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

And we have established global leadership in both left hand and right hand, drive robotaxi market. In the left hand drive market, we were the first to achieve UE breakeven, and all of our current operations in China, in Mainland China, are fully driverless. Globally, we are among the very few, capable of scaled fully driverless and commercial operations in a single, complex, large population area. And in the right hand drive market, we lead the industry globally. In Hong Kong, we are, we we rapidly expanded our open road testing and advanced, into increasingly, complex urban scenarios following regulatory approval.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Our technology stack and, operational expertise are highly transferable across geographies, geographies, allowing us to adapt efficiently to new markets and regulatory involvement. We also view the major advantage with RT6, the world's, first and only, production vehicle designed, especially for level four autonomous driving from day one. Unlike some retrofitted cars, RT6 is a perfect build from the ground up, with a focus on safety, system integration and cost efficiency. Efficiency. It has the lowest unit cost globally for level four, and is already running on our commercial operations at scale, giving us the big edge for broader rollouts.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

With this strength, we are confident about expanding to more cities worldwide, especially those with higher ride fares. Here's the picture. We have the world's lowest cost level four vehicle and most efficient operation. We first achieved UE breakeven in Wuhan, where taxifiers are over 30% cheaper than the tier one cities in China, and far below many overseas markets. Yet we still managed to prove our business model there.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Such operational excellence and cost efficiency is unmatched globally. For us, expanding overseas means going from low fare markets to high fare markets, Often with fares several times higher, our huge cost advantage can deliver much stronger unit economics in most major cities worldwide. To accelerate our global expansion, we are also taking a proactive approach to global partnerships. As we mentioned in our prepared remarks, we announced a partnership with Uber in July and followed by Lyft in August. Our partnerships with this world's leading mobility platforms, will help us enter and scale more quickly into global markets like Middle East, like Asia, like Europe.

[Robin Li, Co-Founder, Chairman & CEO at Baidu]

Looking ahead, we anticipate accelerating growth in ride volumes, with our global operational fleet size multiplying. With that momentum, we are confident that Apollo Gold will continue to lead the market and stay, at the forefront of autonomous driving worldwide. Thank you.

[Thomas Chong, Managing Director at Jefferies]

Thank you.

[Operator]

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Participants

Executives

• Juan Lin, Director, Investor Relations
• Robin Li, Co-Founder, Chairman & CEO
• Haijian He, CFO
• Rong Luo, EVP - Baidu Mobile Ecosystem Group
• Dou Shen, EVP

Analysts

• Alicia Yap, Equity Research Analyst at Citigroup
• Alex Yao, Co-Head of Asia Technology, Media & Telecommunications at JP Morgan
• Gary Yu, Equity Analyst at Morgan Stanley
• Lincoln Kong, Executive Director at Goldman Sachs
• Miranda Zhuang, Equity Research - Internet at Bank of America Merrill Lynch
• Wei Xiong, Equity Research Analyst at UBS Group
• Thomas Chong, Managing Director at Jefferies