In the landscape of Chinese technology, Baidu has long been acknowledged as a pioneer in artificial intelligence (AI), yet it still faces criticism for not having reaped significant rewards from its innovationsDespite its status as a leader in this burgeoning field, Baidu's performance appears underwhelming compared to its peers, which have seemingly surged ahead in recent monthsEven amidst the exhilarating emergence of technologies like Deepseek, which have invigorated the stock prices of giants like Alibaba and Tencent, Baidu's shares have remained relatively stagnant, implying a palpable lack of attractiveness to investors.

Recent findings from Baidu's fourth-quarter report illustrate ongoing challenges the company must navigateWhile total revenue slightly surpassed market expectations during the fourth quarter of 2024, the figures still revealed a year-on-year decline of approximately 2%, amounting to 34.1 billion CNYThis marked the third consecutive quarter in which Baidu's revenue reflected negative growth, underscoring persistent economic hurdles.

Compounding Baidu's difficulties is its subsidiary, iQIYI, which has failed to deliver significant hits to captivate its audienceThis shortfall has negatively impacted core financial metrics, further burdening Baidu's overall results. iQIYI reported a 14% decline in revenue year-on-year during the fourth quarter, pulling in 6.6 billion CNY and showcasing a worrying trend of both declining revenue and profit throughout the year.

In the reported fourth quarter, Baidu achieved a net profit attributable to the company of about 5.2 billion CNY, representing a robust year-on-year growth of 100%, but this number came with caveatsWhen examined through the lens of non-GAAP accounting standards, net profit associated with Baidu saw a decline of 13% to roughly 6.7 billion CNYAnalysts have pointed out that the profit pressure was influenced not only by reduced advertising revenues but also by costs associated with the shutdown of Jiyue Automotive, which resulted in significant one-time expenses (approximately 1 billion CNY) due to severance and other related costs.

Despite these challenges, Baidu's efforts to face potential setbacks head-on with a constructive approach deserve acknowledgment

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The company's willingness to absorb significant costs while reaffirming its operational commitments indicates a level of resilience often overlooked amidst the quantifiable financial metrics.

When looking at the full year, Baidu's total revenue for 2024 reached 133.1 billion CNY, marking a slight decrease of 1% from the previous yearThe net profit attributable to Baidu stood at 23.76 billion CNY, reflecting a notable increase of 17%. However, when assessing according to non-GAAP measures, this profit dipped by 6% to approximately 27 billion CNYNevertheless, Baidu remains in a solid cash position, reporting cash, cash equivalents, and short-term investments totaling 139.1 billion CNY by the end of 2024. Throughout the year, Baidu has also actively engaged in share buybacks, with its total buyback amount exceeding 1 billion USD since the beginning of 2024. Yet, analysts note that the shareholder return rate for Baidu stands only at 2.3%, which remains relatively low among Chinese concept stocks.

Following the release of its financial results, Baidu's stock saw a notable dropOn a recent trading day, its American depositary shares fell by 7.51%, while its Hong Kong-listed shares experienced a decline of approximately 2.38% at the time of reporting.

Advertising revenue, Baidu's traditional stronghold, continues to struggle under the pressure of shifting market dynamicsThe tech company's reliance on its advertising business remains crucial as it navigates the growth and monetization of its AI ventures, which have not fully materialized into profitabilityAmidst an overall decline in advertising demand and heightened competition in the market, the emergence of AI-native search algorithms has disrupted conventional advertising models, placing additional pressure on Baidu's advertising revenues.

For the fourth quarter, Baidu generated 17.9 billion CNY in online marketing revenue, representing a 7% year-on-year decrease, with annual figures reflecting a 3% drop

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Online marketing still constitutes a significant portion of Baidu's earnings, accounting for approximately 59% of overall revenue with annual revenue totals of 78.56 billion CNYBaidu’s management remains optimistic about various policies that could positively impact the economy over time; however, the company has acknowledged that small- and medium-sized enterprises, which heavily rely on its advertising services, are particularly sensitive to macroeconomic changesThis has led to a continued lack of improvement in advertising performance, with the competitive landscape exacerbating these issues.

Additionally, Baidu faces a challenge with user retention on its mobile applicationAs of December 2024, the company reported 679 million monthly active users, down from 704 million in September 2024. This decline has been attributed partly to the rise of competing applications such as Douyin, WeChat, and Xiaohongshu, which have ramped up their search functionalities, increasing competition for search traffic.

On a more positive note, Baidu's intelligent cloud services have exhibited impressive growth, driven by escalating demand for AI solutionsIn the fourth quarter, this segment recorded a 26% year-on-year increase in revenue, helping counterbalance the downturn in the online marketing arenaNon-marketing revenues reached 9.8 billion CNY in the fourth quarter, reflecting an 18% growth primarily propelled by the expansion of the intelligent cloud business.

In an impressive feat, Baidu's Wenxin large model has seen its daily API calls surge to 1.65 billion by December 2024, with external API calls reportedly increasing by 178% sequentiallyIts AI-powered document-sharing platform, Baidu Wenku, also witnessed a staggering 216% growth in average monthly active users, with a quarterly increase of 83%.

In the realm of autonomous driving, Baidu’s eservice, “LuoBo Kuaidi,” has successfully executed over 1.1 million autonomous driving orders in the fourth quarter, reflecting a year-on-year growth of 36%. By January 2025, the service had surpassed 9 million total orders provided to the public

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Notably, since February 2025, LuoBo Kuaidi has achieved 100% fully autonomous operation across China, showcasing a pivotal step towards the future of autonomous transport.

Baidu’s co-founder and CEO, Robin Li, shared on the company’s yearly performance call that the sixth generation of its autonomous vehicle, RT6, represents one of the most cost-effective robotaxi options available globallyWith such technological advancements, Baidu is poised to validate the business model of LuoBo Kuaidi while laying the groundwork for further growth and global expansion.

Looking ahead, Li emphasized 2025 as a critical year for LuoBo Kuaidi, anticipating unprecedented growth in fleet size and passenger capacityThe company is actively seeking out partnerships with various stakeholders, including transportation service platforms, taxi companies, third-party fleet operators, and other potential collaborators.

Nonetheless, the industry landscape reveals that as a traditional search titan and an early mover in China’s large-model sector, Baidu’s competitive moat is undergoing unprecedented scrutiny and threatsRecently, concerns have surfaced regarding Baidu's AI technologies being outpaced by Deepseek, a notable competitor that has seized market attention by enticing platforms such as WeChat, Alibaba, and JD.com to integrate Deepseek's models into their services, imposing additional competitive pressure on Baidu's traditional market position.

In response to the open-source trend sweeping through the AI landscape, Baidu, which previously adopted a stringent closed-source approach, recently signaled a shift by announcing that its search engine will fully integrate Deepseek and its latest Wenxin large model deep search capabilitiesFurthermore, starting April 1, Wenxin Yi Yan, another product from Baidu, will be available for free usage—indicating a staunch commitment to maintaining its search dominance in the face of growing competition.

During the recent conference call, Li also announced that Baidu plans to launch the next version in the Wenxin model series, 4.5, in the coming months, with an open-source release slated for June 30. He emphasized that this decision stemmed from an unwavering confidence in Baidu’s technological leadership, insisting that open-sourcing the model will further accelerate its widespread application and expand its reach across diverse scenarios.

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