In the fast-evolving landscape of artificial intelligence and technology, few companies have captured attention quite like BaiduKnown as one of the pioneers of AI in China, Baidu has faced relentless criticism for its slow progression towards commercialization and profitabilityIn an environment where its peers, such as Alibaba and Tencent, have demonstrated significant stock gains, Baidu’s performance has remained conspicuously muted, suggesting a potential crisis of confidence from investors and stakeholders alike.

Recently, the introduction of Deepseek has sparked a reevaluation of many Chinese tech stocks, with major players witnessing notable increases in their market valuesYet, for Baidu, the scenes unfolding on the stock market appear less favorableDespite the opportunities presented by Deepseek, Baidu's reaction has been tepid; its stock is losing traction amid broader market enthusiasm.

The latest quarterly report indicates that Baidu is grappling with significant hurdlesWhile the company did manage to beat market expectations slightly with a total revenue of 341 billion yuan for Q4 2024, this figure nonetheless represents a 2% decline compared to the same period last yearThis downturn marks the third consecutive quarter of decreasing revenue for the technology giant, indicating systemic issues within its operational model.

A crucial component of its portfolio, iQIYI, has underperformed due to a lack of standout content, causing key financial metrics to falterThe video streaming service has seen a 14% year-over-year drop in revenue during Q4, with the annual figures showing further declines in both revenue and profitsThe association with iQIYI is proving to be a weight around Baidu's neck, hindering any potential recovery.

When arriving at the net profit figures for Q4, Baidu reported approximately 52 billion yuan, a stark 100% leap year-over-yearHowever, when adjusted for non-GAAP results, the attributable net profit amounted to around 67 billion yuan, which represented a 13% decline

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Analysts attribute some of this decline to expenses linked to the closure of Jiyue Automotive, which alone accounted for about 10 billion yuan in one-off costs related to layoffs and termination benefits.

Despite these challenges, Baidu's approach toward rectifying the situation, particularly in the ongoing saga with Jiyue Automotive, has showcased an admirable willingness to confront financial realities head-onThe commitment to weather the storm speaks volumes about their corporate governance and strategic decision-making.

Looking at the entirety of 2024, Baidu's revenue reached 1.331 trillion yuan, marking only a slight decrease of 1%, while the attributable net profit surged by 17% to 23.76 billion yuan, although net profit according to non-GAAP standards fell by 6% to 27 billion yuanThe company maintained a strong cash position at the end of 2024, totaling about 139.1 billion yuan, with share buybacks exceeding 1 billion dollars since the start of the yearNonetheless, Dolphin Investment Research noted that the overall shareholder return for Baidu stands at a relatively low 2.3% among comparable Chinese assets.

Post-earnings release, Baidu's stock experienced a noticeable declineOn the US stock market, shares fell by 7.51%. In tandem, Baidu's H-shares in Hong Kong also opened lower, marking a 2.38% drop during the morning trading session on February 19.

Additionally, Baidu's reliance on its advertising business has become increasingly apparentWith the AI segment yet to fully blossom into a substantial revenue generator, the company continues to lean heavily on advertising—a traditional stronghold that now faces headwinds.

The market dynamics have shifted dramatically, with overall advertising demand softening and competition intensifyingThe advent of AI-native search technologies has posed significant challenges to established advertising paradigms, thereby placing additional strain on Baidu's revenue from this segment

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In Q4, online marketing revenue dropped to 17.9 billion yuan, decreasing by 7% year-on-year, while annual figures declined by approximately 3%. Marketing revenue remains the lion's share of Baidu's earnings, accounting for 59% of its total income at 78.56 billion yuan.

During the earnings call, Baidu management expressed optimism regarding policies intended to bolster economic conditions, yet they acknowledged the particular vulnerability of small and medium enterprises to macroeconomic fluctuationsThis acknowledgment sheds light on why the advertising sector has shown no signs of improvement amidst ongoing competitive challenges.

Adding further complexity to the situation is the troubling trend suggesting a decline in active users for the Baidu appAs of December 2024, active monthly users dropped to 679 million from 704 million in September 2024. Compounding this issue is the rise of competing platforms such as Douyin, WeChat, and Xiaohongshu, which continue to vie for user attention in the search arena.

On a more positive note, Baidu's intelligent cloud business reflects tremendous growth, largely fueled by surging AI demandIn Q4, non-online marketing revenue climbed 18% to 9.8 billion yuan, driven primarily by the cloud divisionThis growth offsets some of the weaknesses seen in traditional marketing efforts.

Highlighting the strength of its AI initiatives, Baidu reported that its Wenxin model achieved an impressive daily API call volume of 1.65 billion, with external API calls skyrocketing 178% quarter-on-quarterThe average monthly active users (MAU) for Baidu’s AI-based features grew by 216%, hitting 94 million—figures indicative of a robust demand for innovation and AI applications.

Baidu is also advancing its autonomous driving initiative, known as Luobo Kuaipao, which bagged over 1.1 million self-driving orders in Q4, a 36% increase from previous yearsBy January 2025, Luobo Kuaipao has offered over 9 million self-driving service orders to the public, signaling a strong foothold in the burgeoning autonomous driving market.

The sixth-generation autonomous vehicle, the RT6, has been introduced as the most cost-effective robotaxi in the market, showcasing Baidu's commitment to redefining transportation through technology

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