Baidu: Search Keeps Shrinking, But AI-Cloud Is Taking Over

Greenery Financial 259 Followers Follow Summary Baidu's legacy online advertising/marketing business is deteriorating faster than I expected, with online marketing down 19% and legacy business down 23% in Q2 2026. At the same time, Baidu's AI-powered business generated RMB 12.5 billion of revenue, grew 25% year over year, and accounted for half of general business revenue. The transition remains expensive; Baidu spent RMB 11.4 billion on CapEx and produced approximately RMB 8 billion of negative free cash flow in Q2, while AI-Cloud profitability remains opaque. I rate BIDU a BUY, citing strong AI/cloud growth, balance sheet strength, and alignment with Chinese policy, despite geopolitical and structural risks. zorazhuang/iStock Unreleased via Getty Images After Baidu's ( BIDU ) Q2 earnings, I think the investment case has become much clearer—the search business is severely impaired; there's no way around that. It's declining much faster than I'd like, than I hoped and expected when This article was written by Greenery Financial 259 Followers Follow Greenery Financial is ran by a full-time investor who invests predominantly in non-US assets and asset classes currently out of favor and hated by the market. Generally this means investing in an active manor in cyclical industries and markets with perceived political risk.He was born in the USA however chose to live abroad the majority of his adult life. He's lived extensively in China, Turkey, Brazil, Thailand, Mexico, India/Nepal, and Albania as well as visited dozens of other counties looking for investment opportunities. Analyst’s Disclosure: I/we have a beneficial long position in the shares of BIDU, BABA, TCEHY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. We own shares of Baidu via 9888.hk Alibaba via 9988.hk and Tencent via 700.hk Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.