As the global tech landscape continues evolving, companies grapple with fluctuating advertising revenues and the challenges of integrating cutting-edge technology. Baidu Inc (NASDAQ:BIDU) faces hurdles and opportunities in this shifting environment.

Benchmark analyst Fawne Jiang maintained Baidu with a Buy and lowered the price target from $120 to $115.

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Jiang cited ongoing ad weakness and delayed GenAI monetization. She projected fiscal 2025 and 2026 adjusted EPS of $7.09 and $9.14, down from prior estimates, reflecting margin pressure from soft advertising and heavy AI investment.

Jiang noted that second-quarter 2025 revenues came in at 32.7 billion Chinese yuan (-4% Y/Y), in line with consensus, while Baidu Core fell 2% Y/Y due to a 15% decline in advertising.

Non-advertising revenue, however, surged 34% Y/Y, now contributing ~40% of Baidu Core, driven by AI Cloud's +27% Y/Y growth and subscription-based revenue strength.

Baidu posted EPS of 13.58 Chinese yuan ($1.90), slightly above expectations, with Baidu Core EBITDA margin at 24%, down 7.9 ppts Y/Y.

For the second half, Jiang forecast Core ad revenue declines of 25% Y/Y in the third quarter and 15% in the fourth quarter, as GenAI monetization remains in its infancy. However, she highlighted potential upside from the upcoming launch of ERNIE 5.0, which will enhance multimodal search and digital human technology.

Non-ad businesses remain Baidu's growth engine. Jiang modeled AI Cloud growth of 19% Y/Y in the second half of 2025, in line with management guidance, while Apollo Go delivered 2.2 million fully driverless rides in the second quarter (+148% Y/Y) and is scaling globally via partnerships with Uber and Lyft. She sees Apollo Go's right-hand-drive leadership as a strategic edge in international markets.

Despite near-term earnings pressure, Jiang argued Baidu's $63 per share in net cash, ~5% annual buyback, AI Cloud momentum and Apollo Go scale-up provide downside support. She said upside depends on sustained AI Cloud strength and early traction in GenAI monetization, which could reshape Baidu into a more diversified, innovation-led company.

BIDU Price Action: Baidu shares are trading higher by 1.33% to $87.01 at publication on Thursday.

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