Baidu reports revenue decline as competition in China’s AI intensifies

Chinese internet giant Baidu Inc. reported a smaller-than-expected decline in quarterly revenue, easing investor concerns that it might be unable to cope with fierce competition in artificial intelligence.

Image source: baidu.com

In the fourth quarter of 2024, the company earned 34.1 billion yuan ($4.7 billion) in revenue, about 2% higher than the 33.4 billion yuan analysts had forecast. At the same time, Baidu’s net profit increased significantly in the period from October to December last year. It amounted to 5.19 billion yuan ($711 million), almost double the 2.6 billion yuan earned in the same period a year earlier. It was also significantly higher than the 3.92 billion yuan analysts had forecast.

Baidu continues to face stiff competition in China’s AI market, which is growing rapidly following the success of Hangzhou-based startup DeepSeek, which last month unveiled AI algorithms that rival or outperform Western counterparts. Against this backdrop, other players such as Tencent and Alibaba have seen their shares rise significantly, although Baidu has benefited the least from the market’s growth.

Baidu faces competition in all areas of its business. In the area of ​​generative AI, DeepSeek’s breakthrough in creating advanced AI algorithms based on an open-source model at minimal cost is undermining Baidu’s long-standing approach to promoting its technology. Last week, the company made a surprise move by announcing its intention to open-source its AI models. Baidu also integrated DeepSeek’s latest algorithm, R1, into its chatbot, following Tencent’s earlier move.

Baidu may be squandering its AI leadership. The company was the first Chinese tech giant to publicly reveal its AI algorithms, launching its own OpenAI ChatGPT AI bot called Ernie for an $8 monthly fee. When the app became free, the company began refunding users. However, Baidu is still one of the leaders in AI, and is working with Apple to bring Apple Intelligence features to iPhone users in China.