China's Baidu sees quarterly revenue drop despite AI push

The Beijing-based internet giant generates much of its revenue from online ads, and has been hit hard by a slump in consumption in the world's second-largest economy.

Even so, its share price has surged by around a third over the past three months thanks to optimism over its push into AI technologies.

In the July-September quarter, revenue was down seven percent on-year to 31.2 billion yuan ($4.4 billion), Baidu said, beating analyst estimates of 30.9 billion yuan.

"AI Cloud achieved healthy expansion in the third quarter, cushioning the impact from softness in our online marketing business," said chief financial officer Haijian He.

He said revenue from AI-related businesses grew more than 50 percent on-year to roughly 10 billion yuan in the quarter.

Ahead of the earnings announcement, Robert Lea of Bloomberg Intelligence warned that "Baidu's outlook remains highly challenged".

"The Chinese tech giant's continued lack of top- and bottom-line traction confirms our view that its AI prospects remain overhyped," he said.

In the third quarter Baidu also logged a net loss of 11.2 billion yuan -- down sharply from a net profit during the same period a year ago of 7.6 billion yuan.

Baidu has invested heavily in AI in an increasingly competitive race alongside China's other tech giants Tencent, Alibaba and ByteDance.

Last week, Baidu released a new version of its Ernie AI model and announced it had developed new chips to power AI systems to go on sale early next year and in 2027.

The company is also developing its international robotaxi service Apollo Go, which handles more than a quarter of a million rides each week, it said.