Baidu Earnings Preview: Can AI Drive a Turnaround in Performance?
Baidu is set to release its second-quarter earnings report after the Hong Kong market closes on August 18. According to analyst estimates, Baidu’s revenue for the second quarter of 2026 is expected to reach RMB 31.587 billion, while adjusted EPS is estimated at RMB 1.218. $BIDU-SW(09888)$ $Baidu(BIDU)$ $BIDU-SWR(89888)$
Baidu’s share price has been volatile recently, with the stock trending downward since early August. With the earnings release approaching, the market will focus on Baidu’s profitability and whether its traditional search advertising and AI businesses can maintain growth amid intensifying competition.
In terms of revenue structure, Baidu has two major business segments: Baidu Core and iQIYI. Baidu Core is the company’s primary source of revenue and includes Baidu Core AI-powered business, AI cloud infrastructure, AI applications, and AI-native marketing services. However, Baidu Core has recently experienced weak growth, with revenue expected to decline in Q2.
Fitch Ratings downgraded Baidu’s Long-Term Issuer Default Rating from “A” to “A-”, with a Stable Outlook, mainly due to the structural decline in search advertising, which has weighed on EBITDA (earnings before interest, taxes, depreciation and amortization). Fitch expects EBITDA to recover to RMB 24-25 billion in 2026-2027, but still remain well below historical levels from 2020 to 2024. Meanwhile, AI chatbots are changing how users obtain information, putting further pressure on traditional search and potentially weighing on Baidu’s advertising revenue.
However, Baidu’s AI transformation remains a key focus. Fitch expects Baidu’s AI cloud infrastructure revenue to accelerate amid surging demand for AI computing. AI-powered businesses are expected to surpass traditional business in 2026, while AI business margins are also expected to improve.
Going forward, market attention may gradually shift from the decline in traditional search toward whether Baidu’s AI businesses can achieve rapid growth and drive a potential earnings inflection point.
From a valuation perspective, Baidu currently trades at a P/E ratio of 18.19x, which is around the mid-range of its five-year historical level.
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