Baidu, Inc. BIDU is scheduled to report first-quarter 2025 results on May 21, before the opening bell.

In the last reported quarter, Baidu reported non-GAAP earnings per share (EPS) of $2.63, which significantly beat the Zacks Consensus Estimate of $1.78. Total revenues were $4.68 billion, which declined 2% year over year but beat analyst estimates by 2.5%. The top-line pressure stemmed from persistent weakness in online marketing, which was partially offset by robust gains in the AI Cloud segment.

Baidu Core revenues grew modestly 1% year over year to $3.8 billion, reflecting mixed performance across business lines. Notably, the AI Cloud business delivered robust fourth-quarter performance with revenues accelerating 26% year over year, offsetting the softness in the online marketing business.

This Chinese tech giant beat on earnings in each of the trailing four quarters, delivering an average surprise of 19.1%. You can see the historical figures in the chart below.Zacks Investment Research

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How Are Estimates Placed for BIDU Stock?

The Zacks Consensus Estimate for first-quarter EPS has increased to $1.96 from $1.65 over the past 60 days. The estimated figure indicates a 29% year-over-year decrease. The consensus mark for revenues is pinned at $4.3 billion, suggesting a 1.6% year-over-year decline. For 2025, BIDU is expected to witness 1.7% revenue growth from the 2024 level.

The company is expected to register a 4.3% year-over-year decline in EPS for this year.Zacks Investment Research

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What the Zacks Model Unveils for Baidu

Our proven model does not conclusively predict an earnings beat for Baidu this reporting cycle. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: Baidu has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Influencing Baidu’s Q1 Performance

Baidu’s first-quarter revenues are expected to have declined, given macroeconomic headwinds and a sluggish advertising recovery. The real drag continues to be Baidu’s core online marketing business (which forms a substantial portion of Baidu's revenues), which fell 7% year over year in the last reported quarter. Despite the ongoing efforts to infuse generative AI into search, 22% of result pages now feature AI-generated content, though monetization is yet to scale. Management indicated that meaningful revenue lift from GenAI will take time, with modest advertising recovery expected in the first half of 2025.  This downward trajectory is expected to have continued in the to-be-reported quarter amid China's sluggish economic recovery and reduced advertising spending.

China’s macroeconomic environment remains fragile due to the ongoing deflationary trends and persistent instability in the property sector. These factors are likely to have constrained advertising budgets and dampened enterprise IT spending, both of which are crucial to Baidu’s core and cloud businesses. The challenging backdrop might have added another layer of pressure to Baidu’s first-quarter performance.

Adding to these concerns is the continued weakness in Baidu’s iQIYI segment, which recorded a 14% year-over-year revenue decline in the last quarter. With little indication of a rebound, similar softness is expected to have continued in the first quarter, reflecting ongoing difficulties in monetizing content and subscriber growth amid broader consumer caution.

While overall results are expected to be soft, Baidu’s AI Cloud segment remains a critical growth engine. Last quarter, AI Cloud revenues rose 26% year over year, fueled by the adoption of Baidu’s ERNIE foundation models and Tianfeng MaaS platform. As inference costs fall and businesses scale their use of generative AI tools, management expects sustained momentum in 2025. ERNIE’s daily API calls surged to 1.65 billion in the fourth quarter, with external usage climbing 178% quarter over quarter. Continued traction could have helped offset ad-related softness in the first quarter.

Increased costs tied to AI infrastructure expansion are expected to have weighed on the company’s profitability. As Baidu deepens its AI capabilities and ramps up its autonomous driving unit, maintaining operational discipline will be key. Nonetheless, the improvement in AI Cloud's operating margins might have helped buffer overall margin compression, as Baidu focused on high-value enterprise contracts and optimized its infrastructure for scale and efficiency.

Story Continues

BIDU Stock Outperforms Sector, Industry

BIDU’s shares have gained 9.3% in the past six months, outperforming the Zacks Internet – Services industry’s 0.2% decline and the Zacks Computer and Technology sector’s 0.4% growth.

SOUN Stock’s 6-Month PerformanceZacks Investment Research

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A Look at BIDU Stock Valuation

From a valuation standpoint, the company is currently trading at a discount relative to its industry and historical metrics, with its forward 12-month price-to-earnings (P/E) ratio sitting below its five-year average. It currently has a Value Score of A.

This is a deep discount to the broader tech sector and even to Chinese peers. By comparison, Alibaba BABA has a forward P/E of 11.02 and Tencent TCEHY has 16.75.Zacks Investment Research

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Why Should You Hold Baidu Stock Now?

Baidu remains a stock worth holding, backed by strong innovation, healthy financials and an attractive valuation. Although the stock trades 23.2% below its 52-week high, its recent outperformance — rising 7.6% in a month — signals renewed investor confidence. The company's AI transformation is gaining momentum, with notable advancements including ERNIE 4.5 Turbo, ERNIE X1 Turbo, pet communication AI, and the expansion of Apollo Go robotaxi services.

Despite persistent macroeconomic headwinds in China and ongoing softness in its core online advertising and iQIYI businesses, Baidu’s strong execution in artificial intelligence, especially the AI Cloud segment, signals long-term upside. Its generative AI capabilities, powered by the ERNIE foundation model, are gaining commercial traction, with API call volumes surging and enterprise adoption accelerating.

Its valuation further strengthens the case for patience. BIDU trades at a discount to both its peers and its own historical average, while outperforming the broader tech and internet services sectors over the past six months. Although short-term earnings and revenue growth may remain under pressure due to China’s weak economic backdrop, Baidu’s robust innovation pipeline, strategic focus on AI monetization and improving operating leverage in the cloud business provide a foundation for recovery. In a nutshell, Baidu’s first-quarter results are likely to show near-term weakness but highlight the long-term potential of its AI transformation. Any indication of GenAI monetization or continued AI Cloud strength could ease investor concerns over short-term earnings softness.

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This article originally published on Zacks Investment Research (zacks.com).

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