Baidu, the big player in China's search engine scene, saw a 2% dip in its quarterly revenue, mainly due to a slowdown in advertising. However, this was somewhat balanced out by growth in its cloud AI sector.
For the last three months of the year, Baidu reported earnings of 34.12 billion yuan ($4.69 billion), which beat analysts' expectations of 33.32 billion yuan, according to LSEG data.
Many small businesses in China have been cutting back on their ad spending because of a sluggish economy and a long-lasting slump in the property market.
Baidu's online marketing revenue, not counting its streaming service iQIYI—which makes up a big chunk of its income—fell by 7% to 17.9 billion yuan.
On the bright side, the company’s AI Cloud division saw a 26% year-over-year increase, helping to cushion the blow from the ad revenue drop.
In premarket trading, Baidu's shares were down about 2%.
Over the past few years, Baidu has been pushing hard into AI to lessen its dependence on ad revenue from its main search engine.
Earlier this year, Baidu was one of the first to roll out a ChatGPT-like chatbot, claiming that its Ernie 4.0 version is on par with OpenAI's GPT-4.
Still, Ernie has faced challenges in gaining traction, especially with tough competition from the Chinese startup DeepSeek and its R1 model.
To tackle this, Baidu recently announced plans to open-source its upcoming models, provide premium chatbot services for free starting in April, and incorporate DeepSeek's tech into its offerings.
The company aims to monetize AI by weaving it into existing apps like Wenku and selling AI services through its cloud platform.
In December, Baidu's Ernie platform handled 1.65 billion daily user queries and interactions, a significant jump from 600 million in August.