--- title: "BIDU: Legacy biz still bottoming; AI strength hinges on compute tailwinds" type: "News" locale: "en" url: "https://longbridge.com/en/news/296230443.md" datetime: "2026-08-18T12:43:42.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296230443.md) - [en](https://longbridge.com/en/news/296230443.md) - [zh-HK](https://longbridge.com/zh-HK/news/296230443.md) --- # BIDU: Legacy biz still bottoming; AI strength hinges on compute tailwinds $Baidu.US Q2 was a mixed bag for BIDU, with overall results underwhelming. Dolphin Research has maintained that BIDU is a range-trade this year, with catalysts being Stock Connect inclusion and Kunlun Chip's IPO (both expected within the year); see the end for details. Since this year, BIDU has adopted a new disclosure framework, splitting results into 'AI biz.' and 'legacy biz.' The AI segment covers AI Infra, AI Applications, and AI-native Marketing Services. As most institutions still model under the old framework, Dolphin Research maps the two to compare against Street expectations while showing growth across BIDU's new AI lines. This helps clarify where the expectation gaps lie. **Detailed analysis below (Baidu Core only, excluding iQIYI):** It excludes iQIYI. **1) AI growth cooling: compute sells, but product edge is lacking** Momentum slowed despite demand for compute capacity. AI-related revenue reached RMB 12.4bn in Q2, with growth decelerating to +27% YoY from +49% in Q1. AI now accounts for about half of total revenue and was flat QoQ. Breakdown as follows. See below for segment details. **(1) AI Infra (cloud, LLM APIs, compute rentals): compute still sells** Revenue of RMB 7.3bn, 60% of AI, rose 53% YoY but trailed BBG cons. Within this, bare-metal GPU cloud stayed strong at +283% YoY, an acceleration vs. Q1, while other pieces were likely flat to down amid private cloud delivery timing. Institutions have trimmed forecasts below the BBG figures cited above. Overall, results confirm tight compute supply. **(2) AI Applications (Baidu Wenku, Netdisk, digital employees, general-purpose agents): still no real traction** Non-compute AI products have been middling for 2–3 quarters, the core reason for Dolphin Research's cautious AI stance. Drag from Netdisk competitiveness and resource refocus after integrating Wenku and Netdisk has not helped. Mid-year marked the peak of the AI office-tool battle, and BIDU rolled out an integrated suite including Dazi, Kuku AI, and Miaoda. Promotion has gone reasonably well, with Jul download ranks near the top (second only to Tencent's Workbuddy). However, unlike Tencent, ByteDance, and Alibaba, BIDU lacks a native office/social platform for direct funneling. As a result, customer acquisition costs are higher and retention is tougher. **(3) AI-native Marketing (agents and digital avatars): seasonal uptick** E-commerce seasonality drove a QoQ rebound in Q2, but the YoY growth trend has largely faded. Competition is intense, and without a clear LLM edge, AI-native marketing is viewed more as a partial offset to the decline in traditional search ads. **2) Legacy ads outlook: inflection still unclear** Traditional ads (search and in-feed) fell 23% YoY, a touch better than expected, but the QoQ downtrend has not materially eased. Baidu App MAUs were 644mn, with a net loss of 11mn users. **3) Autonomous driving, smart hardware and others:** This bucket delivered RMB 2.3bn in Q2, up slightly QoQ but still down YoY. Robotaxi globalization continued (with Mainland operations subject to regulation), with ongoing tests in London, Dubai, Hong Kong and Switzerland. **4) Profit kept improving, but new investment is coming** The main beat was on profit, helped by higher compute pricing and tighter opex (sales and G&A), narrowing the YoY decline. At the same time, BIDU is reshuffling AI orgs and hiring, merging units to improve efficiency (e.g., deeper MEG search-feed integration, Wenku+Netdisk, and MEG e-comm with the commercial unit). R&D leadership is being refreshed as well, with the BMU seeing a new post-95 head appointed in Jul. **Capex more than doubled to RMB 11.4bn in the quarter (45% of revenue; watch for batch procurement effects and the forward plan)**, underscoring commitment to base model development. We expect higher talent and R&D spend in 2H, so profit growth cadence should be dialed back. In the near term, a company that has been running lean will see opex start to rise, including higher payroll, compute and R&D intensity. Operating leverage may be pressured. **5) Buyback pace is sluggish** The $5bn three-year buyback announced in Feb saw just $260mn deployed in 1H, a slow cadence. Management typically adjusts buyback pace around market-cap swings. **With the recent pullback, post-quiet-period repurchases could be attractive.** Net cash is sufficient to execute the plan, but the sharp Q2 capex ramp suggests BIDU must balance investment and buybacks. **Dolphin Research View** Headline takeaways from Q2 are negative. Even with a cloud business and a favorable quarter for cloud peers, the lack of a clear backstop in legacy operations, combined with slowing AI revenue and a surge in investment, is discouraging capital. **GPU revenue surging 283% YoY is a rare bright spot, but it mostly confirms industry-wide compute scarcity.** Its contribution to group revenue is still limited, and the past three quarters of AI Apps and agent performance speak to BIDU's constrained AI edge. Organizational changes continued through 1H, refreshing leadership and trying to spark internal innovation, but this needs time to show up in numbers. Without a high-moat legacy backstop, there is no rush to price this in now. **Hence the thesis remains short-term, with little change in Q2:** excluding iQIYI and other equity holdings, Baidu Core is absorbing search-ecosystem erosion while benefiting from AI cloud's compute tailwind. The former drains cash, the latter supports the story, leaving the stock range-bound as bulls and bears offset each other. **Upside catalysts within the range hinge on capital access opening up—two key windows being Stock Connect inclusion and Kunlun Chip's listing.** Base case is both by year-end, while an optimistic timeline could see inclusion as early as early Sep, similar to Alibaba's path (Jul dual-primary announcement, Aug approval effective, Sep inclusion). **At $35.3bn mkt cap as of yesterday, even with a weak Q2, a simple valuation read implies sentiment is conservative:** Kunlun Chip is pegged at $40bn+, and after a 59% stake and a 30% IPO dilution, BIDU's holding is about $18.2bn. Under neutral-to-cautious assumptions for other businesses and using conservative methods, the SOTP can reach $44bn, implying ~25% upside vs. current. Institutions often add standalone valuations for Robotaxi and include net cash and the iQIYI stake. **Dolphin Research sees that as embedding too much extra premium:** add Robotaxi only if and when a split-off is in motion; include iQIYI only under an optimistic scenario given pressured fundamentals and volatile equity value; and do not add all net cash—at most reflect the $5bn buyback plan and a 5% shareholder return (if on plan, ~$1.6bn per year). **Therefore, expectations for inclusion plus buybacks could provide near-term support, and with earnings sentiment washed out, further downside looks limited.** Once concrete inclusion and Kunlun Chip catalysts arrive, a rebound is likely; after that plays out, further upside is constrained. Kunlun's early trading could see another pop, but timing risk is high and depends on individual risk appetite. **Dolphin Research on 'BIDU' (history):** **Recent earnings season** May 18, 2026 Trans '[BIDU (Trans): Full-stack AI edge lies in cost efficiency and deployment stability](https://longbridge.cn/topics/40885468?channel=SH000001&invite-code=355628&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=f3014d74-3683-4b95-a7bb-6f441db9885a)' May 18, 2026 Earnings take '[BIDU: Little help elsewhere, all-in on Kunlun Chip](https://longbridge.cn/topics/40881952?channel=SH000001&invite-code=355628&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=86283cb1-5edd-4107-bdd1-3ca02b7705ff)' Feb 26, 2026 Trans '[BIDU (Trans): Sharper focus on shareholder returns and execution](https://longbridge.cn/topics/38917013?channel=SH000001&invite-code=355628&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=72637625-3b78-4806-94ff-992efd680880)' Feb 26, 2026 Earnings take '[BIDU: Ad base eroded, is Kunlun Chip the lifeline?](https://longbridge.cn/topics/38912994?channel=SH000001&invite-code=355628&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=fa24cd37-32b5-4dba-9317-e6a3cdf399ba)' Nov 18, 2025 Trans '[BIDU (Trans): AI-native marketing as the second growth curve](https://longbridge.cn/topics/36483983?channel=SH000001&invite-code=355628&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=d9f048be-6399-45eb-9317-45a2f8c61d52)' Nov 18, 2025 Earnings take '[Leaning hard into AI storytelling—can BIDU be saved?](https://longbridge.cn/topics/36480554?channel=SH000001&invite-code=355628&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=03597d68-a7bf-460a-8e85-59a2b10f94f5)' **Risk disclosure and statement for this article:** [**Dolphin Research Disclaimer and General Disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [BIDU.US](https://longbridge.com/en/quote/BIDU.US.md) - [89888.HK](https://longbridge.com/en/quote/89888.HK.md) - [09888.HK](https://longbridge.com/en/quote/09888.HK.md) - [HBUD.SG](https://longbridge.com/en/quote/HBUD.SG.md) ## Related News & Research - [Trump-Backed World Liberty Partners With Platform Offering Chinese AI Models Flagged by US: Report](https://longbridge.com/en/news/296217305.md) - [China's Baidu Q2 revenue falls amid pressure on online marketing business](https://longbridge.com/en/news/296203059.md) - [3 arguments for and against AI watermarks](https://longbridge.com/en/news/296205500.md) - [Originalis AI Founding Engineer Ujjwal Jain Unveils AI System Processing Over 645,000 VC Email Threads](https://longbridge.com/en/news/296065185.md) - [The hottest AI models aren’t the ones developers actually use](https://longbridge.com/en/news/296083842.md)