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Baidu's AI Cloud Gains Traction: Can it Fuel Long-Term Growth?

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Key Takeaways

  • Baidu's AI Cloud revenues rose 27% year over year to RMB 6.5B, lifting non-GAAP operating profit.
  • Advances in ERNIE models and Qianfan MaaS boost enterprise adoption and lower inference costs.
  • Partnerships and the ERNIE X1.1 launch highlight Baidu's push to lead in AI innovation and services.

Baidu, Inc. (BIDU - Free Report) is gaining momentum in its AI cloud business, which is shining bright despite broader revenue challenges. Revenues from AI Cloud jumped 27% year over year to RMB 6.5 billion, with non-GAAP operating profit also rising. The growth stemmed from strong enterprise demand for model hosting, inference and subscriptions. Steady gains in subscription revenues made the company’s enterprise cloud more predictable and sustainable.

A key driver of this momentum is Baidu’s 4-layer AI architecture, which integrates infrastructure, frameworks, models and applications. Recent breakthroughs in resource utilization have significantly reduced inference costs, boosting the competitiveness of its offerings. The Qianfan MaaS platform also gained traction, with an expanded library that now includes the open-sourced ERNIE 4.5 series and multiple third-party models, giving enterprises greater flexibility in deploying AI solutions.

Partnerships with organizations like the Shenzhen Institute of Artificial Intelligence and Black Sesame Technologies further validate Baidu’s competitive edge in AI cloud infrastructure. Baidu strengthened its AI ecosystem with the launch of ERNIE X1.1 at the Wave Summit in September 2025. The advanced reasoning model excels in creative writing, coding and mathematics, rivaling top global models like GPT-5 and Gemini 2.5 Pro. This upgrade highlights Baidu’s push to enhance its ERNIE series and solidify leadership in AI innovation.

Despite continued declines in advertising revenues, the steady expansion of AI clouds signals a shift toward a more resilient model. The long-term opportunity lies in Baidu's ability to scale high-margin AI services and accelerate the monetization of its AI-powered products, potentially transforming its revenue model from ad-dependent to AI-led growth.

BIDU Faces Stiff Competition in AI-Cloud Space

Alibaba (BABA - Free Report) has been aggressively investing in its AI and cloud infrastructure. Over the next three years, it plans to spend $52-$53 billion in AI and cloud. In the first quarter of fiscal 2026, Alibaba’s cloud segment revenues rose 26%, with AI-related product revenues showing triple-digit increases. Alibaba’s vast ecosystem in e-commerce, logistics and payments fuels internal adoption and subsidizes innovation, while its “Qwen” LLM family attracts strong enterprise uptake. Compared to Baidu, Alibaba’s larger cloud scale and diversified revenue base provide a stronger foundation and maintain competitiveness.

Amazon (AMZN - Free Report) , through Amazon Web Services (AWS), remains the global leader, holding about 30% of the global cloud market share, maintaining clear leadership through its vast IaaS, PaaS and AI services portfolio. AWS combines global scale, regulatory compliance and enterprise trust with specialized AI offerings like SageMaker, Trainium-powered EC2 and Bedrock for foundation models. In comparison, Baidu remains localized, excelling in Chinese-language AI and regulation-specific use cases. AWS’ scale, infrastructure depth and global ecosystem make it a superior competitor in AI Cloud.

BIDU’s Price Performance, Valuation & Estimates

Baidu’s shares have gained 36.2% in the year-to-date period, outperforming the Zacks Internet - Services industry and the Zacks Computer and Technology sector’s growth of 34.1% and 22.4%, respectively.

BIDU’s YTD Price Performance

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From a valuation standpoint, BIDU’s forward 12-month price/earnings ratio is 17.87, far below the industry average of 25.06. BIDU has a Value Score of B.

BIDU’s Valuation

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The Zacks Consensus Estimate for the full-year 2025 earnings is pegged at $8.32 per share, down by 3.9% over the past 30 days, indicating a 20.99% year-over-year decline.

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Baidu currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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