Baidu Inc. fell 7.4% in premarket trading on Tuesday after reporting second-quarter results that missed analyst expectations, with earnings per share and revenue trailing estimates.
The Chinese internet giant posted earnings per share of ¥7.22, down 26.6% from the ¥9.84 forecast, while revenue totaled ¥31.33 billion, below the projected ¥34.1 billion. Core advertising revenue, which has declined for four consecutive quarters, dropped 19% year-over-year to ¥13.1 billion, reflecting structural shifts in digital marketing as users migrate from traditional search to AI-driven platforms and e-commerce firms redirect budgets toward user subsidies.
AI cloud infrastructure revenue rose 50% year-over-year to ¥7.3 billion, while GPU cloud revenue surged 283%, accelerating from 184% growth in the prior quarter. Despite these gains, Baidu reported a negative free cash flow yield of -4.0% and a near-zero return on equity of 0.1%, underscoring the financial strain from heavy AI investment.
Analysts have trimmed earnings forecasts, with Bank of America reducing its price target to $165 from $180 while maintaining a Buy rating, and Barclays maintaining an Equal Weight rating with a $124 target. The stock, trading at $96.38 premarket, carries a forward P/E of 14.1x and an EV/EBITDA of 3.4x.
Technical indicators signal bearish momentum, with the stock trading below all major moving averages and technical readings such as the RSI at 37.95 and MACD at -1.87. Bank of America’s fair value estimate of $132.11 implies a 26.9% upside from current levels, though management has warned of higher AI spending in the second half of 2026, which may further pressure margins.
