A prolonged downturn in China's property sector and weak consumer spending have led businesses to cut marketing budgets, weighing on advertising demand and pressuring Baidu's online marketing business.
The company reported a 4% decline in revenue to 31.33 billion yuan ($4.65 billion) in the second quarter, compared with analysts' average estimate of 31.96 billion yuan, according to data compiled by LSEG.
The online marketing services segment reported total revenue of 13.1 billion yuan in the quarter ended June, down 19% from a year ago.
However, the company's AI-related businesses stood out, as businesses' adoption of AI drove demand for Baidu's cloud infrastructure.
Revenue from its Core AI-powered Business, which includes cloud computing and AI applications, rose 25% year-on-year to 12.5 billion yuan.
Baidu has been increasing spending on AI infrastructure and talent, which analysts say could continue to pressure margins even as AI-related revenue grows.
Even so, Baidu has fallen behind Chinese rivals such as ByteDance and Alibaba (9988.HK) in the race to develop AI technologies and products.
Its Ernie large language model has gone months without a major upgrade, while competitors have continued to roll out newer versions of their models.
($1 = 6.7423 Chinese yuan renminbi)
