Baidu (BIDU -1.98%), the largest online search engine provider in China, was once considered a great growth stock. It went public in 2005, and its annual revenue grew at a CAGR of 45% from 319 million yuan in 2005 to 124.5 billion yuan ($19.5 billion) in 2021.
The Chinese tech giant experienced a major growth spurt after cybersecurity and censorship issues drove Alphabet's Google to shutter its search engine in mainland China in 2010. Its stock closed at a record high of $339.91 on Feb. 19, 2021, which represented a 12,489% gain from its split-adjusted IPO price of $2.70 per share.
Image source: Getty Images.
But from 2021 to 2024, Baidu's revenue only grew at a CAGR of 2%. Its ad sales cooled off as it dealt with fierce macro headwinds in China and intense competition from ByteDance's Douyin (known as TikTok in overseas markets), Tencent's Weixin (also known as WeChat), and other nimbler apps that changed how people conducted online searches.
That's why its stock now trades at about $88. It's up less than 4% year to date, even as lower interest rates and milder macro headwinds drove many investors back toward tech stocks. Let's see why Baidu isn't impressing the bulls -- and what it would take for its stock to soar again.
The biggest challenges for Baidu
Back in 2021, Baidu generated 78% of its revenue from its online marketing services segment, which sells traditional search-based and display ads. That business is struggling to stay relevant as more internet users shift their searches to the newer mobile apps. To offset that pressure, Baidu expanded its AI Cloud platform to boost its non-online marketing services revenue. That business grew much faster than its online marketing business over the following years.
In 2024, Baidu only generated 55% of its revenue from its online marketing services, while 24% of its revenue came from its non-online marketing services. The rest mainly came from its streaming video platform iQiyi (IQ -1.09%), which struggled over the past year as it launched fewer hit shows and attracted fewer advertisers.
|
Metric |
2021 |
2022 |
2023 |
2024 |
Q1 2025 |
|---|---|---|---|---|---|
|
Online marketing services revenue growth (YOY) |
12% |
(6%) |
8% |
(3%) |
(6%) |
|
Non-online marketing services revenue growth (YOY) |
71% |
22% |
9% |
12% |
40% |
|
Total revenue growth |
16% |
(1%) |
9% |
(1%) |
3% |
Data source: Baidu. RMB terms. YOY = Year over year.
Baidu's non-online marketing services segment is growing rapidly as the AI boom drives more businesses to its AI Cloud platform -- which bundles together its ERNIE large language model (LLM) for generative AI applications, self-developed AI chips (including its Kunlun 800) for servers, data storage and analytics tools, and cloud infrastructure services. Its AI Cloud is also tethered to Apollo, its open-source software platform for driverless vehicles.
Baidu's goal is to keep expanding its non-online marketing services segment to curb its dependence on its fading online marketing services segment. It's also been reportedly mulling a full spinoff or divestment of iQiyi over the past few years. That sale would free up a lot of cash for the expansion of its AI Cloud business.
Why didn't Baidu's stock impress the bulls this year?
For 2025, analysts expect Baidu's revenue to stay nearly flat as its EPS drops 17%. Its online marketing services and iQiyi segments should remain weak, but its AI Cloud business could grow rapidly enough to offset those declines. However, its earnings will be reduced by its higher investments in its AI Cloud platform, driverless vehicles, and fresh media content for iQiyi.
That mix of flat revenue growth and rising expenses, along with the macro pressure from the unresolved tariffs and trade issues between China and the U.S., made Baidu a tough stock to love.
Baidu's stock seems cheap at 12 times this year's earnings, but it might deserve that discount valuation. Meanwhile, China's e-commerce and cloud leader Alibaba -- which is growing faster and more broadly diversified -- might be a better value at 17 times this year's earnings.
For 2026, analysts expect Baidu's revenue and EPS to grow 5% and 3%, respectively. That stabilization would be a step in the right direction, but Baidu would still be a slow-growth stock with limited upside potential. Unless Baidu finds fresh ways to ignite its growth -- possibly by spinning off its weaker segments -- it will likely stay in the penalty box.
