Baidu Swings the Ax: Massive Layoffs Rock Core Business Amid AI-Driven Strategy Shift

Baidu, one of China’s leading search and technology companies, has initiated a major restructuring effort following a weak performance in the third quarter of 2025. The firm reported its steepest revenue decline since going public and posted a substantial net loss, which it attributed to sluggish results from core businesses and significant write-downs on long-term assets.

During the quarter, Baidu generated RMB 31.2 billion (about USD 4.39 billion) in revenue, representing a drop of more than 7% compared with the same period a year earlier. The decline was largely traced to its online marketing division—still the company’s largest revenue contributor—which saw sales fall over 10% year-on-year to RMB 15.3 billion. As a result, Baidu recorded a net loss of RMB 11.23 billion. Much of this loss stemmed from an impairment charge of RMB 16.2 billion on older infrastructure deemed insufficient for newer computing demands. Without this one-time item, Baidu would have reported a profit of roughly RMB 2.6 billion. Executives acknowledged that the move toward AI-centered operations will likely strain earnings and margins in the near term.

In reaction to the downturn, the company has launched sizable layoffs that are expected to continue through the end of the year. Employees indicated that the reductions are substantial, with some groups experiencing cuts of as much as 40%. The Mobile Ecosystem Group, responsible for traditional advertising services, is bearing most of the impact. Meanwhile, positions tied to AI development and cloud services are largely being maintained, signaling a reallocation of resources toward faster-growth areas.

Despite weaker results in its legacy operations, Baidu’s AI-related businesses are expanding quickly. Revenue from its AI Cloud division climbed to RMB 6.2 billion, up more than 20% from the prior year. Subscription-based offerings for AI accelerator infrastructure grew especially fast, rising over 125% year-over-year. AI-driven marketing tools—such as automated agents and digital human technologies—also gained traction, increasing more than 260% and contributing 18% of Baidu Core’s marketing revenue. In mobility services, Apollo Go, the company’s autonomous ride-hailing platform, completed 3.1 million fully driverless trips in the quarter, more than triple the volume from a year earlier, bringing total cumulative rides past 17 million.

Baidu is still facing challenges in driving widespread adoption of its AI applications. Although the ERNIE model was an early entrant in China’s large-language-model landscape, it lags competitors in user activity. Nevertheless, the company continues to embed AI into its ecosystem, with about 70% of mobile search outputs now incorporating AI-generated results. Analysts caution that weakness in the advertising sector will likely persist, underscoring the difficulty of transforming Baidu into an AI-first organization while managing short-term financial pressures.