Baidu (NASDAQ:BIDU) just posted its third straight quarter of revenue declines, down 2% to 34.12 billion yuan ($4.69 billion). But here's the twistprofit more than doubled to 5.19 billion yuan, crushing analyst expectations. The core ad business took a 7% hit as China's struggling economy forced businesses to cut marketing budgets. Still, AI Cloud picked up the slack, soaring 26% year over year. Investors are watching closely as Baidu pushes deeper into AI, trying to move beyond its reliance on search ads.

• Warning! GuruFocus has detected 3 Warning Sign with BIDU.

The company is going all-in on AI, making its chatbot free in April and open-sourcing its next-gen models to stay competitive. But the landscape is shifting fast. DeepSeek and ByteDance's Doubao are gaining ground, putting pressure on Baidu to prove Ernie can hold its own. The company isn't stopping at AIits Apollo Go robotaxis just secured approval for self-driving tests in Hong Kong, signaling a push into autonomous vehicles. Whether this pivot is enough to offset advertising losses remains the big question.

Investors aren't fully convinced yet. Baidu's stock slipped nearly 1.5% at 7.55am, premarket trading as concerns linger over its ability to turn AI into a consistent revenue stream. But there's a wildcardBeijing's stance on tech is warming up. President Xi just met with top industry leaders, hinting at more private sector support. If China follows through, Baidu could be in prime position to capitalize on the AI boom while stabilizing its core business.