By Adam Clark and George Glover

Baidu stock was falling on Tuesday after a slowdown in advertising spending dragged down the Chinese search-engine provider's quarterly revenue.

American depositary receipts slipped 2.4% to $95.19 in premarket trading. Futures tracking the S&P 500 were up 0.3%.

Baidu reported its fourth-quarter earnings ahead of the opening bell. The company posted an adjusted net profit of 4.72 billion yuan, as revenue fell 2% from a year ago to 34.12 billion yuan. Analysts polled by FactSet were expecting profit of 4.96 billion yuan on revenue of 33.24 billion yuan.

The results show that the surge in demand for Baidu's AI business, which includes its ERNIE chatbot, wasn't enough to offset a drop in advertising revenue as Beijing struggles to revive China's faltering economy. Online marketing revenue dropped 7% from a year ago to 17.9 billion yuan.

This is breaking news. Read a preview of Baidu's earnings below and check back for more analysis soon.

Baidu is set to report its fourth-quarter earnings Tuesday. The Chinese search-engine company needs to reassure the market that it's still in contention to be one of China's leading artificial-intelligence providers.

Baidu is expected to post a 44% jump in net profit to 3.75 billion yuan ($517 million), according to a FactSet poll of analysts' estimates, when it reports results before the U.S. market opens. Revenue is expected to fall, though, to 33.25 billion yuan for the quarter, down from 34.95 billion yuan a year earlier.

The contrasting directions are a reflection of Baidu's problems with declining advertising revenue in a sluggish Chinese economy, as opposed to its growing AI business. Analysts at Benchmark Research forecast Baidu's core advertising revenue will fall 6.6% from the prior year but its cloud business -- which houses AI services -- will grow 13%.

Baidu said last week it would offer its Ernie AI chatbot at no cost to both desktop and mobile users, from April 1. Baidu is also launching a "deep search" function, designed to handle more complex tasks with reasoning, also free. That came after it reportedly lost out in a race to be the AI provider for Apple devices in China to domestic rival Alibaba.

Concerns over Baidu's position in the AI race looked to become more acute on Monday after its CEO Robin Li appeared to be absent from a meeting between President Xi Jinping and tech leaders. Baidu's Hong Kong-listed shares dropped 6.9%.

Baidu didn't immediately respond to a request for comment on Monday.

Write to Adam Clark at adam.clark@barrons.com

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February 18, 2025 06:03 ET (11:03 GMT)

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