Why Baidu Stock Plunged Today
Key Points
Baidu's quarterly results were disappointing to investors.
The company has been investing heavily in AI, but its results continue to lag.
- 10 stocks we like better than Baidu ›
Shares of Baidu (NASDAQ: BIDU) fell sharply on Tuesday, falling as much as 11.6%. As of 11:32 a.m. ET, the stock was still down 11.4%.
The catalyst that sent the Chinese tech giant lower was news that its heavy investment in artificial intelligence (AI) isn't paying off quickly enough for Wall Street.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
Heavy investment, little return
Baidu reported its second-quarter results, and to say investors were disappointed might be putting it mildly. Revenue of RMB 31.3 billion (roughly $4.62 billion) fell 4% year over year, with declines across the major operating units. Revenue from its general business declined 3% to $3.71 billion, while revenue from iQIYI -- its majority-owned streaming service -- slipped 5% to $927 million.
If the top-line results were disappointing, the bottom line was doubly so. Diluted earnings per American Depository Share (ADS) of RMB 5.74 (about $0.85) plunged 72%.
For context, analysts' consensus estimates called for revenue of RMB 31.95 billion and earnings per ADS of RMB 9.84, so Baidu missed expectations by a country mile.
Perhaps most concerning was that the company's legacy ad business continued to struggle, as online marketing revenue fell 19% year over year.
There were some green shoots, as Baidu's AI-powered core business grew 25% year over year, driven higher by its AI cloud, which jumped 50%. AI applications edged 3% higher, while its AI-based marketing services were flat.
Baidu continues to invest heavily in its AI-powered future, with capital expenditures (capex) of RMB 11.4 billion (about $1.68 billion), triple the RMB 3,800 it spent in the prior-year quarter. It's clear investors had hoped that spending of that magnitude would yield more impressive results.
At 71 times trailing-12-month earnings, Baidu is selling for a premium. However, at just 13 times forward earnings, it represents a high-risk, high-reward proposition. Let the buyer beware.
Should you buy stock in Baidu right now?
Before you buy stock in Baidu, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Baidu wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $409,970!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,381,040!*
Now, it’s worth noting Stock Advisor’s total average return is 969% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of August 18, 2026.
Danny Vena, CPA has positions in Baidu. The Motley Fool has positions in and recommends Baidu. The Motley Fool recommends iQIYI. The Motley Fool has a disclosure policy.
Recommended Articles
