Baidu Stock Drops After Earnings. What’s Worrying Markets.

Baidu reported second-quarter earnings ahead of Wednesday’s opening bell. (JADE GAO/AFP via Getty Images)

Baidu stock was falling Wednesday after slowing advertising revenue weighed on the Chinese search-engine provider’s profit.

The company’s American depositary receipts fell 3% to $86.42 ahead of the U.S. opening bell. The S&P 500 slid 0.1%.

The move higher after Baidu reported an adjusted second-quarter net income of 6.47 billion yuan ($669 million), down 35% from a year ago. Revenue slid 4% from a year ago to ¥32.45 billion ($4.57 billion). Analysts were expecting net income of $543 million on revenue of $4.57 billion, according to a FactSet poll.

Baidu’s advertising business has faced headwinds over the past year amid worries about faltering demand in China, as well as the rise of AI-powered search engines. Online marketing revenue dropped 15% from a year ago to $2.27 billion.

“Baidu’s advertising business is under increasing pressure,” ThirdBridge analyst Eric Shen said. “The company’s search arm, once a dominant cash generator, now faces stiff competition from Xiaohongshu and Douyin. These rivals have built content ecosystems that feel livelier and stickier, drawing users away.”

Offsetting that was solid-enough demand for the company’s other products. Non-advertising revenue jumped 34% from a year ago to $1.40 billion, which the company said was “primarily driven by the boost of AI Cloud business.”

Write to George Glover at george.glover@dowjones.com