Baidu's consolidated revenue fell 4% year over year to RMB31.325 billion ($4.617 billion), its second consecutive sequential decline. AI-powered revenue grew 25% to RMB12.5 billion and GPU Cloud's year-over-year growth rate accelerated to 283%, but AI-powered revenue and AI Cloud Infra both declined from an unusually strong first quarter. Legacy Business and iQIYI remained the main revenue headwinds. Operating profitability was comparatively resilient, while capital expenditures nearly doubled sequentially to RMB11.39 billion and pushed free cash flow to negative RMB7.954 billion.
Consolidated revenue fell for a second straight quarter. Exact RMB values are shown because the percentage changes are small.
AI reached half of Baidu General Business, but its increase did not offset the combined decline in Legacy and Others. This mix excludes iQIYI.
Consolidated revenue also includes iQIYI and intersegment eliminations. iQIYI contributed RMB6.287 billion, down 5% year over year. Within Baidu General Business, an approximately RMB2.5 billion increase in AI-powered revenue did not offset declines of roughly RMB3.2 billion in Legacy and RMB0.4 billion in Others. AI's revenue share slipped from 52% in Q1 to 50%.
Over twelve months, another 23% Legacy decline would reduce revenue from RMB10.4 billion to roughly RMB8.0 billion. AI-powered Business would then need to reach about RMB14.9 billion, or grow 19%, to keep Baidu General Business approximately flat if Others is unchanged. If Others also falls 15%, AI would need roughly RMB15.2 billion, or 22% growth. This independent scenario is not guidance, consensus or a next-quarter forecast.
GPU Cloud's year-over-year growth rate accelerated, while the broader AI Cloud Infra business declined sequentially after a particularly strong Q1.
Baidu did not disclose GPU Cloud's absolute revenue; the left panel shows a growth rate only and does not share a scale with the RMB figures on the right.
AI Applications generated about RMB2.5 billion, up 3% year over year, while AI-native Marketing Services produced about RMB2.6 billion, roughly flat year over year.
GAAP net income attributable to Baidu fell 68% to RMB2.319 billion, or RMB5.74 per diluted ADS ($0.85). Non-GAAP net income, excluding selected accounting items, declined 46% to RMB2.573 billion, or RMB7.22 per ADS ($1.06).
Total other income, net, fell by about RMB4.679 billion, mainly because of a smaller investment fair-value gain and a larger foreign-exchange loss. This explains most of the GAAP net-income decline but does not measure operating cash flow.
Non-GAAP operating margins weakened, while GAAP operating margin and adjusted EBITDA margin were broadly stable. The two reporting scopes should not be compared directly.
Operating cash flow improved to RMB3.436 billion, but capex rose 93% sequentially to RMB11.390 billion. Free cash flow therefore deteriorated from negative RMB3.246 billion in Q1 to negative RMB7.954 billion.
Improved operating cash flow could not offset the near-doubling of capex, leaving free cash flow almost negative RMB8 billion. This reflects investment spending, not an accounting loss.
Baidu retains balance-sheet capacity, but quarterly operating cash flow does not cover the current investment program. Financing cash inflow was approximately RMB17.4 billion, while short-term loans rose from RMB7.6 billion at year-end 2025 to RMB26.3 billion.
Total cash and investments were RMB283.1 billion, a broad company-defined measure; the more liquid subtotal was about RMB166.4 billion. Baidu also repurchased approximately $259 million of shares in 2026 through the reporting date despite negative Q2 free cash flow.
Apollo Go expanded to 28 cities and passed 350 million cumulative autonomous kilometers, including more than 240 million fully driverless. Operations or testing advanced in Dubai, London, Switzerland and Hong Kong. Baidu does not disclose separate Apollo Go revenue or profitability.
Baidu is also pursuing a dual-primary Hong Kong listing, subject to shareholder and exchange approval. This is a capital-markets change, not a Q2 operating driver.
Baidu's AI transition is real but uneven: AI grew year over year, sequential momentum weakened, and Legacy plus iQIYI remained headwinds. Margins were comparatively resilient, but heavy investment left free cash flow deeply negative.
Can Baidu's AI-powered Business regain sequential growth fast enough to offset Legacy Business and iQIYI while sustained AI investment keeps free cash flow deeply negative?