BIDU 2Q26 First Take: results were a tale of two h

BIDU 2Q26 First Take: results were a tale of two halves, and overall underwhelmed.

Dolphin Research has long argued BIDU is a trading-range story this year.

Catalysts are Stock Connect inclusion and the Kunlun Chip IPO (both targeted within the year), with updates to watch on the earnings call.

1) Legacy ads show no turn yet: traditional advertising fell 19% YoY, a drag on the group.

While slightly better than expected, the QoQ downtrend has not eased meaningfully.

Momentum remains weak.

2) AI growth cooled: overall AI revenue growth slowed to 27% YoY.

AI apps and AI-native marketing have yet to see a clear rebound, though management guided last quarter for continued improvement in H2.

AI cloud infrastructure revenue was RMB 7.3bn, with YoY growth slowing to 50%.

Only the GPU cloud that sells raw compute kept strong traction, up 283% YoY, effectively stepping on the gas vs. Q1.

Other sub-segments were likely flat to down, potentially affected by private-cloud delivery timing.

The Street has cut fresh estimates, now below the BBG figures shown in the chart.

Taken together, AI performance mostly confirms capacity is tight in compute.

But BIDU’s LLM and agent offerings face heavy competition and lack a clear edge.

3) Profit improved, but new spend is coming: Q2 beat on the bottom line.

Higher compute pricing and tight opex control (notably sales and G&A) helped, and the YoY decline narrowed visibly.

Margins benefited from mix and discipline.

However, BIDU is still reshaping its AI org and hiring, notably changing leadership on the base LLM.

Capex more than doubled and beat expectations, reaching RMB 11.4bn in the quarter (45% of revenue), and may reflect procurement bunching and forward build-out.

This underscores commitment to model development, and we expect higher personnel and R&D spend in H2, so the pace of profit recovery may need to be tempered.

4) Buybacks slowed: BIDU repurchased $90mn in Q2, down from $170mn in Q1.

Under the 3-year $5bn plan, H1 buybacks totaled $260mn, implying sluggish execution.

Management typically adjusts pace with market cap swings, and the recent selloff could present a good window post-blackout.

Net cash reserves are sufficient to sustain the original buyback plan.

But the sharp Q2 Capex step-up suggests a balance between investment and repurchase.

For more, follow Dolphin Research’s follow-up take and Trans. $Baidu(BIDU.US) $BIDU-SW(09888.HK)