Baidu Layoffs Signal Struggles in AI and Ad Revenue

China’s Baidu has initiated a significant wave of layoffs this week, impacting several key business units across the company. The workforce reduction follows the firm’s announcement of a substantial third-quarter loss and a decline in advertising revenue. This large-scale move is seen as a direct response to intensifying competition within the rapidly evolving artificial intelligence sector. Sources close to the matter indicate these cuts are expected to continue through the end of the current year.

Scope of the Restructuring

The cuts are widely perceived internally to be large-scale, although a precise company-wide total has not been publicly confirmed. Specific teams within certain business units could see reductions reaching as high as 40%, contingent upon their individual performance ratings. Reporting suggests the Mobile Ecosystem Group (MEG) will be the unit most severely affected by this restructuring effort. Conversely, positions critical to Artificial Intelligence (AI) and cloud computing are expected to be largely protected during this process.

Baidu’s workforce stood at 35,900 employees at the close of last year, already reflecting a continuous downward trend. The headcount had previously decreased from 39,800 in 2023 and 41,300 in the year prior, according to company reports. One source noted that the firm plans to redirect greater financial and human resources specifically toward AI development going forward. These job reductions align with broader cost-cutting measures recently adopted by major Chinese internet companies operating in a fiercely competitive market.

Financial Downturn and Market Erosion

The decision to execute mass layoffs comes after Baidu reported its second consecutive quarterly revenue decline. Total revenue dropped by 7% during the third quarter, while the core online advertising revenue experienced an 18% fall. Furthermore, the company posted a net loss of 11.23 billion yuan (approximately $1.59 billion) for the reporting period. This performance signals major challenges in maintaining profitability within Baidu’s traditionally dominant search business stream.

The company’s online advertising segment has consistently ceded market share to rival social media and short-video platforms. Competitors like ByteDance’s Douyin and the lifestyle platform RedNote have successfully captured a significant portion of advertiser spending. Baidu has heavily invested in AI for several years, yet these efforts have not yet managed to revive growth in its core revenue source. Ultimately, this market erosion highlights the difficulty Baidu faces in monetizing its established digital ecosystem against newer models.

Lagging AI Adoption

Baidu was notably the first major Chinese technology company to launch a ChatGPT-style service in 2023. Despite this early lead, the company’s Ernie large language model (LLM) has struggled to maintain its competitive position against rivals. Key competitors include established giants like Alibaba and the emerging AI startup DeepSeek, which have gained significant traction. The strategy has included multiple shifts, such as an attempt to open-source the model earlier this year, yet adoption still lags.

Adoption rates for Baidu’s Ernie Bot application significantly trail those of its market peers. Data from AI product tracker Aicpb.com showed that Ernie Bot had only 10.77 million monthly active users in September. This figure is starkly lower than the 73.4 million reported for DeepSeek and the 150 million users claimed by ByteDance’s Doubao. Baidu remains focused on embedding AI technology directly into its existing portfolio, claiming over half of its mobile search result pages now feature AI-generated content.