How BIDU (Baidu) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a technology giant like Baidu makes money is essential for investors and anyone interested in the business of internet services and AI. In this post, we break down Baidu's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick Baidu Overview

Baidu operates as China's leading internet search and AI company, providing search services, online marketing, cloud computing, and video streaming through its core platform and iQIYI subsidiary. Revenue comes primarily from online marketing in Baidu Core and membership/subscription fees in iQIYI. The company focuses on AI-driven innovations like ERNIE models and Apollo autonomous driving, alongside its dominant search market position.

Revenue Breakdown

• Total Revenue (Q3 2025): $4.36B (-7.1% YoY)
  • Total Baidu Core Revenue: $3.45B (79.1% of total, -7.0% YoY)
  • Total iQIYI Revenue: $0.93B (21.4% of total, -7.8% YoY)
  • Other Revenue by Product: -$0.02B (-0.5% of total, -21.6% YoY)
  • Growth is powered by AI cloud services and advertising resilience, despite macroeconomic headwinds in China.

Gross Profit and Margins

• Gross Profit: $1.80B (41.2% gross margin)
  • Cost of Revenue: $2.56B (+11.7% YoY)
  • Baidu maintains robust margins due to its scalable digital business model and efficiencies in content delivery and cloud infrastructure.
• Most costs come from server operations, content acquisition for iQIYI, and bandwidth expenses.

Operating Income and Expenses

• Operating Income: -$2.11B (negative due to high expenses, operating expenses up 148.8% YoY)
• Operating Expenses: $3.91B (+148.8% YoY)
  • R&D: $0.72B (-3.5% YoY, 16.6% of revenue) — focused on AI models like ERNIE, autonomous driving via Apollo, and cloud computing advancements
  • SG&A: $0.92B (+12.2% YoY, 21.1% of revenue) — covers sales, marketing, and administrative functions amid competitive pressures
  • Baidu continues to prioritize innovation while expanding operations in AI and international markets.

Net Income

• Pre-Tax Income: Not specified in available data (inferred positive after other income)
• Income Tax: Not specified (effective tax rate not available)
• Net Income: $1.57B (0.0% YoY, 36.0% net margin)
• Baidu converts a significant portion of sales into profit due to scalability, other income streams like investments $692.7M, and pricing power in search advertising.

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What Drives Baidu's Money Machine?

• Online Marketing in Baidu Core: 79.1%+ of revenue / performance-based ads on search and feed, resilient despite economic slowdown
• AI Cloud Growth: Key metric with accelerating adoption, contributing to core revenue stabilization
• R&D Investments: Heavy spending on generative AI and robotics to build long-term moats
• Future growth areas: iQIYI streaming expansions and Apollo robotaxi services, though not yet profitable amid content and development costs

Visualizing Baidu's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially R&D and SG&A) taking the largest chunk.
• Even after significant costs, 36.0% of revenue drops to the bottom line, boosted by other income.

Key Takeaways

• Baidu's money comes overwhelmingly from Baidu Core online marketing
• High gross and net margins illustrate the power of Baidu's asset-light digital platform
• Heavy investment in AI R&D, balanced by efficiency in core operations
• Ongoing growth is driven by AI cloud and advertising recovery

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FAQ About Baidu's Income Statement

1. What is the main source of Baidu's revenue in 2025?

Baidu generates over 79.1% of its revenue from Total Baidu Core Revenue, primarily online marketing. iQIYI adds 21.4% from video streaming and memberships.

2. How profitable is Baidu in Q3 2025?

Baidu reported net income of $1.57B in Q3 2025, with a net margin of approximately 36.0%, reflecting strong profitability driven by gross margins and other income despite high operating expenses.

3. What are the largest expense categories for Baidu?

The biggest expenses on Baidu's income statement are operating expenses, particularly Research & Development (R&D) and Sales, General & Administrative (SG&A) costs. R&D investment reached $0.72B in Q3 2025, as Baidu prioritizes AI, cloud, and autonomous driving.

4. Why does iQIYI operate at a loss?

iQIYI, despite generating $0.93B in revenue, contributes to overall operating losses as Baidu aggressively invests in content acquisition and technology, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does Baidu's effective tax rate compare to previous years?

Baidu's effective tax rate in Q3 2025 was not specified in available data. This moderate rate is primarily due to international structuring and tax benefits from operations in China.