How BIDU (Baidu) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a Chinese technology leader like Baidu (formerly known as Baidu, Inc.) makes money is essential for investors and anyone interested in the business of AI-powered internet services and digital media. In this post, we break down Baidu's quarterly income statement (Q2 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 a leading provider of internet search, AI cloud services, and online video streaming through its core Baidu business and subsidiary iQIYI. Revenue comes primarily from digital advertising, cloud computing, and subscription-based streaming services. The company’s business segments include Baidu Core (search, cloud, AI solutions) and iQIYI (online entertainment and video streaming).

Revenue Breakdown

• Total Revenue (Q2 2025): $4.52B (-3.6% YoY)
  • Total Baidu Core Revenue: $3.63B (80.2% of total, -1.6% YoY)
  • Total iQIYI Revenue: $0.92B (20.3% of total, -10.9% YoY)
  • Other Revenue by Product: -$0.02B (0.5% of total, -14.9% YoY)
• Growth is powered by AI cloud adoption, digital advertising demand, and premium content subscriptions, though iQIYI faced headwinds.

Gross Profit and Margins

• Gross Profit: $1.99B (43.9% gross margin)
  • Cost of Revenue: $2.54B (+11.9% YoY)
  • Baidu maintains moderate margins due to its scalable digital business model and ongoing operational efficiencies.
• Most costs come from content acquisition, cloud infrastructure, and traffic acquisition costs.

Operating Income and Expenses

• Operating Income: $0.45B (-44.9% YoY, 10.0% margin)
• Operating Expenses: $1.53B (-4.4% YoY)
  • R&D: $0.71B (-13.1% YoY, 15.6% of revenue) — Focused on AI, autonomous driving, and cloud technologies
  • SG&A: $0.82B (+4.6% YoY, 18.2% of revenue) — Includes sales, marketing, and administrative support for business expansion
  • Baidu continues to prioritize innovation in AI and cloud while maintaining efficiency in its core operations.

Net Income

• Pre-Tax Income: $1.13B (+21.2% YoY, 24.9% margin)
• Income Tax: $0.12B (10.8% effective tax rate)
• Net Income: $1.01B (+33.4% YoY, 22.4% net margin)
• Baidu converts a significant portion of sales into profit due to its scalable platform and strong pricing power in core markets.

What Drives Baidu's Money Machine?

• Digital Advertising & AI Cloud: Over 80% of revenue comes from Baidu Core, driven by search advertising and cloud solutions.
• User Engagement: Baidu’s platforms reach hundreds of millions of users monthly, supporting robust ad demand and cloud growth.
• Strategic R&D Investment: $0.71B invested in Q2 2025, targeting AI, autonomous vehicles, and next-gen cloud infrastructure.
• Future Growth Areas: Autonomous driving and generative AI, though not yet profitable, are positioned for long-term expansion.

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 large investments in AI and cloud, 22.4% of revenue drops to the bottom line.

Key Takeaways

• Baidu's money comes overwhelmingly from digital advertising and AI cloud services
• High gross and net margins illustrate the power of Baidu's scalable, data-driven business model
• Heavy investment in AI and autonomous driving, balanced by efficiency in operating costs
• Ongoing growth is driven by cloud adoption, premium content, and next-gen AI technologies

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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 80% of its revenue from digital advertising and AI cloud services via Baidu Core. iQIYI streaming subscriptions contribute about 20%, but declined in Q2 2025.

2. How profitable is Baidu in Q2 2025?

Baidu reported net income of $1.01B in Q2 2025, with a net margin of approximately 22.4%, reflecting strong profitability driven by scalable digital operations and pricing power.

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) at $0.71B and Sales, General & Administrative (SG&A) at $0.82B in Q2 2025, as Baidu prioritizes AI, cloud, and business expansion.

4. Why does iQIYI operate at a loss?

iQIYI, despite generating $0.92B in revenue, posted an operating loss in Q2 2025 because Baidu aggressively invests in premium content acquisition and platform growth, believing these will drive long-term user engagement—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 Q2 2025 was 10.8%, lower than previous years. This moderate rate is primarily due to tax benefits from share-based compensation and international structuring.