(Yicai) May 22 -- Baidu's shares fell despite the Chinese tech giant reporting strong first-quarter earnings buoyed by breakthroughs in artificial intelligence and autonomous driving.

Baidu [HKG: 9888] was trading down 4.6 percent at HKD82.15 (USD10.50) as of 2 p.m. in Hong Kong today. Its New York-listed stock [NASDAQ: BIDU] dropped 4.3 percent to USD85.48 yesterday.

Net profit widened 42 percent to CNY7.7 billion (USD1.1 billion) in the three months ended March 31 from a year earlier, the Beijing-based company said in its first-quarter financial statement released yesterday. Revenue rose 3 percent to CNY32.5 billion (USD4.5 billion).

Compared to Tencent Holdings, Alibaba Group Holding, and JD.Com, Baidu logged a relatively modest 3 percent revenue growth in the first quarter, according to analysts. The three others saw their revenues climb 13 percent, 7 percent, and 16 percent, respectively, in the period.

Baidu Core's net profit jumped 48 percent to CNY7.6 billion in the period. Revenue increased 7 percent to CNY25.5 billion, of which revenue from online marketing fell 6.4 percent to CNY16 billion, and non-online marketing revenue soared 40 percent to CNY9.4 billion.

"Baidu Core revenue grew 7 percent year over year in the first quarter, driven by the accelerating momentum of AI Cloud," said Robin Li, Baidu's co-founder and chief executive officer. "We are confident that our AI-first strategy positions us to remain at the forefront and to capture long-term growth opportunities in the AI era."

AI Push

Baidu AI Cloud Group generated CNY6.7 billion in revenue in the first quarter of the year, a 42 percent increase from a year earlier, according to data released by Baidu during the earnings conference call. AI Cloud accounted for 26 percent of Baidu Core's total revenue in the period, up from 20 percent.

AI Cloud's non-generally accepted accounting principles operating margin has reached the 'teens' level, Shen Dou, executive vice president of Baidu and president of AI Cloud, said during the conference call.

Baidu's technology advancements continued in March with the release of Ernie 4.5, its first multimodal foundation model, and Ernie X1, its first reasoning model. The enhanced Turbo versions of the two models, which launched in April, delivered improved performance at much lower prices, addressing market demands for cost-effective AI solutions.

Baidu's search transformation is also accelerating, with AI-generated content now accounting for 35 percent of mobile search results in April, up from 22 percent in January. This rapid growth reflects improving model capabilities and user experience, with AI-exposed users showing stronger retention and query exploration patterns.

"We have established a solid product framework that incorporates multimedia content, helping provide more digestible answers that align with user behavior," Shen noted.

"We follow an application-driven approach because we believe the greatest value of AI eventually lies at the application layer," Shen said about AI chip export restrictions. "Even without access to the most advanced chips, our unique full-stack AI capabilities enable us to build strong applications and deliver meaningful value."

Robotaxi Expansion

Baidu's autonomous driving business completed its first overseas expansion in March, with Apollo Go foraying into the Dubai and Abu Dhabi markets. In May, it commenced open-road validation testing in Dubai and secured approval for designated passenger testing in Hong Kong, its first right-hand drive market.

Apollo Go provided over 1.4 million rides in the first quarter, up 75 percent from a year earlier, underscoring the accelerating momentum of its scaled operations. As of May, it had provided a total of more than 11 million rides.

Apollo Go has deployed over 1,000 fully driverless vehicles across 15 cities globally, with 100 percent autonomous operations achieved in the Chinese mainland.

"We see a clear path to profitability as hardware and labor costs continue declining and our growing operational scale brings more efficiencies," Li said, positioning Apollo Go as a key long-term growth driver.

Apollo Go recently partnered with leading Chinese car rental company CAR to introduce fully autonomous vehicles for rent.

Despite Baidu's heavy investment in AI and Ernie's leading position among large language models, commercializing AI technologies takes time. While AI Cloud margins are expanding and robotaxi operations show promising results, questions remain about the timeline for meaningful profitability contribution.

Editor: Futura Costaglione