(Yicai) Aug. 21 -- Baidu's shares fell after the Chinese internet giant said revenue fell 4 percent in the second quarter from a year earlier, as “robust growth” at its artificial intelligence cloud business failed to make up for a decline in income from online advertising.

Baidu [HKG: 9888] closed 2.6 percent lower at HKD85 (USD10.88) a share in Hong Kong today. Its New York-listed stock [NASDAQ: BIDU] fell by the same degree yesterday to USD86.76.

Revenue was CNY32.7 billion (USD4.6 billion) in the three months ended June 30, the Beijing-based firm said in a financial report released yesterday. Its core online marketing income, mainly from search engine advertisements, tumbled 15 percent to CNY16.2 billion (USD2.3 billion).

“Our AI Cloud business continued to deliver robust and healthy revenue growth, supported by our strengthening full-stack AI capabilities and comprehensive end-to-end AI products and solutions," said Baidu founder Robin Li.

“This performance helped mitigate the near-term pressure on online marketing business, as we intensified the AI transformation of Baidu Search to elevate user experience and establish a stronger foundation for long-term growth,” he said.

The AI pivot is bearing fruit, with more than half of Baidu’s mobile search results pages containing AI-generated content as of June-end, up from roughly a third in April, the firm noted, adding that it has also open-sourced its Ernie 4.5 model family and unveiled MuseSteamer, an image-to-video generation model, moves aimed to boost Baidu’s competitiveness in China’s AI race.

“We remain focused on AI initiatives that offer the greatest long-term value creation potential, where our technology and innovation can make the most meaningful and lasting impact,” said Li, who is also chairman and chief executive.

Second-quarter net profit jumped 33 percent to CNY7.3 billion (USD1 billion), largely driven by a more than sixfold increase in “other income” to CNY4.9 billion, chiefly from fair-value gains and investment returns. Based on non-generally accepted accounting principles, net profit sank 35 percent to CNY4.8 billion.

Baidu also reported solid growth in its autonomous driving business, with its Apollo Go driverless taxis providing over 2.2 million rides in the second quarter, up 148 percent from a year earlier. It also joined hands with ride-hailing giant Uber Technologies on July 15 and Lyft earlier this month to launch robotaxi services in Asian, Middle Eastern, and European markets.

But the expense associated with Baidu’s AI and content push also increased. Cost of revenue rose 12 percent to CNY18.4 billion as AI Cloud and content expenses climbed. Research and development spending shrank 13 percent to CNY5.1 billion, a decline the company attributed to lower personnel-related costs.

Editors: Dou Shicong, Martin Kadiev