(Yicai) Nov. 19 -- Chinese internet giant Baidu has turned its net profit into a CNY11.2 billion (USD1.6 billion) net loss in the third quarter of the year, mainly due to the impairment of assets despite sustained growth in artificial intelligence businesses.

Net loss totaled CNY11.2 billion in the third quarter, compared with net profits of CNY7.6 billion (USD1.1 billion) a year earlier and CNY7.3 billion in the second quarter, according to data from the Beijing-based company's latest earnings report released yesterday. The impairment of long-lived assets reached CNY16. 2billion.

Baidu's revenue fell 7 percent to CNY31.2 billion, as revenue from its core business dropped 7 percent to CNY24.7 billion. Meanwhile, online marketing revenue plunged 18 percent to CNY15.3 billion, and non-marketing revenue climbed 21 percent to CNY9.3 billion, led by AI Cloud. Revenue from iQiyi shrank 8 percent to CNY6.7 billion.

For the first time, Baidu disclosed its overall AI-powered operations performance, with revenue soaring more than 50 percent to CNY10 billion in the three months ended Sept. 30 from a year earlier.

AI Cloud Infrastructure revenue rose 33 percent to CNY4.2 billion, with subscription revenue from AI accelerator infrastructure surging 128 percent. AI-Native Marketing Services, including digital humans and agents, skyrocketed 262 percent to CNY2.8 billion, while AI Applications, including Baidu Wenku and Baidu Drive, rose 6 percent to CNY2.6 billion.

"AI Cloud achieved healthy expansion in the third quarter, cushioning the impact from softness in our online marketing business," said He Haijian, Baidu's chief financial officer. "Our strategic AI investments are yielding strong returns."

Since the launch of Ernie Bot in March 2023, Baidu has invested over CNY100 billion (USD14.1 billion) in AI and will continue to increase its commitment, He noted in the earnings conference call.

During Baidu World in November, the firm launched Ernie 5.0, its first native omni-modal foundation model that offers improved multimodal understanding and instruction following.

Around 70 percent of mobile search result pages on Baidu contained AI-generated or model-prioritized content in October. The Baidu App recorded 708 million monthly active users in September. Paying subscribers for Baidu's Ernie assistant climbed to 12 million, with dialogue rounds increasing about five-fold from a year earlier.

Baidu's robotaxi service Apollo Go provided 3.1 million driverless rides in the third quarter, up 212 percent from a year earlier. Cumulative rides have exceeded 17 million.

Apollo Go now operates in 22 cities worldwide, including new deployments in Switzerland and Abu Dhabi. All operations in Chinese mainland cities are now fully driverless.

Baidu's research and development expenses declined 3 percent to CNY5.2 billion in the third quarter from a year earlier, while adjusted earnings before interest, taxes, depreciation, and amortization totaled CNY4.4 billion, with a 14 percent margin.

Non-generally accepted accounting principles net profit shrank 36 percent to CNY3.8 billion, with non-GAAP diluted earnings per American depository share of CNY11.12 (USD1.56).

He also indicated that Baidu expects non-GAAP operating profit and margins to improve next year, as its AI infrastructure utilization rises. The company is reviewing new shareholder-return mechanisms following the nearly completed USD2.3 billion buyback program approved in 2023.

Baidu's shares [HKG: 9888] were trading down 0.1 percent at HKD111.50 (USD14.32) as of 2.40 p.m. in Hong Kong today. Those listed in New York [NASDAQ: BIDU] rose 2.7 percent at USD117.14 yesterday.

Editor: Futura Costaglione