Chinese tech giant Baidu reported first-quarter 2026 results that came in better than feared: revenue slipped 1% to 32.1 billion yuan ($4.7 billion), extending a losing streak into a fourth consecutive quarter of decline. But beneath the headline numbers, a significant structural shift is underway, Bloomberg reports.

For the first time, AI-related segments — spanning cloud services, applications, and AI-powered marketing — contributed more than half of Baidu's core revenue, officially overtaking the traditional online advertising business that has long been the company's backbone. Shares responded with a gain of more than 3% in pre-market US trading.

The AI cloud unit was the standout performer, driving Baidu's core business — excluding streaming platform iQiyi — back into growth territory. The company has also moved to raise prices on AI products, mirroring rivals like Alibaba and capitalizing on a supply-demand imbalance in China's constrained compute market. Net income for the quarter more than halved to 3.45 billion yuan, in line with analyst estimates.

Founder and CEO Robin Li is positioning agentic AI as Baidu's next major growth frontier. At the company's annual developer conference, he unveiled a suite of agent-based tools — from a no-code website builder to a general-purpose agent comparable to the widely discussed Manus platform. Notably, the flagship Ernie 5.0 foundation model received no updates, with Li signaling that the race for better base models is no longer the central battleground. "We should focus on how many agents are actually performing tasks for humans and delivering results," he said.

The autonomous driving business, once a rare bright spot, is facing new headwinds. Following an incident in which Baidu's robotaxis stalled on Wuhan city streets in March, Beijing regulators suspended the issuance of new self-driving vehicle licenses. Operations in the city have been paused while the fault is investigated. Baidu is now looking to take its Apollo Go robotaxi fleet into Europe and the Middle East.

The company's chip arm, Kunlunxin, is planning a dual listing on the Shanghai and Hong Kong stock exchanges. Jefferies analysts expect the Hong Kong listing to take place in the third quarter, noting growing investor appetite for domestically produced alternatives to Nvidia amid ongoing geopolitical tensions.

In February, Baidu announced its first-ever dividend alongside a three-year share buyback program worth up to $5 billion — moves that signal a company increasingly focused on returning capital to shareholders as its business matures.