Morgan Stanley downgraded Baidu to Underweight from Equal-weight. The bank slashed its price target for the company to $80 from $130. Baidu shares fell approximately 13% on August 18 following the announcement.
Second-quarter revenue declined 4% year-over-year, missing analyst estimates. Online advertising revenue dropped 19%, marking the eighth consecutive quarterly decline. AI Cloud revenue grew 50% but failed to offset the advertising slump.
Capital expenditures nearly doubled due to heavy investments in artificial intelligence. These AI ventures resulted in negative free cash flow for the period. Rising costs continue to pressure profitability as the core business weakens.