Despite advances from cloud AI, the Chinese search engine giant Baidu reported a two percent decline in quarterly revenue, which was mostly caused by a slowdown in the advertising industry.

According to figures produced by LSEG, the company reported sales of 34.12 billion yuan ($4.69 billion) for the three months ending in December, which was lower than the 33.32 billion yuan experts had predicted.

China's small enterprises have been cutting back on their advertising budgets due to the country's stammering economy and protracted real estate market downturn.

With the exception of its streaming service iQIYI, which accounts for the majority of its revenue, Baidu's online marketing division saw a seven percent decline to 17.9 billion yuan.

In an effort to lessen its reliance on advertising revenue from its primary search engine business, Baidu has increased its push into AI in recent years.

In early 2023, Baidu was one of the first to introduce a chatbot that resembled ChatGPT. According to Baidu, the current Ernie 4.0 version is comparable to OpenAI's GPT-4.

However, fierce competition, especially from Chinese firm DeepSeek's R1 model, has made it difficult for Baidu's Ernie big language model to become widely used.

In response, Baidu recently revealed intentions to include DeepSeek's technology into its products, provide premium chatbot services for free starting in April, and open-source its next-generation models.

By incorporating AI into already-existing apps like Wenku and offering AI services via its cloud computing, the company hopes to make money off of AI.

The number of daily user inquiries and interactions handled by Baidu's Ernie platform increased from 600 million in August to 1.65 billion in December.