China’s tech giant Baidu has begun a new round of widespread layoffs, marking one of its most aggressive cost-cutting efforts in years, as the company battles falling advertising revenue and intensifying rivalry in artificial intelligence. The cuts come days after Baidu reported a third-quarter loss of 11.23 billion yuan ($1.59 billion), its weakest performance in years, underscoring the urgency of restructuring at a time when the company is losing ground to faster-moving competitors.

A Company Under Pressure After Consecutive Revenue Declines

Baidu’s decision to slash jobs across multiple business units reflects deepening strain in its core business. Total revenue fell 7% in the third quarter, with online advertising—a long-standing profit engine—plunging 18%. This marks Baidu’s second consecutive quarter of declining revenue, a trend that highlights structural shifts in how Chinese consumers and advertisers engage with digital platforms.

The rise of short-video and social platforms such as ByteDance’s Douyin and RedNote has reshaped China’s advertising landscape, siphoning market share from traditional search-driven models. Baidu’s search-based ecosystem has struggled to adapt to these behavioral shifts, even as the firm continues to funnel resources into AI technologies designed to modernize its offerings.

Internally, the layoffs are seen as large in scale, with some teams expecting reductions of up to 40%, according to several people familiar with the situation. Baidu’s workforce has already shrunk from 41,300 employees in 2022 to 35,900 at the end of 2024, reflecting years of tightening amid regulatory pressure, macro uncertainty and strategic pivots.

AI and Cloud Remain Core Priorities Despite Cuts

While the cuts hit Baidu’s mobile ecosystem group hardest, roles connected to artificial intelligence and cloud computing will be largely protected. According to sources, the company plans to redirect more resources to AI—an acknowledgment that Baidu’s future competitiveness hinges on securing a meaningful foothold in China’s rapidly expanding generative-AI sector.

Yet the reality on the ground is sobering. Baidu was the first major Chinese tech firm to launch a ChatGPT-style service in 2023, but its early lead has evaporated. The company’s Ernie large language model now trails rivals such as Alibaba’s Qwen series and DeepSeek’s fast-growing platform. In September, Baidu’s Ernie Bot app logged just 10.77 million monthly active users, compared with 73.4 million for DeepSeek and an extraordinary 150 million for ByteDance’s Doubao, according to Aicpb.com.

Baidu has emphasized integrating AI deeply into its existing products—especially search, where more than half of results pages now include AI-generated content. But early adoption has been slower than expected, raising questions about Baidu’s ability to convert AI investments into meaningful business growth.

A Market-Wide Shift Toward Efficiency

Job reductions have become common across the Chinese tech ecosystem, driven by regulatory resets, margin pressure and an increasingly competitive AI race. Alibaba and Tencent eliminated tens of thousands of jobs in recent years. Global peers such as Amazon and IBM are also tightening labor forces as they realign spending around automation, AI infrastructure and high-margin business lines.

What Comes Next

Baidu’s strategic challenge is clear: reduce costs without weakening the very innovation needed to regain its technological edge. The company’s ability to stabilize advertising revenue, improve AI adoption, and keep pace with aggressive rivals will determine whether the latest restructuring becomes a turning point or another sign of gradual decline. Investors will closely monitor Q4 performance, user-growth metrics for Ernie, and the speed at which Baidu can translate AI ambition into sustainable revenue.