Baidu Reportedly Launches Major Layoffs as Intensifying AI Competition and Plummeting Ad Revenue Force Restructuring

China’s technology giant Baidu, which operates the country’s largest search engine, initiated a round of large-scale layoffs this week that is expected to hit multiple business units and run until the end of the year.

This aggressive restructuring move, confirmed by six sources briefed on the matter, follows the company’s recent report of a disappointing third-quarter net loss on November 18, underscoring the twin pressures of intensifying competition in artificial intelligence (AI) and the continued decline of its core online advertising business.

While the total, companywide number of jobs being cut could not be immediately established, the sources told Reuters the workforce reduction is internally perceived to be of a large-scale nature. The severity of the cuts is not uniform; layoff numbers vary significantly by business unit and performance ratings, with some teams facing reductions as high as 40%, according to two of the sources.

The job reductions are primarily a response to financial strain and market shifts. The layoffs follow Baidu’s second straight quarterly revenue decline, with total revenue falling 7% and the crucial online advertising revenue dropping 18% in the third quarter year-over-year. For the period, Baidu posted a substantial net loss of 11.23 billion yuan ($1.59 billion), a stark reversal from profit a year prior, primarily driven by asset impairment charges.

In response to these headwinds, the company is executing a definitive pivot by reallocating resources to high-growth, high-value areas. This means roles tied to AI and cloud computing will largely be protected, with one source noting that more resources would be directed into the AI division, signaling that long-term technological leadership remains the central ambition despite short-term profitability challenges.

Conversely, the Mobile Ecosystem Group (MEG) is expected to bear the brunt of the staff reductions, as this legacy unit is heavily exposed to the contracting online advertising market. Baidu’s workforce already stood at 35,900 at the end of last year, down from 39,800 in 2023 and 41,300 in 2022, indicating a multi-year trend of cost rationalization.

The Losing Ground in the AI Race

The deep cuts underscore Baidu’s failure to translate its multi-year, multi-billion-dollar investment in AI into a revival for its core growth. While Baidu was the first major Chinese tech firm to roll out a ChatGPT-style service, Ernie Bot, in 2023, it has struggled to maintain its early lead against agile competitors. Its large language model is now trailing offerings from rivals, including Alibaba and, notably, the fast-growing AI start-up DeepSeek.

The challenge is most apparent in user adoption figures: in September, Baidu’s Ernie Bot app recorded only 10.77 million monthly active users, significantly lower than the 150 million for ByteDance’s Doubao and 73.4 million for DeepSeek, according to AI product tracker Aicpb.com. Baidu’s attempts to gain ground through strategy shifts, including making its Ernie model open source earlier this year, have not yet closed the gap.

Nevertheless, Baidu remains committed to its AI push, focusing on embedding the technology into existing products. It states that more than half of its mobile search result pages now include AI-generated content, aiming to modernize user experience and drive future monetization.

However, this massive job reduction is part of a broader, global trend: major Chinese internet companies like Alibaba and Tencent slashed tens of thousands of jobs in 2022 following a broad regulatory crackdown, and major U.S. tech companies such as Amazon and IBM have also announced thousands of job cuts globally, making cost reduction and AI prioritization the dominant narrative across the tech sector.