China’s Baidu begins layoffs after reporting third-quarter losses, sources say

China’s Baidu this week began layoffs that will affect multiple business units, six sources briefed on the matter said, as the company grapples with increasing competition in artificial intelligence and declining advertising revenue.

The move by the company, which operates China’s largest search engine, comes shortly after it reported a third-quarter loss on November 18. The sources added that the layoffs were expected to last until the end of this year. Reuters could not determine the number of job cuts companywide, but sources said it was considered large-scale internally.

Layoff rates varied by business unit and performance ratings and could be as high as 40% for some teams, two of the people said.

The mobile ecosystem group will bear the brunt of the cuts, two sources said.

However, roles related to AI and cloud computing will be largely protected, four of the people said. One of the sources said more resources would be devoted to AI. The sources declined to be identified because the information is private.

Baidu’s workforce stood at 35,900 at the end of last year, up from 39,800 in 2023 and 41,300 a year earlier, according to annual reports. Baidu did not immediately respond to a request for comment.

The cuts follow Baidu’s second straight quarterly revenue decline; total revenue fell 7% and online advertising revenue fell 18% in the third quarter. It also posted a loss of 11.23 billion yuan ($1.59 billion) for the period.

Baidu has invested in AI for years, but those efforts have yet to revive growth in its core online advertising business, which has ceded market share to social media platforms like RedNote and ByteDance’s Douyin.

Although Baidu was the first major Chinese tech company to roll out a ChatGPT-style service in 2023, it has struggled to maintain an early lead over competitors including Alibaba and AI startup DeepSeek.

Baidu’s major language model Ernie is lagging behind offerings from rivals including Alibaba and DeepSeek after multiple strategy shifts, including a move to make it open source earlier this year.

Adoption has also lagged behind. As of September, Baidu’s Ernie Bot app had 10.77 million monthly active users, below 150 million for ByteDance’s Doubao and 73.4 million for DeepSeek, according to AI product tracker Aicpb.com.

Baidu has focused its AI effort on embedding the technology into existing products, including search, and says more than half of its mobile search results pages now contain AI-generated content.

Job cuts have become a common tool for major Chinese internet companies looking to cut costs in a highly competitive sector.

Alibaba and Tencent have cut tens of thousands of jobs in 2022 to cope with a broad crackdown by regulators on China’s major internet platforms. In addition, several US technology companies, such as Amazon and IBM, are cutting thousands of jobs worldwide.