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BIDU · Forward model · Legacy Business · Bull case

What has to happen in Legacy Business

Model as of

This page changes Legacy Business inside the complete BIDU model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

BIDU forward model
Horizon
Consolidated fair value $276.71 all other verticals held in this portfolio case
Final-quarter revenue $1.50B 15% of company revenue
Explicit segment contribution $7.52B EBITDA less segment capex, before corporate items

Chinese enterprise AI demand outruns domestic compute supply, Kunlun silicon carries a genuine cost advantage, and the AI-native ad formats price better than the blue links they replace so the advertising line actually bottoms. Capex is front-loaded rather than permanent, and the market re-rates a business it currently values below its own cash.

Legacy Business

Basis quarter$1.53B
Final quarter$1.50B
Implied CAGR0%
Final revenue mix15%

The old Baidu: classic search advertising, feed monetisation and the non-AI mobile ecosystem. It fell 23% year over year in Q2 2026 to RMB 10.4B and is now smaller than the AI half for the first time. This is the melting ice cube, and how fast it melts decides whether the company's total revenue ever grows again.

Last four quarters
2025 Q3 $1.84B Estimated
2025 Q4 $1.81B Estimated
2026 Q1 $1.50B Estimated
2026 Q2 $1.53B Estimated
Classic search-results advertisingFeed and in-app advertisingNon-AI mobile ecosystem services
Sequential growth −3.0%/qtr decaying toward −0.5% -3% a quarter, about -11% a year, against -23% year over year and +3% this quarter. The decline is assumed to be decelerating.
Legacy Business

Latest: $1.50B (2031Q2E)

Period Value
2025Q1 $2.11B
2025Q2 $2.00B
2025Q3 $1.84B
2025Q4 $1.81B
2026Q1 $1.50B
2026Q2 $1.53B
2026Q3E $1.51B
2026Q4E $1.49B
2027Q1E $1.47B
2027Q2E $1.46B
2027Q3E $1.45B
2027Q4E $1.44B
2028Q1E $1.44B
2028Q2E $1.44B
2028Q3E $1.43B
2028Q4E $1.43B
2029Q1E $1.44B
2029Q2E $1.44B
2029Q3E $1.44B
2029Q4E $1.45B
2030Q1E $1.45B
2030Q2E $1.46B
2030Q3E $1.47B
2030Q4E $1.48B
2031Q1E $1.49B
2031Q2E $1.50B

Assumptions & reasoning

  • Down 23% year over year - but UP 3% sequentially, off Q1's low. One quarter is not a bottom; it is the first thing a bottom looks like.
  • 2025 Q3 is the one estimated split in this model: that quarter's release published the Core AI-powered components but not the Legacy and Others lines beneath them, so Others is interpolated at RMB 2.6B and Legacy takes the residual, RMB 12.46B. Every other quarter's Legacy figure is Baidu's own.
  • Modelled at -3% a quarter decaying toward -0.5%: roughly -11% in year one, easing to about -2% a year in the terminal year. That is materially kinder than the -23% just printed, on the view that the AI-native line is cannibalising this one internally rather than the whole advertising pool shrinking at 23% forever.
  • The single most important interaction in this model is between this line and AI-native Marketing. If the decline here is genuine substitution, the two roughly net; if it is share loss to Tencent, ByteDance and Alibaba, the AI line does not catch it and total revenue keeps falling.
  • Margin starts at 36% and DECLINES to 30%. A shrinking ad business loses operating leverage; it does not gain it. This is the only vertical here whose margin gets worse.
  • Little capex. The infrastructure this business runs on was built years ago and is being repurposed for the cloud line.
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