On September 8, Baidu announced plans to issue RMB-denominated senior unsecured notes through an offshore offering outside the US. Proceeds will go toward general corporate purposes, including debt repayment, interest payments, and other funding needs.
Investors responded positively. Baidu’s Hong Kong-listed shares climbed as much as 12.7% during the day before closing 9.5% higher.
The company’s second-quarter 2025 report showed USD 4.1 billion in cash reserves. On its earnings call, management said that as of June, it held USD 32 billion in cash and equivalents, with net cash of USD 21.7 billion, underscoring its ample reserves.
Short-term borrowings rose sharply in the interim results, reaching USD 3.3 billion from USD 1.47 billion in the first quarter, the highest level since 2017. The increase suggests Baidu is seeking to optimize its debt structure.
At the same time, Baidu is expanding investments in artificial intelligence infrastructure, including cloud services, data centers, and large models. Capital expenditures rose to USD 3.8 billion in the second quarter, up from USD 2.1 billion a year earlier, an increase of more than 80%. Such investments require substantial reserves to sustain momentum.
China’s current low interest rates work in Baidu’s favor. The company priced its 1.9% senior unsecured notes due 2029 at a level that will reduce its interest burden.
In 2024, Baidu’s interest expense totaled USD 397 million, with average interest-bearing debt of USD 9.39 billion. That implied an effective interest rate of 4.2%, far higher than the coupon rate on the new notes.
Baidu began restructuring its debt earlier this year. In March, it issued its first dim sum bonds, raising RMB 10 billion (USD 1.4 billion) with coupon rates of 2.7% for the five-year tranche and 3% for the ten-year tranche. By issuing medium- and long-term bonds during a low-rate cycle, the company has locked in cheaper funding and lowered financing costs.
Global peers have employed similar strategies. Apple, for instance, capitalized on low interest rates in 2015–2017 and again during the pandemic in 2020–2021 to issue long-term bonds, securing inexpensive capital and improving financial efficiency.
Meanwhile, Baidu’s core search business is being reshaped by AI, bringing both challenges and opportunities. By July, AI-generated content accounted for 64% of mobile search results, up from 35% in April. On the Baidu app, more than 60% of results now feature rich media at the top of the page. But AI search introduces new monetization hurdles compared with traditional web search, since single-text outputs limit ad placement opportunities.
Even so, Baidu has shown willingness to adapt. The latest bond issuance strengthens its ability to fund long-term AI investments.
From a capital markets perspective, Baidu can be compared with its global peers across three areas: e-commerce, social media, and search. While Alibaba dominates in e-commerce data and Tencent in social platforms, Baidu’s extensive search data may offer an underappreciated advantage. The question is whether the company, long underestimated, can leverage this to catch up—or even move ahead—in the AI era.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by 36Kr Caijing.