Baidu has warned of headwinds in the second half of the year from geopolitical tensions and the Covid-19 pandemic as the Chinese search engine and artificial intelligence giant narrowed a decline in revenue in the April to June quarter. “With Covid-19 becoming more manageable in China, Baidu's business is steadily rebounding,” said co-founder and CEO Robin Li. “We are pleased that in-app revenue grew in the second quarter, despite a challenging macro environment.” Baidu reported total revenue of 26.03 billion yuan (US$3.75 billion) in the June quarter, down 1 per cent year on year, versus a forecast of 25.7 billion yuan. Revenue in the first quarter was down 7 per cent year on year to 22.5 billion yuan.. Baidu said it posted 3.58 billion yuan in profits for the quarter versus a projection of 2 billion yuan. However, Li said he was still “cautiously optimistic” about the business climate in the second half despite the geopolitical tensions and “other phenomenon plaguing the economy that may continue to cause hiccups”. China’s Midea, Baidu team up on AI-powered smart home appliances Baidu has sought to diversify its revenue mix with a 500 million yuan investment announced in May to boost its live-streaming services after its traditional online marketing revenue was hammered by the rise of short-video platforms like ByteDance’s Douyin and Tencent-backed Kuaishou. Li said the company’s new AI-related businesses, including cloud, smart devices and smart transport, saw strong growth in the quarter ended June 30 and will contribute to revenue growth in coming years. “In addition to investing in new AI businesses, Baidu is also diversifying our revenue streams through membership, online games and others to increase the [average revenue per user] of our existing traffic,” said the company’s chief financial officer Herman Yu. China’s Netflix’ tanks on Nasdaq as US watchdog probes alleged fraud Despite those efforts, Baidu saw an 8 per cent year-on-year drop in online marketing revenue to US$2.5 billion in the June quarter, versus a 19 per cent decline in the previous quarter. Baidu’s US-listed shares were down 6.7 per cent after the markets closed on Thursday. Despite adding more subscribers and growth in membership revenue in the June quarter, Baidu’s IQIYI subsidiary saw its US-traded shares shed 12.36 per cent after the video-streaming service platform said it was being investigated by the US Securities and Exchange Commission (SEC). The SEC has required IQIYI to provide all its financial reports since January 2018. For the September quarter, Baidu said its revenues would range from US$3.7 billion to US$4.1 billion, representing a worst case 6 per cent year on year drop, or best case 2 per cent growth, owing to “very limited” business visibility amid the evolving Covid-19 situation in China. Li said Baidu Apollo, a leading player in the Chinese autonomous driving sector, will benefit from providing vehicle-to-everything (V2X) infrastructure to local governments amid China’s new infrastructure spending drive, adding that Apollo has won contracts worth more than 100 million yuan to date.