Chinese tech company Baidu has reportedly begun laying off employees after publishing its loss-making third quarter financial results last week.

While the move is perceived internally as “large-scale”, the exact number of job cuts is unknown, according to six sources that confirmed the plans with Reuters on Friday.

Two of the sources noted that in some specific units, layoffs could affect up to 40 percent of entire teams. They also told the news agency they expect the cuts to continue until the end of the year.

The cuts follow Baidu's second consecutive quarterly decline in revenue, which recorded a loss of 11.23 billion yuan (£1.59 billion) in the third quarter.

During the same period, total revenue fell by seven per cent and online advertising revenue fell by 18 per cent.

Two sources added that the mobile ecosystem will be the area where staff losses will be most pronounced, while jobs focused on AI and cloud computing will be less affected by the reductions. The sources added that, on the contrary, additional resources could be allocated to AI.

Baidu currently has 35,900 employees, representing a significant reduction in team size form previous years. In 2023, the company had 41,300 employees, while in 2024, the number had already fallen to 39,800.

While the firm has been investing heavily in AI chips, industrial AI applications and next-gen models to strengthen its position in China’s AI ecosystem, its online advertising business has lost ground to rising social media platforms such as RedNote and Douyin, Reuters reported.

Growing competition from tech giants such as Alibaba and DeepSeek is also hampering its growth and spread.

According to a September report by AI product tracker Aicpb.com, Baidu's Ernie Bot app had 10.77 million monthly active users, fewer than ByteDance's Doubao (150 million) and DeepSeek (73.4 million).

Earlier this month, the company unveiled Ernie 5.0, a new version of its multimodal base model that jointly models text, images, audio, and video for complete multimodal understanding and generation.

The new version aims to improve multimodal understanding, instruction execution, creative writing, factual reasoning, agentic planning and tool use.

During the presentation of the model, Robin Li, co-founder and chief executive officer of Baidu, said that foundation models are evolving rapidly, as evidenced by continuous advances in the field such as increased model “thinking time”, native integration of multiple modalities, and the ability to self-learn and evolve.

"AI agents themselves are the most significant applications, and the speed of technological iteration is the only competitive moat," he said.

He added that Baidu will continue to invest in advancing the frontier models.

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