The world's biggest companies are plowing hundreds of billions of dollars into the artificial-intelligence arms race. Baidu shows the risks.

The Chinese search-engine provider posted a dismal set of second-quarter results on Tuesday, piling on more misery for a stock that was already down 20% for the year.

Baidu's net income for the period slumped 68% from a year ago to 2.3 billion yuan ($344 million). Revenue dropped 4% from a year ago to 31.3 billion yuan.

Both figures missed expectations. Analysts polled by FactSet were looking for net income of 2.8 billion yuan and revenue of 31.7 billion yuan.

Baidu's American depositary receipts dropped 7.1% to $96.71 ahead of the opening bell. Futures tracking the S&P 500 were 0.4% lower.

Baidu's search-engine business has come under pressure in recent years, with users pivoting to large-language models and advertising and marketing income drying up.

The company has poured money into AI in a bid to offset that. AI accounted for 12.5 billion yuan worth of revenue over the second quarter.

Still, investors are questioning if Baidu can win in a crowded industry that includes tech giants including online retailer Alibaba and AI start-ups such as DeepSeek.

Baidu ADRs have tumbled 24% over the past 12 months. The company has shed about $70 billion in total market capitalization since February 2021, with a valuation of just over $35 billion as of Monday's close.