Chinese internet giant Baidu recorded a slight drop in quarterly revenue on Wednesday, dragged down by a persistent slump in domestic spending as its push into artificial intelligence accelerates.

Beijing-based Baidu, the operator of China's top search engine, generates a significant proportion of its revenue from online ads, making its performance highly susceptible to fluctuations in the country's spending patterns.

The firm achieved revenue of 32.7 billion yuan ($4.56 billion) during the second quarter of 2025, down four percent year-on-year, according to a statement to the Hong Kong Stock Exchange.

Revenue from online marketing during the period was down 15 percent year-on-year to 16.2 billion yuan, the statement showed.

China is facing an uncertain economic outlook as cautious consumers navigate a years-long downturn in the property market, high unemployment and trade tensions with Washington.

Retail sales -- a key gauge of consumer demand in China -- grew at a slower rate in July than expected, official data showed on Friday.

Following years of tight regulation of the vast Chinese tech sector, Beijing is hoping that recent advancements in AI will provide the spark needed to jumpstart the domestic economy.

Baidu also said on Wednesday that its net profit during the second quarter was 7.3 billion yuan -- a 33-percent jump year-on-year but down five percent from the previous quarter.

The company has invested heavily in AI, placing it in an increasingly competitive race alongside China's other tech giants Tencent, Alibaba and ByteDance.

It has also sought to advance its autonomous "robotaxi" services abroad.

Baidu and Lyft announced plans this month to launch robotaxis on the rideshare app in Germany and Britain in 2026, pending regulatory approval.

The firm said in a joint statement with Uber in July that it plans to offer driverless cars on the Lyft competitor's app in Asia and the Middle East this year.

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