The following discussion of our financial condition and results of operations is based upon, and should be read in conjunction with, our audited consolidated financial statements and the related notes included in this annual report on Form 20-F. This report contains forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3.D. Key Information—Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties. A. Operating Results Overview We are a leading AI company with a strong internet foundation. We have been consistently investing in AI since 2010 to solidify our technology advancement, improve search capabilities and boost overall monetization. The breadth and depth of our AI capabilities provide the differentiating foundational technologies that power all of our businesses. Revenue Our revenues are derived principally from online marketing services and others. Online marketing services primarily include performance-based online marketing services and other online marketing services. Others primarily include cloud services and video membership services. Costs and Expenses Our costs and expenses consist of cost of revenues, selling, general and administrative expenses, research and development expenses, and impairment of long-lived assets. Share-based compensation expenses are allocated among cost of revenues, selling, general and administrative expenses and research and development expenses, based on the nature of the work of the employees who have received share-based compensation. Cost of Revenue Our cost of revenue primarily consist of content costs, traffic acquisition costs, bandwidth costs, depreciation costs, server custody fees, cost of goods sold and salaries and benefits for operation and service personnel. Selling, General and Administrative Expenses Our selling, general and administrative expenses primarily consist of promotional and marketing expenses, salaries and benefits for our sales, marketing, general and administrative personnel, and expected credit losses. Research and Development Expenses Research and development expenses primarily consist of salaries and benefits for research and development personnel, server depreciation expenses and server custody fees. We expense research and development costs as they are incurred, except for capitalized software development costs that fulfill the capitalization criteria. Impairment of long-lived assets Impairment of long-lived assets consists of impairment losses attributable to the Core asset group. Taxation Cayman Islands Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains. Additionally, no Cayman Islands withholding tax will be imposed on dividend payments we make. 144 Table of Contents Hong Kong Subsidiaries in Hong Kong are subject to Hong Kong profits tax rate of 16.5% and foreign-derived income is exempted from income tax. There is no withholding tax upon payment of dividends by the subsidiaries incorporated in Hong Kong to its shareholders. Chinese Mainland Enterprise Income Tax Chinese mainland’s statutory enterprise income tax rate is 25%. An enterprise may benefit from a preferential tax rate of 15% under the EIT Law if it qualifies as a “High and New Technology Enterprise” strongly supported by the state. Pursuant to the Administrative Measures on the Recognition of High and New Technology Enterprises, as amended in January 2016, the provincial counterparts of the Ministry of Science and Technology, the Ministry of Finance and the State Administration of Taxation make a joint determination on whether an enterprise is qualified as a “High and New Technology Enterprise,” or HNTE, under the EIT Law. In making such determination, these government agencies consider, among other factors, ownership of core technology, whether the key technology supporting the core products or services falls within the scope of high and new technology strongly supported by the state as specified in the administrative measures, the ratios of research and development personnel to total personnel, the ratio of research and development expenditures to annual sales revenues, the ratio of revenues attributed to high and new technology products or services to revenue, and other measures set forth in the guidance. A “High and New Technology Enterprise” certificate is effective for a period of three years. Further, preferential enterprise income tax rates are available for qualified Software Enterprises whereby entities are entitled to full exemption from enterprise income tax for two years beginning from their first profitable calendar year and a 50% reduction for the subsequent three calendar years. Certain PRC subsidiaries and VIEs, including Baidu Online, Baidu China, Baidu International and Baidu Netcom, etc. are qualified HNTEs and enjoy a reduced tax rate of 15% for the years presented, which will expire from 2026 to 2028. An entity could re-apply for the HNTE certificate when the prior certificate expires. Historically, all of the Company’s subsidiaries and VIEs have successfully renewed their certificates when the prior ones expired. Certain subsidiaries enjoyed a reduced tax rate as qualified Software Enterprise for the years presented, which will expire from 2026 to 2028. If our Chinese mainland subsidiaries or the variable interest entities that have enjoyed preferential tax treatment no longer qualify for the preferential treatment, we will consider available options under applicable law that would enable us to qualify for alternative preferential tax treatment. To the extent we are unable to offset the impact of the expiration of existing preferential tax treatment with new tax exemptions, tax incentives or other tax benefits, the expiration of existing preferential tax treatment may cause our effective tax rate to increase. The amount of income tax payable by our Chinese mainland subsidiaries and the variable interest entities in the future will depend on various factors, including, among other things, the results of operations and taxable income of, and the statutory tax rate applicable to, each of the entities. Our effective tax rate depends partially on the extent of the relative contribution of each of our subsidiaries and the variable interest entities to our consolidated taxable income. Withholding Tax Under the EIT Law and its implementation rules, dividends, interests, rent or royalties payable by a foreign-invested enterprise, such as our Chinese mainland subsidiaries, to any of its non-resident enterprise investors, and proceeds from any such non-resident enterprise investor’s disposition of assets (after deducting the net value of such assets) are subject to enterprise income tax at the rate of 10%, namely withholding tax, unless the non-resident enterprise investor’s jurisdiction of incorporation has a tax treaty or arrangement with Chinese mainland that provides for a reduced withholding tax rate or an exemption from withholding tax. The Notice on Several Preferential Policies regarding Enterprise Income Tax Law jointly promulgated by the Ministry of Finance and State Administration of Taxation in February 2008, clarifies that undistributed profits earned by foreign-invested enterprises prior to January 1, 2008 will be exempted from any withholding tax. The British Virgin Islands, where Baidu Holdings Limited, the sole shareholder of certain of our mainland subsidiaries such as Baidu Online, is incorporated, does not have such a tax treaty with Chinese mainland. 145 Table of Contents Hong Kong, where Baidu (Hong Kong) Limited, our wholly owned subsidiary and the sole shareholder of certain of our Chinese mainland subsidiaries such as Baidu Times and Baidu China, is incorporated, has a tax arrangement with Chinese mainland that provides for a lower withholding tax rate of 5% on dividends subject to certain conditions and requirements, such as the requirement that the Hong Kong resident enterprise own at least 25% of the Chinese mainland enterprise distributing the dividend at all times within the 12-month period immediately preceding the distribution of dividends and be a “beneficial owner” of the dividends. However, pursuant to Circular on Issues Concerning Implementing Dividend Clauses of Tax Treaties issued by the State Administration of Taxation in February 2009, if the PRC tax authorities determine, in their discretion, that a company benefits from the reduced withholding tax rate on dividends due to a structure or arrangement designed for the primary purpose of obtaining favorable tax treatment, the PRC tax authorities may adjust the preferential tax treatment. Moreover, pursuant to Circular on Several Issues regarding the “Beneficial Owner” in Tax Treaties, issued by the State Administration of Taxation in February 2018, which became effective from April 1, 2018, a resident of a contracting state will not qualify for the benefits under the tax treaties or arrangements, if it is not the “beneficial owner” of the dividend, interest and royalty income. According to this circular, a “beneficial owner” is required to have ownership and the right to dispose of the income or the rights and properties giving rise to the income, and generally engage in substantive business activities. An agent or conduit company will not be regarded as a “beneficial owner” and, therefore, will not qualify for treaty benefits. A conduit company normally refers to a company that is set up primarily for the purpose of evading or reducing taxes or transferring or accumulating profits. In addition, pursuant to Bulletin on Administrative Measures on Treaties Benefit for Non-resident Taxpayers, issued by the State Administration of Taxation in October 2019, non-resident enterprises are not required to obtain pre-approval from the tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises may, if they determine by self-assessment that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply for the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-filing examinations by the tax authorities. From 2023 to 2025, certain of our Chinese mainland subsidiaries have declared and distributed profits earned to Baidu (Hong Kong) Limited, the dividend payments are subject to withholding tax. In addition, in 2024 and 2025, Baidu, Inc. received RMB15.2 billion and RMB6.5 billion (US$933 million) as cash distributions from one of its subsidiaries. We have made tax provisions based on the corresponding tax rate. If our Chinese mainland subsidiaries further declare and distribute profits earned after January 1, 2008 to us in the future, the dividend payments will be subject to withholding tax, which will increase our tax liability and reduce the amount of cash available to our company. For the potential distributable profits to be distributed to our qualified Hong Kong incorporated subsidiary, the deferred tax liabilities are accrued at a 5% withholding tax rate or the statutory withholding tax rate. For more information on related risks, please see “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—If our Chinese mainland subsidiaries declare and distribute dividends to their respective offshore parent companies, we will be required to pay more taxes, which could have a material and adverse effect on our result of operations.” Tax Residence Under the EIT Law and its implementation rules, an enterprise established outside of Chinese mainland with “de facto management body” within Chinese mainland is considered a resident enterprise and will be subject to enterprise income tax at the rate of 25% on its worldwide income. The term “de facto management body” refers to “the establishment that exercises substantial and overall management and control over the production, business, personnel, accounts and properties of an enterprise.” Pursuant to SAT Circular 82, issued by the State Administration of Taxation in April 2009, an overseas registered enterprise controlled by a Chinese mainland company or a Chinese mainland company group will be classified as a “resident enterprise” with its “de facto management body” located within Chinese mainland if the following requirements are satisfied: (i) the senior management and core management departments in charge of its daily operations are mainly located in Chinese mainland; (ii) its financial and human resources decisions are subject to determination or approval by persons or bodies located in Chinese mainland; (iii) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in Chinese mainland; and (iv) no less than half of the enterprise’s directors or senior management with voting rights reside in Chinese mainland. The State Administration of Taxation issued additional rules to provide more guidance on the implementation of SAT Circular 82 in July 2011, and issued an amendment to SAT Circular 82 delegating the authority to its provincial branches to determine whether a Chinese-controlled overseas-incorporated enterprise should be considered a Chinese mainland resident enterprise, in January 2014. Although the SAT Circular 82, the additional guidance and its amendment only apply to overseas registered enterprises controlled by Chinese mainland enterprises and not those controlled by Chinese mainland individuals or foreigners, the determining criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by Chinese mainland enterprises, individuals or foreigners. 146 Table of Contents If our offshore entities are deemed Chinese mainland resident enterprises, these entities may be subject to enterprise income tax at the rate of 25% on their global incomes, except that the dividends distributed by our Chinese mainland subsidiaries may be exempt from enterprise income tax to the extent such dividends are deemed “dividends among qualified resident enterprises.” For more information on related risks, please see “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—We may be deemed a Chinese mainland resident enterprise under the EIT Law, which could subject us to Chinese mainland’s taxation on our global income, and which may have a material and adverse effect on our results of operations.” Should our offshore entities be deemed as Chinese mainland resident enterprises, such changes could significantly increase our tax burden and materially and adversely affect our cash flow and profitability. Chinese Mainland Urban Maintenance and Construction Tax and Education Surcharge Any entity, foreign-invested or purely domestic, or individual that is subject to consumption tax and value-added tax is also required to pay Chinese mainland urban maintenance and construction tax. The rates of urban maintenance and construction tax are 7%, 5% or 1% of the amount of consumption tax and value-added tax actually paid depending on where the taxpayer is located. All entities and individuals who pay consumption tax and value-added tax are also required to pay education surcharges at a rate of 3%, and local education surcharges at a rate of 2%, of the amount of value-added tax and consumption tax actually paid. Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated. The period-to-period comparisons of results of operations should not be relied upon as indicative of future performance. Year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in millions) Consolidated Statements of Comprehensive Income Data Revenue 134,598 133,125 129,079 18,458 Costs and expenses: Cost of revenue(1) 65,031 66,102 72,436 10,358 Selling, general and administrative(1) 23,519 23,620 25,843 3,696 Research and development(1) 24,192 22,133 20,433 2,922 Impairment of long-lived assets — — 16,190 2,315 Total costs and expenses 112,742 111,855 134,902 19,291 Operating income (loss) 21,856 21,270 (5,823 ) (833 ) Total other income, net 3,342 7,352 12,539 1,793 Income before income taxes 25,198 28,622 6,716 960 Income tax expense 3,649 4,447 1,259 180 Net income 21,549 24,175 5,457 780 Less: Net income (loss) attributable to noncontrolling interests 1,234 415 (132 ) (19 ) Net income attributable to Baidu, Inc. 20,315 23,760 5,589 799 Year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in millions) (1) Includes share-based compensation expenses as follows: Cost of revenue 590 461 389 56 Selling, general and administrative 1,678 1,427 1,181 169 Research and development 4,077 2,896 2,035 292 Total 6,345 4,784 3,605 517 147 Table of Contents Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Consolidated revenue. Our total revenue in 2025 were RMB129.1 billion (US$18.5 billion), decreasing by 3% from 2024, primarily due to a decrease in online marketing revenue, partially offset by an increase in revenue from cloud services. Consolidated costs and expenses. Our total costs and expenses increased by RMB23.0 billion, or 21%, from RMB111.9 billion in 2024 to RMB134.9 billion (US$19.3 billion) in 2025. Cost of Revenue. Our cost of revenue increased by RMB6.3 billion, or 10%, from RMB66.1 billion in 2024 to RMB72.4 billion (US$10.4 billion) in 2025, primarily due to an increase in bandwidth costs, depreciation costs and server custody fees, mainly related to development of cloud services. Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased by RMB2.2 billion, or 9%, from RMB23.6 billion in 2024 to RMB25.8 billion (US$3.7 billion) in 2025, primarily due to an increase in channel spending expenses and expected credit losses. Research and Development Expenses. Our research and development expenses decreased by RMB1.7 billion, or 8%, from RMB22.1 billion in 2024 to RMB20.4 billion (US$2.9 billion) in 2025, primarily due to a decrease in personnel-related expenses. Impairment of long-lived assets. Impairment of long-lived assets was RMB16.2 billion (US$2.3 billion) in 2025, attributable to an impairment loss of Core asset group. Operating loss. As a result of the foregoing, we generated an operating loss of RMB5.8 billion (US$833 million) in 2025. Excluding the impact of impairment of long-lived assets, operating income was RMB10.4 billion (US$1.5 billion) in 2025. Total other income, net. Our total other income, net was RMB12.5 billion (US$1.8 billion) in 2025, compared to RMB7.4 billion in 2024. Income tax expense. Our income tax expense was RMB1.3 billion (US$180 million) in 2025, compared to RMB4.4 billion in 2024. Net income attributable to Baidu, Inc. As a result of the foregoing, net income attributable to Baidu, Inc. decreased from RMB23.8 billion in 2024 to RMB5.6 billion (US$799 million) in 2025. Excluding the impact of impairment of long-lived assets, net income attributable to Baidu, Inc. was RMB19.4 billion (US$2.8 billion) in 2025. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Consolidated revenue. Our total revenue in 2024 were RMB133.1 billion, decreasing by 1% from 2023, primarily due to a decrease in online marketing revenue, partially offset by an increase in revenue from cloud services. Consolidated costs and expenses. Our total costs and expenses decreased by RMB887 million, or 1%, from RMB112.7 billion in 2023 to RMB111.9 billion in 2024. Cost of Revenue. Our cost of revenue increased by RMB1.1 billion, or 2%, from RMB65.0 billion in 2023 to RMB66.1 billion in 2024, primarily due to an increase in traffic acquisition costs arose from increasing union revenues, an increase in bandwidth costs and server custody fees mainly related to development of cloud services, and partially offset by a decrease in content costs mainly due to iQIYI’s lighter content slate. 148 Table of Contents Selling, General and Administrative Expenses. Our selling, general and administrative expenses were RMB23.6 billion in 2024, which remained generally flat from RMB23.5 billion in 2023. Research and Development Expenses. Our research and development expenses decreased by RMB2.1 billion, or 9%, from RMB24.2 billion in 2023 to RMB22.1 billion in 2024, primarily due to a decrease in personnel-related expenses. Operating income. As a result of the foregoing, we generated operating income of RMB21.3 billion in 2024, a 3% decrease from RMB21.9 billion in 2023. Total other income, net. Our total other income, net was RMB7.4 billion in 2024, compared to RMB3.3 billion in 2023. Income tax expense. Our income tax expense was RMB4.4 billion in 2024, compared to RMB3.6 billion in 2023. Net income attributable to Baidu, Inc. As a result of the foregoing, net income attributable to Baidu, Inc. increased from RMB20.3 billion in 2023 to RMB23.8 billion in 2024. Segment Revenue The following table sets forth our revenues by segment and the year-over-year change rate for the periods indicated, with each segment revenues including inter-segment revenues: Year ended December 31, 2023 2024 2025 RMB RMB YoY% RMB US$ YoY% (In millions, except percentages) Revenue: Baidu General Business* 103,465 104,712 1 102,485 14,655 (2 ) iQIYI 31,873 29,225 (8 ) 27,290 3,902 (7 ) * Starting from the fourth quarter of 2025, we redefined Baidu Core as Baidu General Business. Baidu General Businesses 2025 compared to 2024 Baidu General Business revenue was RMB102.5 billion (US$14.7 billion) in 2025, decreasing by 2% compared to RMB104.7 billion in 2024. The decrease was primarily due to a decline in online marketing revenue, partially offset by growth in cloud services. The decline in online marketing revenue reflected the impact of our ongoing AI transformation on monetization, as well as unfavorable macroeconomic conditions that adversely affected customers’ advertising budgets and spending. The decline was partially offset by growth in cloud services, which was mainly driven by accelerating enterprise AI adoption and our full-stack end-to-end AI capabilities. 2024 compared to 2023 Baidu General Business revenue was RMB104.7 billion in 2024, increasing by 1% compared to RMB103.5 billion in 2023. The increase was primarily driven by growth in cloud services, partially offset by a decline in online marketing revenue. Growth in cloud services revenue was mainly attributable to an increase in scale of cloud solution projects and standardizing cloud solutions and applications for scale, and an increase in subscription for personal cloud service, partially offset by a decrease in cloud solution revenue generated from the smart transportation industry. The decline in online marketing revenues was mainly attributable to weakness in certain offline sectors, such as healthcare, real estate and home furnishing, which were particularly impacted by persistent macroeconomic challenges. During 2024, we continued our AI-driven search renovation to improve monetization capabilities. 149 Table of Contents iQIYI 2025 compared to 2024 iQIYI revenue was RMB27.3 billion (US$3.9 billion) in 2025, decreasing by 7%, from RMB29.2 billion in 2024. The decrease was primarily due to declines in membership services revenue and online advertising revenue. The decline in membership services revenue was attributable to a lighter content slate and the competition among online entertainment video service providers. The decline in online advertising revenue was mainly due to some advertisers adjusting their advertising and promotion strategies in response to macro pressure. 2024 compared to 2023 iQIYI revenue was RMB29.2 billion in 2024, decreasing by 8%, from RMB31.9 billion in 2023. The decrease was primarily due to declines in membership services revenue and online advertising revenue. The decline in membership services revenue was attributable to a lighter content slate. The decline in online advertising revenue mainly reflected a decrease in brand advertising, partially offset by growth in performance-based advertising. Segment Costs and Expenses The following table sets forth our costs and expenses by segment and the year-over-year change rate for the periods indicated, with each segment costs and expenses including inter-segment costs and expenses: Year ended December 31, 2023 2024 2025 RMB RMB YoY% RMB US$ YoY% (In millions, except percentages) Costs and Expenses: Baidu General Business 84,640 85,234 1 108,529 15,519 27 iQIYI 28,884 27,414 (5 ) 27,061 3,870 (1 ) Baidu General Business. Costs and expenses of Baidu General Business mainly consist of personnel-related costs and expenses, traffic acquisition costs, marketing and promotion spending, depreciation costs and expenses, server custody fees, bandwidth costs, costs of goods sold, content costs, and impairment of long-lived assets. Cost of revenues. The cost of revenues of Baidu General Business increased by 15% from RMB44.8 billion in 2024 to RMB51.5 billion (US$7.4 billion) in 2025, primarily due to an increase in bandwidth costs, depreciation costs and server custody fees, mainly related to development of cloud services. The cost of revenue of Baidu General Business increased by 5% from RMB42.6 billion in 2023 to RMB44.8 billion in 2024, primarily due to an increase in traffic acquisition costs arose from increasing union revenues and an increase in bandwidth costs and server custody fees mainly related to development of cloud services. Selling, general and administrative expenses. The selling, general and administrative expenses of Baidu General Business increased by 10% from RMB20.0 billion in 2024 to RMB22.1 billion (US$3.2 billion) in 2025, primarily due to an increase in channel spending expenses and expected credit losses. The selling, general and administrative expenses of Baidu General Business increased by 2% from RMB19.6 billion in 2023 to RMB20.0 billion in 2024, primarily due to an increase in channel spending and promotional marketing expenses. 150 Table of Contents Research and development expenses. The research and development expenses of Baidu General Business decreased by 8% from RMB20.4 billion in 2024 to RMB18.8 billion (US$2.7 billion) in 2025, primarily due to a decrease in personnel-related expenses. The research and development expenses of Baidu General Business decreased by 9% from RMB22.4 billion in 2023 to RMB20.4 billion in 2024, primarily due to a decrease in personnel-related expenses. Impairment of long-lived assets. Impairment of long-lived assets of Baidu General Business was RMB16.2 billion (US$2.3 billion) in 2025, attributable to an impairment loss of Core asset group. iQIYI. Costs and expenses of iQIYI mainly consist of content costs, personnel-related costs and expenses, traffic acquisition costs, marketing and promotion spending, payment platform charges, server custody fees and bandwidth costs. Cost of revenue. The cost of revenue of iQIYI decreased by 2% from RMB22.0 billion in 2024 to RMB21.5 billion (US$3.1 billion) in 2025, primarily due to a decrease in content cost, which was mainly due to iQIYI adopting a more curated content acquisition strategy centered on quality. The cost of revenue of iQIYI decreased by 5% from RMB23.1 billion in 2023 to RMB22.0 billion in 2024, primarily due to a decrease in the content cost, which was mainly due to a lighter content slate. Selling, general and administrative expenses. The selling, general and administrative expenses of iQIYI increased by 5% from RMB3.7 billion in 2024 to RMB3.9 billion (US$552 million) in 2025, primarily due to increased marketing and promotional expenses, which was primarily driven by higher marketing spending. The selling, general and administrative expenses of iQIYI decreased by 8% from RMB4.0 billion in 2023 to RMB3.7 billion in 2024, primarily due to decreased marketing and promotional expenses, which was due to the less spending on user acquisition channels and content promotions. Research and development expenses. The research and development expenses of iQIYI decreased by 6% from RMB1.8 billion in 2024 to RMB1.7 billion (US$238 million) in 2025, primarily attributable to the decrease in personnel-related expenses. The research and development expenses of iQIYI was RMB1.8 billion in 2024, which remained generally flat from RMB1.8 billion in 2023. Critical Accounting Policies and Estimates We prepare financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of our assets and liabilities, and the disclosure of our contingent assets and liabilities at the end of each fiscal period and the reported amounts of revenue and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application. 151 Table of Contents The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. For further information on our critical accounting policies, see Note 2 to our consolidated financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. Fair Value Measurements of Non-Marketable Equity Investments We measure certain financial instruments at fair value on a nonrecurring basis, consisting primarily of our non-marketable equity investments. These investments are accounted for under the measurement alternative and are measured at cost, less impairment, subject to upward and downward adjustments resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. These adjustments require quantitative assessments of the fair value of equity investments, primarily using a market approach, which requires the use of unobservable inputs, such as selection of comparable companies and multiples, expected volatility, discount for lack of marketability and probability of exit events as it relates to liquidation and redemption preferences when applicable. Non-marketable equity investments are also evaluated for impairment, based on qualitative factors including the companies’ financial and liquidity position and access to capital resources, among others. When indicators of impairment exist, we also prepare quantitative measurements of the fair value of our equity investments using market approach with unobservable inputs. Our estimates of these inputs require subjective management judgment and are inherently uncertain. The fair value information is sensitive to changes in the unobservable inputs used to determine fair value and such changes could result in the fair value at the reporting date to be different from the fair value presented. When our assessment indicates that an impairment exists, we write down the investment to its fair value. Amortization of Content Assets Based on factors including historical and estimated future viewership consumption patterns, our content assets (licensed copyrights and produced content) are amortized using an accelerated method over the shorter of each content’s contractual period or estimated useful lives, generally within ten years. We review the estimates of future viewership consumption patterns and estimated useful lives on a regular basis. Our estimates require complex and subjective management judgment and any changes in our estimates of future viewership consumption patterns and estimated useful lives may cause us to realize different amounts of amortization in future periods. Consolidation of Variable Interest Entities In order to comply with the laws and regulations of Chinese mainland limiting foreign ownership of or imposing conditions on internet content services, value-added telecommunication-based services, internet map services, online audio and video services, and mobile application distribution businesses, we operate our websites and primarily provide the aforementioned services subject to such restriction through the variable interest entities in Chinese mainland by means of contractual arrangements. We have entered into certain exclusive agreements with the variable interest entities directly or through our subsidiaries, which obligate us to absorb losses of the variable interest entities’ that could potentially be significant to the variable interest entities or entitle us to receive economic benefits from the variable interest entities that could potentially be significant to the variable interest entities. In addition, we have entered into certain agreements with the variable interest entities and the nominee shareholders of variable interest entities directly or through our subsidiaries, which enable us to direct the activities that most significantly affect the economic performance of the variable interest entities. Based on these contractual arrangements, we consolidate the variable interest entities as required by ASC Topic 810, Consolidation, because we hold the variable interests of the variable interest entities directly or through the subsidiaries, which are the primary beneficiaries of the variable interest entities. We will reconsider the initial determination of whether a legal entity is a variable interest entity upon certain events listed in ASC 810-10-35-4 occurring. We will also continuously reconsider whether we are the primary beneficiaries of the variable interest entities as facts and circumstances change. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Corporate Structure.” 152 Table of Contents Segment Reporting As of December 31, 2023, 2024 and 2025, we had two reportable segments, Baidu General Business and iQIYI. Baidu General Business mainly provides online marketing services and others including cloud services. iQIYI produces, aggregates and distributes a wide variety of professionally produced content, as well as a broad spectrum of other video content, in a variety of formats. Our chief executive officer, who has been identified as the chief operating decision maker, reviews the operating results of Baidu General Business and iQIYI, to allocate resources and assess our performance. Accordingly, the financial statements include segment information which reflects the current composition of the reportable segments in accordance with ASC Topic 280, Segment Reporting. Revenue Recognition Our revenue is derived principally from online marketing services and others. Revenue is recognized when control of promised goods or services is transferred to our customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. Revenue is recorded net of value-added tax. For arrangements that include multiple promised goods or services, we would evaluate all of the performance obligations in the arrangement to determine whether each performance obligation is distinct. For arrangements with multiple distinct performance obligations, each distinct performance obligation is separately accounted for and the total consideration is allocated to each performance obligation based on their relative standalone selling price at contract inception. We generally determine standalone selling prices based on the prices charged to customers on a standalone basis or estimates it using an expected cost plus margin approach. For arrangement with multiple components that are not distinct within the context of the contract because they have significant integration and the customer can only benefit from these promised goods or services in conjunction with one another, we account for them as one performance obligation. Our revenue recognition policies by types are as follows: (1) Online marketing services Performance-based online marketing services Our P4P platform enables customers to bid for priority placement of paid sponsored links and reach users who search for information related to their products or services. P4P online marketing customers can choose from search-based and feed-based online marketing services, and select criteria for their purchase, such as daily spending limit and user profile targeted. Revenue is recognized when all of the revenue recognition criteria are met, which is generally when a user clicks on one of the customer-sponsored links or feed-based marketing. To the extent we provide online marketing services based on performance criteria other than CPC, revenue is recognized when the specified performance criteria are met along with the satisfaction of other applicable revenue recognition criteria. Baidu Union online marketing services Baidu Union is a program through which we expand distribution of its customers’ sponsored links or advertisements by leveraging the traffic of Baidu Union partners’ online properties. We acquire traffic from Baidu Union partners and are responsible for service fulfillment and pricing. The services which we provided to customers through Baidu Union partners’ online properties include CPC, other performance-based online marketing services and online display advertising services. These services are provided in the same way to customers as those through Baidu’s own platforms or properties. As the principal, we recognize revenue from Baidu Union on a gross basis. Payments made to Baidu Union partners are recorded as traffic acquisition costs, which are included in “Cost of revenue” in the consolidated statements of comprehensive income. 153 Table of Contents Sales incentives We provide major sales incentives to third-party agents, which are identified as customers, that entitle them to receive price reduction on the online marketing services by meeting certain cumulative consumption requirements. We account for these incentives granted to customers as variable consideration and net them against revenue. The amount of variable consideration is measured based on the expected value of incentives to be provided to customers. (2) Others Cloud services We provide a wide range of cloud services, generally on either a subscription or consumption basis. Revenue related to cloud services provided on a subscription basis is recognized ratably over the contract period. Revenue related to cloud services provided on a consumption basis, such as the amount of storage used in a period, is recognized based on the customer’s utilization of such resources. We provide cloud solutions for our customers in various industries. Revenue related to cloud solutions, which mainly include significant integrated products and services, is recognized over time if one of the following criteria is met: (i) the customer simultaneously receives and consumes the benefits as we perform; (ii) our performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (iii) the asset delivered has no alternative use and we have an enforceable right to payment for performance completed to date. For performance obligations satisfied over time, we recognize revenue over time by measuring the progress toward complete satisfaction of a performance obligation. Otherwise, revenue is recognized at a point in time when a customer obtains control of a promised asset or service and we satisfy our performance obligation. Video membership services We offer membership services through iQIYI to subscribing members with various privileges. When the receipt of membership fees is for services to be delivered over a period of time, the receipt is initially recorded as “Customer deposits and deferred revenue” and revenue is recognized ratably over the membership period as services are rendered. Membership services revenue also includes fees earned from subscribing members for on-demand content purchases and early access to premium content. We are the principal as we retain control over the service delivery to the subscribing members. For the sale of the right to other membership services through strategic cooperation with other parties, we recognize revenue on a net basis when we do not control the specified services before they are transferred to the customer. Contract assets and contract liabilities Payment terms and conditions vary by customer and are based on the billing schedule established in our contracts or purchase orders with customers, although terms generally include a requirement of payment within one year. Timing of revenue recognition may differ from the timing of invoicing to customers. For certain services, customers are required to pay before the services are delivered to the customer. When either party to a revenue contract has performed, we recognize a contract asset or a contract liability on the consolidated balance sheets, depending on the relationship between the entity’s performance and the customer’s payment. Contract liabilities are mainly related to fees for membership services to be provided over the membership period, which are included in “Customer deposits and deferred revenue” and “Deferred revenue” on the consolidated balance sheets. Contract assets mainly represent unbilled amounts related to our rights to consideration from the customers and are included in “Other current assets, net” on the consolidated balance sheets. Share-based Compensation We account for share-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation. We have elected to recognize share-based compensation using the straight-line method for all share-based awards issued with no performance conditions. For awards with performance conditions, compensation cost is recognized on an accelerated basis if it is probable that the performance condition will be achieved. 154 Table of Contents Forfeitures are estimated based on historical experience and are periodically reviewed. Cancellation of an award accompanied by the concurrent grant of a replacement award is accounted for as a modification of the terms of the cancelled award, or modified awards. The compensation costs associated with the modified awards are recognized if either the original vesting condition or the new vesting condition is achieved. Total recognized compensation cost for the awards is at least equal to the fair value of the awards at the grant date unless at the date of the modification the performance or service conditions of the original awards are not expected to be satisfied. The incremental compensation cost is measured as the excess of the fair value of the replacement award over the fair value of the cancelled award at the cancellation date. Therefore, in relation to the modified awards, we recognize share-based compensation over the vesting periods of the replacement award, which comprises (i) the amortization of the incremental portion of share-based compensation over the remaining vesting term, and (ii) any unrecognized compensation cost of the original award, using either the original term or the new term, whichever results in higher expenses for each reporting period. Income Taxes We recognize income taxes under the liability method. Deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted tax rates in effect for the years in which the differences are expected to reverse. We record a valuation allowance against the amount of deferred tax assets that we determine is not more-likely-than-not to be realized. The effect on deferred taxes of a change in tax rates is recognized in earnings in the period that includes the enactment date. Deferred income taxes are recognized on the undistributed earnings of subsidiaries, which are presumed to be transferred to the parent company and are subject to withholding taxes, unless there is sufficient evidence to show that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation. We apply the provisions of ASC Topic 740, Income Taxes (“ASC 740”) in accounting for uncertainty in income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. We have elected to classify interest and penalties related to an uncertain tax position (if and when required) as part of income tax expense in the consolidated statements of comprehensive income. We do not expect the amount of unrecognized tax benefits to increase significantly in the next 12 months. In general, the PRC tax authorities have up to five years to conduct examinations of the tax filings of our PRC subsidiaries. Accordingly, the PRC subsidiaries’ tax years of 2020–2025 remain open to examination by the respective tax authorities. We may also be subject to the examination of the tax filings in other jurisdictions, which are not material to the consolidated financial statements. Long-term Investments Our long-term investments consist of equity method investments, equity investments with readily determinable fair value, equity investments without readily determinable fair value, equity investments in private equity funds, other investments accounted for at fair value and available-for-sale debt investments. Investments in entities in which we can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting in accordance with ASC Topic 323, Investments-Equity Method and Joint Ventures. Under the equity method, we initially record its investment at cost and the difference between the cost of the equity investee and the amount of the underlying equity in the net assets of the equity investee is accounted for as if the investee was a consolidated subsidiary. We subsequently adjust the carrying amount of our investment to recognize our proportionate share of each equity investee’s net income or loss into earnings after the date of investment and its share of each equity investee’s movement in accumulated other comprehensive income or loss is recognized in other comprehensive income(loss). When calculating our proportionate share of each equity investee’s net income or loss, we adjust the net income or loss of equity investee to include accretion of preferred stock that is classified in temporary equity in the investee’s financial statements into earnings. We will discontinue applying the equity method if an investment (plus additional financial support provided to the investee, if any) has been reduced to zero. When we have other investments in the equity-method investee and we are not required to advance additional funds to the investee, we would continue to report its share of equity method losses in our statements of comprehensive income after our equity-method investment in ordinary shares has been reduced to zero, to the extent of and as an adjustment to the adjusted basis of our other investments in the investee. Such losses are first applied to those investments of a lower liquidation preference before being further applied to the investments of a higher liquidation preference. We adopted a one-quarter lag in reporting for our share of equity earnings (losses) to a majority of our equity method investees. 155 Table of Contents We evaluate the equity method investments for impairment at each reporting date, or more frequently if events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. Factors considered by us when determining whether an investment has been other-than-temporarily-impaired, include, but are not limited to, the length of the time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the investee, and our intent and ability to retain the investment until the recovery of its cost. An impairment loss on the equity method investments is recognized in earnings when the decline in value is determined to be other-than-temporary and is allocated to the individual net assets underlying equity method investments in the following order: 1) reduce any equity method goodwill to zero; 2) reduce the individual basis differences related to the investee’s long-lived assets pro rata based on their amounts relative to the overall basis difference at the impairment date and 3) reduce the individual basis difference of the investee’s remaining assets in a systematic and rational manner. For equity investments in private equity funds, over which we do not have the ability to exercise significant influence, we measure those investments using the net asset value per share based on the practical expedient in ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), or NAV practical expedient. For equity investments without readily determinable fair value and do not qualify for the NAV practical expedient of the investment, we elected to use the measurement alternative to measure those investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. Significant judgments are required to determine (i) whether observable price changes are orderly transactions and identical or similar to an investment held by us, and (ii) the selection of appropriate valuation methodologies and underlying assumptions, including expected volatility and the probability of exit events as it relates to liquidation and redemption features used to measure the price adjustments for the difference in rights and obligations between instruments. For equity investments with readily determinable fair values representing investments in the equity securities of publicly listed companies, on which we do not have significant influence, we measure those investments at fair value, any changes in fair value are recognized in “Others, net” in the consolidated statements of comprehensive income. For equity investments measured at fair value with changes in fair value recorded in earnings, we do not assess whether those investments are impaired. For equity investments that we elect to use the measurement alternative, we perform impairment assessment considering impairment indicators to evaluate whether investments are impaired at each reporting date. Impairment indicators considered include, but are not limited to, a significant deterioration in the financial performance or business prospects of the investee, factors that raise significant concerns about the investee’s ability to continue as a going concern, a significant adverse change in the regulatory, economic, or technologic environment of the investee and a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates. If impairment assessment indicates that the investment is impaired, we estimate the investment’s fair value in accordance with the principles of ASC 820. If the fair value is less than the investment’s carrying value, we recognize an impairment loss in earnings equal to the difference between the carrying value and fair value. In accordance with ASC Subtopic 946-320, Financial Services—Investment Companies, Investments—Debt and Equity Securities, our consolidated investment company accounts for long-term equity investments in unlisted companies at fair value. These investments were initially recorded at their transaction price net of transaction costs, if any. Fair values of these investments are re-measured at each reporting date in accordance with ASC 820, and any changes in fair value are recognized in “Others, net” in the consolidated statements of comprehensive income. Available-for-sale debt investments are convertible debt instruments and investments in preferred shares that are currently redeemable at our option, which are measured at fair value. Interest income is recognized in earnings. All other changes in the carrying amount of these debt investments are recognized in other comprehensive income (loss). 156 Table of Contents Long-term Time Deposits and Held-to-maturity Investments Long-term time deposits and held-to-maturity investments are mainly deposits in commercial banks and wealth management products issued by commercial banks and other financial institutions with maturities of greater than one year. Investments in debt securities with maturities of greater than one year that we have positive intent and ability to hold to maturity are classified as long-term held-to-maturity investments and stated at amortized cost less allowance for credit losses. The allowance for credit losses of the held-to-maturity debt investments reflects our estimated expected losses over the contractual lives of the held-to-maturity debt investments and is charged to “Others, net” in the consolidated statements of comprehensive income. Licensed Copyrights, net Licensed copyrights consist of professionally-produced content acquired from external parties, such as drama series, films, variety shows, children’s content, animations, and others, along with micro dramas. The license fees are capitalized and, unless prepaid, a corresponding liability is recorded when the cost of the content is known, the content is accepted by us in accordance with the conditions of the license agreement and the content is available for its first showing on our platforms. Licensed copyrights are presented on the consolidated balance sheets as current and non-current, based on estimated time of usage. Our licensed copyrights include the right to broadcast and, in some instances, the right to sublicense. When licensed copyrights include both broadcasting and sublicensing rights, the content costs are allocated to these two rights upon initial recognition. For the right to broadcast the contents on our own platforms, the content costs are amortized with an accelerated method considering historical and estimated future viewership consumption patterns over the shorter of each content’s contractual period or estimated useful lives within ten years. Estimates of future viewership consumption patterns and estimated useful lives are reviewed periodically, at least on an annual basis and revised, if necessary. Revisions to the amortization patterns are accounted for as a change in accounting estimate prospectively in accordance with ASC Topic 250, Accounting Changes and Error Corrections. For the right to sublicense the content to external parties, the content costs are amortized based on its estimated usage pattern and recorded as cost of revenue. Produced Content, net We produce original content in-house and in collaboration with external parties. Produced content primarily consists of drama series, films, variety shows, children’s content, animations and others, along with micro dramas. The costs incurred in the physical production of original content include direct production costs, production overhead and acquisition costs. Produced content also includes cash expenditures made to acquire a proportionate share of certain rights to films including profit sharing, distribution and/or other rights. Exploitation costs are expensed as incurred. Participation costs are accrued using the individual-film-forecast-computation method, which recognizes the costs in the same ratio as the associated ultimate revenue. Production costs for original content that are predominantly monetized in a film group are capitalized. Production costs for original content predominantly monetized on its own are capitalized to the extent that they are recoverable from total revenue that are expected to be earned, or ultimate revenue; otherwise, they are expensed as cost of revenue. Ultimate revenue estimates include revenue expected to be earned from all sources during the estimated useful lives of produced content based on anticipated release patterns and historical results of similar produced content. The capitalized production costs are reported separately as “Produced content, net” on the consolidated balance sheets. 157 Table of Contents We amortize produced content using an accelerated method by considering historical and estimated usage patterns, generally within ten years. Amortization costs are included in “Cost of revenue” in the consolidated statements of comprehensive income. Impairment of Licensed Copyrights and Produced Content We evaluate our film groups and individual content for impairment when there are events or changes in circumstances that indicate the fair value of a film group or individual content may be less than its unamortized costs. When such events or changes in circumstances are identified, we assess whether the fair value of an individual content (or film group) is less than its unamortized film costs, determine the fair value of an individual content (or film group) and recognize an impairment charge for the amount by which the unamortized capitalized costs exceed the individual content’s (or film group’s) fair value. We mainly use a discounted cash flow approach to determine the fair value of an individual content or film group, of which the most significant inputs include the forecasted future revenue, costs and operating expenses attributable to an individual content or the film group and the discount rate. An impairment loss attributable to a film group is allocated to individual licensed copyright and produced content within the film group on a pro rata basis using the relative carrying values of those assets. Impairment of Long-Lived Assets Other Than Goodwill We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets in an asset group may not be fully recoverable. We evaluate the recoverability of our long-lived assets by comparing the carrying amount of our assets to the future undiscounted cash flows expected to result from the use of our assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of our assets, we recognize an impairment loss based on the excess of the carrying amount of our assets over their fair value. Due to fluctuations in the external environment, in particular the rapid iteration of AI technology, and changes in our internal operations, we performed a recoverability test of the Core asset group and the result indicated that long-lived assets were not recoverable as of September 30, 2025. As the estimated fair value of these assets was below their carrying value, we recognized RMB16.2 billion (US$2.3 billion) impairment losses. We determined the fair value of the Core asset group using the discounted cash flows method, a widely accepted valuation model, with the assistance of an independent third-party valuation firm. The significant assumptions used included revenue growth rates and the discount rate of approximately 13%. The compound annual revenue growth rates used in the quantitative impairment analysis were primarily derived from our projections of future growth activity of 8% to 18% as contemplated in its business plan and adjusted based on the anticipated future utility of the existing long-lived assets. Business Combinations We account for our business combinations using the acquisition method in accordance with ASC Topic 805, Business Combinations. The acquisition method requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities we acquired, based on their estimated fair values. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interests in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings. In a business combination achieved in stages, we re-measured our previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in “Others, net” in the consolidated statements of comprehensive income. The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and noncontrolling interests are based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. We determine discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. 158 Table of Contents B. Liquidity and Capital Resources As of December 31, 2025, we had RMB115.5 billion (US$16.5 billion) in cash, cash equivalents, restricted cash and short-term investments, and the variable interest entities had RMB7.6 billion (US$1.1 billion) of cash, cash equivalents, restricted cash, and short-term investments. The cash and cash equivalents consist of cash on hand and investments in interest-bearing demand deposit accounts, time deposits, money market funds and other liquid investments which have original maturities of three months or less. The short-term investments primarily consist of fixed-rate and adjustable-rate debt investments with original maturity of less than one year. We believe that our current cash, cash equivalents, restricted cash and short-term investments and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital, capital expenditures and debt repayment, for at least the next 12 months. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue, and we may incur additional indebtedness (such as loans, convertible senior notes and notes) in the future. Furthermore, cash transfers from our Chinese mainland subsidiaries to their parent companies outside of Chinese mainland are subject to PRC government control of currency conversion. Shortages in the availability of foreign currency may restrict the ability of our Chinese mainland subsidiaries and the variable interest entities to remit sufficient foreign currency to pay dividends or other payments to their parent companies outside of Chinese mainland or our company, or otherwise satisfy their foreign currency denominated obligations. See “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Governmental control of currency conversion may affect the value of your investment.” As of December 31, 2025, our Chinese mainland subsidiaries and the variable interest entities held RMB67.9 billion (US$9.7 billion) of cash, cash equivalents, restricted cash, and short-term investments, RMB239 million (US$34 million) of which were in the form of foreign currencies. As of December 31, 2025, we have made long-term loans in an aggregate principal amount of RMB19.6 billion (US$2.8 billion) to the nominee shareholders of the variable interest entities. As of the date of this annual report, we do not have any repayment schedule with respect to such loans to the nominee shareholders of the variable interest entities. Equity financing Baidu, Inc. raised approximately US$3.1 billion in net proceeds from its global offering in connection with the listing in Hong Kong in March 2021 after deducting underwriting commissions, share issuance costs and the offering expenses. iQIYI raised an aggregate amount of US$285 million through private investments of ordinary shares in March 2022. iQIYI received net proceeds of US$500 million through a public offering of ordinary shares in the form of ADSs in January 2023. Short-term loans The total outstanding balance of our short-term loans as of December 31, 2024 and 2025 was RMB10.7 billion and RMB7.6 billion (US$1.1 billion), respectively, which consisted of RMB denominated borrowings from financial institutions in Chinese mainland that were repayable within one year. As of December 31, 2024 and 2025, we factored certain notes receivables, which mainly comprised of intercompany notes, for cash proceeds. These notes receivables factoring transactions did not qualify as a sale of financial assets under ASC 860 as these notes receivables were transferred with recourse. The factoring transactions were accounted for as secured borrowings and were included in “Short-term loans.” The factored intercompany notes receivables were RMB6.7 billion and RMB5.0 billion (US$711 million) as of December 31, 2024 and 2025, respectively. 159 Table of Contents As of December 31, 2024 and 2025, the weighted average interest rates for the outstanding borrowings were 1.79% and 1.31%, respectively, and the aggregate amounts of unused lines of credit for short-term loans were RMB17.2 billion and RMB17.8 billion (US$2.2 billion), respectively. Long-term loans In April 2021, we entered into a five-year US$3.0 billion term and revolving facilities agreement with a group of 22 arrangers. The facilities consist of a US$1.5 billion five-year bullet maturity term loan and a US$1.5 billion five-year revolving facility. The facility was priced at 85 basis points over LIBOR and is intended for the general corporate purposes. In June 2021, we drew down US$1.5 billion term loan and US$500 million revolving loan under the facility commitment. In June 2023, the facilities were modified and priced at 93 basis points over SOFR (secured overnight financing rate). In connection with the drawdowns and the modification, we entered into and restructured the two interest rate swap agreements, pursuant to which each of the loans would be settled with a fixed annual interest rate of 1.71% during the respective term of the loans. In 2024, we canceled US$1.0 billion unused revolving loan lines under the facility commitment. Debt securities issuances We have conducted the following rounds of debt securities issuances, which remain outstanding as of the date of this annual report: • In June 2015, we issued an aggregate of US$500 million senior unsecured notes due in 2025, or the 2025 Ten-year Notes, with stated annual interest rate of 4.125%. The net proceeds from the sale of the notes were used for general corporate purposes. We are not subject to any financial covenants or other significant restrictions under the 2025 Ten-year Notes. In 2025, we paid an aggregate of US$10 million in interest payments related to the 2025 Ten-year Notes. In June 2025, the 2025 Ten-year Notes were fully repaid when they became due. • In July 2017, we issued an aggregate of US$600 million senior unsecured notes due in 2027, or the 2027 Ten-year Notes, with stated annual interest rate of 3.625%. The net proceeds from the sale of the notes were used to repay existing indebtedness and for general corporate purposes. As of December 31, 2025, the total carrying value and estimated fair value were US$600 million and US$597 million, respectively, with respect to the 2027 Ten-year Notes. The estimated fair values were based on quoted prices for our publicly-traded debt securities as of December 31, 2025. We are not subject to any financial covenants or other significant restrictions under the notes. In 2025, we paid an aggregate of US$22 million in interest payments related to the 2027 Ten-year Notes. • In March 2018, we issued an aggregate of US$1.0 billion senior unsecured notes due in 2023, or the 2023 Notes, with stated annual interest rate of 3.875%, and an aggregate of US$500 million senior unsecured notes due in 2028, or the 2028 March Notes, with stated annual interest rate of 4.375%. The net proceeds from the sale of the notes were used to repay existing indebtedness and for general corporate purposes. In September 2023, the 2023 Notes were fully repaid when they became due. As of December 31, 2025, the total carrying value and estimated fair value of the 2028 March Notes were US$500 million and US$504 million, respectively. The estimated fair values were based on quoted prices for our publicly-traded debt securities as of December 31, 2025. We are not subject to any financial covenants or other significant restrictions under the 2028 March Notes. In 2025, we paid an aggregate of US$22 million in interest payments related to the 2028 March Notes. • In November 2018, we issued an aggregate of US$600 million senior unsecured notes due in 2024, or the 2024 November Notes, with stated annual interest rate of 4.375%, and an aggregate of US$400 million senior unsecured notes due in 2028, or the 2028 November Notes, with stated annual interest rate of 4.875%. In December 2018, we issued an aggregate of US$250 million senior unsecured notes due in 2024, or the 2024 December Notes, with stated annual interest rate of 4.375%, which constitute a further issuance of, and be fungible with and be consolidated and form a single series with the 2024 November Notes. The net proceeds from the sale of the notes were used to repay existing indebtedness and for general corporate purposes. In May 2024, the 2024 November Notes and the 2024 December Notes were fully repaid when they became due, respectively. As of December 31, 2025, the total carrying value and estimated fair value were US$400 million and US$409 million, respectively, with respect to the 2028 November Notes. The estimated fair values were based on quoted prices for our publicly-traded debt securities as of December 31, 2025. We are not subject to any financial covenants or other significant restrictions under the notes. In 2025, we paid an aggregate of US$20 million in interest payments related to these notes. 160 Table of Contents • In April 2020, we issued an aggregate of US$600 million senior unsecured notes due in 2025, or the 2025 Five-year Notes, with stated annual interest rate of 3.075%, and an aggregate of US$400 million senior unsecured notes due in 2030, or the 2030 April Notes, with stated annual interest rate of 3.425%. The net proceeds from the sale of the notes were used to repay existing indebtedness and for general corporate purposes. In April 2025, the 2025 Five-year Notes were fully repaid when they became due. As of December 31, 2025, the total carrying value and estimated fair value were US$400 million and US$388 million, respectively, with respect to the 2030 April Notes. The estimated fair values were based on quoted prices for our publicly-traded debt securities as of December 31, 2025. We are not subject to any financial covenants or other significant restrictions under the notes. In 2025, we paid an aggregate of US$23 million in interest payments related to these notes. • In October 2020, we issued an aggregate of US$650 million senior unsecured notes due in 2026, or the 2026 Notes, with stated annual interest rate of 1.720%, and an aggregate of US$300 million senior unsecured notes due in 2030, or the 2030 October Notes, with stated annual interest rate of 2.375%. The net proceeds from the sale of the notes are to be used to repay existing indebtedness. As of December 31, 2025, the total carrying value and estimated fair value were US$650 million and US$646 million, respectively, with respect to the 2026 Notes, and US$300 million and US$277 million, respectively, with respect to the 2030 October Notes. The estimated fair values were based on quoted prices for our publicly-traded debt securities as of December 31, 2025. We are not subject to any financial covenants or other significant restrictions under the notes. In 2025, we paid an aggregate of US$18 million in interest payments related to these notes. • In August 2021, we issued an aggregate of US$300 million senior unsecured notes due in 2027, or the 2027 Five-year Notes, with stated annual interest rate of 1.625%, and an aggregate of US$700 million senior unsecured notes due in 2031, or the 2031 Notes, with stated annual interest rate of 2.375%. The net proceeds from the sale of the notes are to be used for general corporate purposes, including repayment of certain existing indebtedness. As of December 31, 2025, the total carrying value and estimated fair value were US$300 million and US$292 million, respectively, with respect to the 2027 Five-year Notes, and US$700 million and US$637 million, respectively, with respect to the 2031 Notes. The estimated fair values were based on quoted prices for our publicly-traded debt securities as of December 31, 2025. We are not subject to any financial covenants or other significant restrictions under the notes. In 2025, we paid an aggregate of US$22 million in interest payments related to these notes. • In March 2025, we issued an aggregate of RMB7.5 billion senior unsecured notes due in 2030, or the 2030 Five-year Notes, with stated annual interest rate of 2.70%, and an aggregate of RMB2.5 billion senior unsecured notes due in 2035, or the 2035 Notes, with stated annual interest rate of 3.00%. The net proceeds from the sale of these notes are to be used for general corporate purposes, including repayment of certain existing indebtedness and payment of interest and general corporate purposes. As of December 31, 2025, the total carrying value and estimated fair value were RMB7.5 billion and RMB7.6 billion, respectively, with respect to the 2030 Five-year Notes, and RMB2.5 billion and RMB2.5 billion, respectively, with respect to the 2035 Notes. We are not subject to any financial covenants or other significant restrictions under these notes. In 2025, we paid an aggregate of RMB139 million in interest payments related to these notes. • In March 2025, we issued an aggregate of US$2 billion exchangeable bonds due 2032, or the 2032 Exchangeable Bonds, which bear no regular interest. Holders of the 2032 Exchangeable Bonds may not exchange their bonds prior to the first anniversary of the issue date of the bonds. Between the first anniversary of the issue date and the date falling 6 months prior to the maturity date of the 2032 Bonds, holders of the bonds may exchange the bonds into cash only upon the satisfaction of certain contingencies. Thereafter and until the second scheduled trading day preceding the maturity date, holders may exchange the bonds into cash at any time. The 2032 Exchangeable Bonds reference ordinary shares of Trip.com Group Limited that are listed on the Hong Kong Stock Exchange, or the Trip.com Shares, and the initial exchange ratio of the 2032 Exchangeable Bonds is 1,107.0457 Trip.com Shares per US$100,000 principal amount of the 2032 Exchangeable Bonds. Subject to certain conditions, we may elect to deliver Trip.com Shares held by us in lieu of cash or a combination of cash and Trip.com Shares. The net proceeds from the sale of the 2032 Exchangeable Bonds are for repayment of certain existing indebtedness, payment of interest and general corporate purposes. As of December 31, 2025, the total carrying value and estimated fair value were US$2 billion and US$2 billion, respectively, with respect to the 2032 Exchangeable Bonds. We are not subject to any financial covenants or other significant restrictions under the notes. 161 Table of Contents • In September 2025, we issued an aggregate of RMB4.4 billion senior unsecured notes due in 2029, or the 2029 Notes, with stated annual interest rate of 1.90%. The net proceeds from the sale of these notes are to be used for general corporate purposes, including repayment of certain existing indebtedness, payment of interest and general corporate purposes. We are not subject to any financial covenants or other significant restrictions under these notes. As of December 31, 2025, the total carrying value and estimated fair value were RMB4.4 billion and RMB4.3 billion, respectively, with respect to the 2029 Notes. We are not subject to any financial covenants or other significant restrictions under the 2029 Notes. Under the terms of the indentures governing the 2027 Ten-year Notes and the 2028 March Notes, events of default include, among others, there occurring with respect to any of our indebtedness or indebtedness of our principal controlled entities, an event of default resulting in accelerated maturity or a failure to pay principal, interest or premium when due, and that the outstanding principal amount under payment default or accelerated maturity equals or exceeds the greater of US$100 million and 2.5% of our total equity. Under such indentures, principal controlled entities refer to entities as to which one or more of the following conditions is/are satisfied: (i) its total revenue or consolidated total revenue attributable to our company is at least 5% of our consolidated total revenue, (ii) its net profit or consolidated net profit attributable to our company is at least 5% of our consolidated net profit; or (iii) its net assets or consolidated net assets attributable to our company are at least 10% of our consolidated net assets. For example, iQIYI constitutes a principal controlled entity under such indentures. Under the terms of the indentures governing the 2028 November Notes, the 2030 April Notes, the 2026 Notes, the 2030 October Notes, the 2027 Five-year Notes, the 2031 Notes, the 2030 Five-year Notes, the 2035 Notes and the 2029 Notes, events of default include, among others, there occurring with respect to any of our company’s indebtedness, an event of default resulting in accelerated maturity or a failure to pay principal, interest or premium when due, and that the outstanding principal amount under payment default or accelerated maturity equals or exceeds the greater of US$100 million and 2.5% of our total equity. Under the terms and conditions of the 2032 Exchangeable Bonds, events of default include, among others, a failure to perform obligations arising in respect of the exercise of exchange rights and a failure to give certain specified notices to the holder of the bonds. If any such event of default were to take place, the holders of those notes may declare the principal of notes to be due and payable prior to the stated maturity. Under the terms of the indentures governing the various notes, a declaration of acceleration of the relevant series of notes will be automatically annulled if such event of default is remedied or cured by our company or any of our company’s principal controlled entities, in the case of the 2027 Ten-year Notes and the 2028 March Notes, or our company, in the case of the 2028 November Notes, the 2030 April Notes, the 2026 Notes, the 2030 October Notes, the 2027 Five-year Notes, the 2031 Notes, the 2030 Five-year Notes, the 2035 Notes and the 2029 Notes, or waived by the holders of the relevant notes within 30 days after the declaration of acceleration with respect thereto and if the annulment of the acceleration of those notes would not conflict with any judgment or decree of a court of competent jurisdiction. As of December 31, 2025, there was no such event of default. iQIYI convertible notes iQIYI has conducted the following issuances of convertible notes, which remain outstanding as of the date of this annual report: 162 Table of Contents iQIYI 2026 Convertible Senior Notes • On December 21, 2020, iQIYI issued US$800 million convertible senior notes and offered an additional US$100 million principal amount simultaneously, pursuant to the underwriters’ option to purchase additional notes. On January 8, 2021, the additional US$100 million principal amount was issued pursuant to the underwriters’ exercise of their option. The convertible senior notes issued on December 21, 2020 and January 8, 2021 (collectively referred to as the “iQIYI 2026 Convertible Notes”) are senior, unsecured obligations of iQIYI, and interest is payable semi-annually in cash at a rate of 4.00% per annum on June 15 and December 15 of each year, beginning on June 15, 2021. The iQIYI 2026 Convertible Notes will mature on December 15, 2026 unless redeemed, repurchased or converted prior to such date. The initial conversion rate of the iQIYI 2026 Convertible Notes is 44.8179 of iQIYI’s ADS per US$1,000 principal amount of the iQIYI 2026 Convertible Notes (which is equivalent to an initial conversion price of approximately US$22.31 per ADS). Prior to June 15, 2026, the iQIYI 2026 Convertible Notes will be convertible at the option of the holders only upon the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2021, if the last reported sale price of ADSs for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price; (2) during the five business day period after any ten consecutive trading day period in which the trading price per US$1,000 principal amount of notes was less than 98% of the product of the last reported sale price of the ADSs and the conversion rate on each such trading day; (3) if iQIYI calls the notes for a tax redemption; or (4) upon the occurrence of specified corporate events. Thereafter, the iQIYI 2026 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The conversion rate is subject to adjustment in some events but is not adjusted for any accrued and unpaid interest. In addition, following a make-whole fundamental change that occurs prior to the maturity date or following iQIYI’s delivery of a notice of a tax redemption, iQIYI will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or such tax redemption. Upon conversion, iQIYI will pay or deliver to such converting holders, as the case may be, cash, ADSs, or a combination of cash and ADSs, at its election. The holders may require iQIYI to repurchase all or a portion of the iQIYI 2026 Convertible Notes for cash on August 1, 2024, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. In 2023, iQIYI repurchased the iQIYI 2026 Convertible Notes with the aggregate principal amount of US$504 million through separate and individually privately negotiated agreements with certain holders. In 2024, iQIYI repurchased the iQIYI 2026 Convertible Notes in an aggregate principal amount of US$396 million as requested by the holders. As of December 31, 2025, US$0.1 million principal amount of the iQIYI 2026 Convertible Notes remained outstanding. iQIYI PAG Convertible Senior Notes • On December 30, 2022, iQIYI issued US$500 million convertible senior notes, pursuant to the definitive agreements entered into with PAGAC IV-1 (Cayman) Limited, PAG Pegasus Fund LP and/or their affiliates (collectively, the “Investors”) in August 2022. iQIYI also offered an additional US$50 million principal amount simultaneously, pursuant to the Investors’ option to purchase additional notes. On February 24, 2023, the additional US$50 million principal amount was issued pursuant to the Investors’ exercise of their option. The convertible senior notes issued on December 30, 2022 and February 24, 2023 (collectively referred to as the “iQIYI PAG Convertible Notes”) are senior, secured obligations of iQIYI by certain collateral arrangements, and interest is payable quarterly in cash at a rate of 6.00% per annum on January 1, April 1, July 1 and October 1 of each year, beginning on April 1, 2023. The iQIYI PAG Convertible Notes will mature on the fifth anniversary of the issuance date unless redeemed, repurchased or converted prior to such date. 163 Table of Contents The iQIYI PAG Convertible Notes will be convertible at the holder’s option at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date and subject to the terms of the iQIYI PAG Convertible Notes, at an initial conversion rate of 216.9668 ADS per US$ 1,000 principal amount of the iQIYI PAG Convertible Notes (which is equivalent to an initial conversion price of approximately US$4.61 per ADS). Following a make-whole fundamental change that occurs prior to the maturity date, iQIYI will increase the conversion rate for a holder who elects to convert its notes in connection with such make-whole fundamental change. Holders of the iQIYI PAG Convertible Notes have the right to require iQIYI to repurchase for cash all or part of their Notes, at a repurchase price equal to 120% and 130% of the principal amount of the iQIYI PAG Convertible Notes on or shortly after the third anniversary of the issuance date and the fifth anniversary of the issuance date, respectively. Upon the closing of the transaction, the Investors have appointed the executive chairman of PAG, as a member to the board of directors, a member of the compensation committee and a non-voting member of the audit committee of iQIYI pursuant to their rights in the definitive agreements. For the years ended December 31, 2023, 2024 and 2025, the amount of interest cost recognized of iQIYI PAG Convertible Notes was RMB473 million, RMB487 million and RMB439 million (US$63 million), respectively. The repayments of iQIYI PAG Convertible Notes are guaranteed by equity interests of certain subsidiaries of iQIYI and collateralized by partial cash consideration related to certain contracts for which nil cash consideration has been charged as of December 31, 2025 and recorded as long-term restricted cash. In 2025, iQIYI repurchased the iQIYI PAG Convertible Notes in an aggregate principal amount of US$28 million through separate and individually privately negotiated agreements with certain holders. As of December 31, 2025, US$523 million principal amount of the iQIYI PAG Convertible Notes remained outstanding. iQIYI 2028 Convertible Senior Notes • On March 7, 2023, iQIYI issued US$600 million convertible senior notes (the “iQIYI 2028 Convertible Notes”). The iQIYI 2028 Convertible Notes are senior, unsecured obligations of iQIYI, and interest is payable quarterly in cash at a rate of 6.50% per annum on March 15, June 15 September 15 and December 15 of each year, beginning on June 15, 2023. The iQIYI 2028 Convertible Notes will mature on March 15, 2028 unless redeemed, repurchased or converted prior to such date. The initial conversion rate of the iQIYI 2028 Convertible Notes is 101.4636 of iQIYI’s ADS per US$1,000 principal amount of the iQIYI 2028 Convertible Notes (which is equivalent to an initial conversion price of approximately US$9.86 per ADS). Prior to September 15, 2027, the iQIYI 2028 Convertible Notes will be convertible at the option of the holders only upon the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2023 (and only during such calendar quarter), if the last reported sale price of ADSs for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price; (2) during the five business day period after any ten consecutive trading day period in which the trading price per US$1,000 principal amount of notes was less than 98% of the product of the last reported sale price of the ADSs and the conversion rate on each such trading day; (3) if iQIYI calls the notes for a tax redemption or an optional redemption; or (4) upon the occurrence of specified corporate events. Thereafter, the iQIYI 2028 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The conversion rate is subject to adjustment in some events but is not adjusted for any accrued and unpaid interest. In addition, following a make-whole fundamental change that occurs prior to the maturity date or following iQIYI’s delivery of a notice of a tax redemption, iQIYI will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or such tax redemption. Upon conversion, iQIYI will pay or deliver to such converting holders, as the case may be, cash, ADSs, or a combination of cash and ADSs, at its election. 164 Table of Contents The holders may require iQIYI to repurchase all or a portion of the iQIYI 2028 Convertible Notes for cash on March 16, 2026, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. On or after March 20, 2026, iQIYI may redeem for cash all or part of the iQIYI 2028 Convertible Notes, at its option, if the last reported sale price of the ADSs has been at least 130% of the conversion price then in effect on (i) each of at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the trading day immediately prior to the date iQIYI provides the optional redemption notice and (ii) the trading day immediately preceding the date iQIYI provides the optional redemption notice. As of December 31, 2025, iQIYI had repurchased the iQIYI 2028 Convertible Notes in an aggregate principal amount of US$392 million through separate and individually privately negotiated agreements with certain holders. As of December 31, 2025, US$208 million principal amount of the iQIYI 2028 Convertible Notes remained outstanding. iQIYI 2030 Convertible Senior Notes • On February 24, 2025, iQIYI issued US$350 million convertible senior notes (the “iQIYI 2030 Convertible Notes”). The iQIYI 2030 Convertible Notes are senior, unsecured obligations of iQIYI, and interest is payable quarterly in cash at a rate of 4.625% per annum on March 15, June 15 September 15 and December 15 of each year, beginning on June 15, 2025. The iQIYI 2030 Convertible Notes will mature on March 15, 2030 unless redeemed, repurchased or converted prior to such date. The initial conversion rate of the iQIYI 2030 Convertible Notes is 324.0966 of iQIYI’s ADS per US$1,000 principal amount of the iQIYI 2030 Convertible Notes (which is equivalent to an initial conversion price of approximately US$3.09 per ADS). Prior to September 15, 2029, the iQIYI 2030 Convertible Notes will be convertible at the option of the holders only upon the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2025 (and only during such calendar quarter), if the last reported sale price of ADSs for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price; (2) during the five business day period after any ten consecutive trading day period in which the trading price per US$1,000 principal amount of notes was less than 98% of the product of the last reported sale price of the ADSs and the conversion rate on each such trading day; (3) if iQIYI calls the notes for a tax redemption or an optional redemption; or (4) upon the occurrence of specified corporate events. Thereafter, the iQIYI 2030 Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The conversion rate is subject to adjustment in some events but is not adjusted for any accrued and unpaid interest. In addition, following a make-whole fundamental change that occurs prior to the maturity date or following iQIYI’s delivery of a notice of a tax redemption, iQIYI will increase the conversion rate for a holder who elects to convert its notes in connection with such a corporate event or such tax redemption. Upon conversion, iQIYI will pay or deliver to such converting holders, as the case may be, cash, ADSs, or a combination of cash and ADSs, at its election. The holders may require iQIYI to repurchase all or a portion of the iQIYI 2030 Convertible Notes for cash on March 15, 2028, or upon a fundamental change, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest. On or after March 20, 2028, iQIYI may redeem for cash all or part of the iQIYI 2030 Convertible Notes, at its option, if the last reported sale price of the ADSs has been at least 130% of the conversion price then in effect on (i) each of at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the trading day immediately prior to the date iQIYI provides the optional redemption notice and (ii) the trading day immediately preceding the date iQIYI provides the optional redemption notice. 165 Table of Contents If any event of default are to take place, the trustee or the holders of at least 25% in aggregate principal amount may declare the whole principal of (or, in the case of the iQIYI PAG Convertible Notes, 120% or 130% of the principal amount for such notes, as the case may be, depending on the date of occurrence of the event of default), and accrued and unpaid interest on, all the outstanding convertible senior notes to be due and payable immediately, subject to certain exceptions and conditions under the respective indenture. iQIYI may also be required to pay additional interest. If any fundamental change are to take place, holders of the iQIYI Convertible Notes will have the right, at their option, to require iQIYI to repurchase all of their notes or any portion of the principal amount (or, in the case of the iQIYI PAG Convertible Notes, 120% or 130% of the principal amount for such notes, as the case may be, depending on the date of occurrence of the fundamental change), and accrued and unpaid interests. In the event of a fundamental change, iQIYI may also be required to issue additional ADSs upon conversion of its convertible notes. As of December 31, 2025, there was no such event of default or fundamental change. We may use the net proceeds from our issuance and sale of the notes to fund the operations of our Chinese mainland subsidiaries by making additional capital contributions to our existing Chinese mainland subsidiaries, injecting capital to establish new Chinese mainland subsidiaries and/or providing loans to our Chinese mainland subsidiaries. Such transfer of funds from Baidu, Inc. or any of our offshore subsidiaries to our Chinese mainland subsidiaries is subject to the PRC regulatory restrictions and procedures: (i) capital increase of the existing Chinese mainland subsidiaries and establishment of new Chinese mainland subsidiaries must be registered with the local branch of SAMR and reported to the Ministry of Commerce via the online enterprise registration system, and registered with local banks authorized by SAFE; and (ii) loans to any of our Chinese mainland subsidiaries must not exceed the statutory limit and must be filed with SAFE. See “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—Chinese mainland’s regulation of loans to and direct investment in entities in Chinese mainland by offshore holding companies and governmental control of currency conversion may delay or prevent us from making loans to our Chinese mainland subsidiaries, the variable interest entities and certain related parties, or making additional capital contributions to our Chinese mainland subsidiaries, which could adversely affect our ability to fund and expand our business.” As of December 31, 2024 and 2025, we had RMB51.8 billion and RMB73.7 billion (US$10.5 billion) in long-term loans and notes payable (including current portion of RMB8.2 billion and RMB19.3 billion (US$2.8 billion)), RMB8.6 billion and RMB8.2 billion (USD1.2 billion) in long-term convertible notes (including current portion of RMB242 million and RMB1.5 billion (US$209 million)), RMB8.3 billion and RMB7.6 billion (US$1.1 billion) in lease liabilities (including current portion of RMB3.3 billion and RMB3.5 billion (US$494 million)) and had RMB10.7 billion and RMB7.6 billion (US$1.1 billion) in short-term loans, respectively. Accounting for Convertible Senior Notes As the iQIYI 2026 Convertible Notes, the iQIYI 2028 Convertible Notes, the iQIYI 2030 Convertible Notes and the iQIYI PAG Convertible Notes (collectively as the “iQIYI Convertible Notes”) were not issued at a substantial premium, all of the proceeds received from the issuance of the iQIYI Convertible Notes are recorded as a liability on the consolidated balance sheet in accordance with ASC 470-20. That is, no portion of the proceeds from issuing the iQIYI Convertible Notes are attributed to the conversion option at inception. The difference between the principal amount of each of the iQIYI Convertible Notes and net proceeds from the issuance is considered debt discount and is amortized at their respective effective interest rates to accrete the carrying value of the iQIYI Convertible Notes to its face value (120% or 130% of the principal amount for iQIYI PAG Convertible Notes) on the respective put dates or maturity dates of the iQIYI Convertible Notes. For the year ended December 31, 2025, the effective interest rates of the iQIYI PAG Convertible Notes, the iQIYI 2028 Convertible Notes and the iQIYI 2030 Convertible Notes were 10.20%, 7.15% and 5.28%, respectively. 166 Table of Contents The net proceeds from the issuance of the iQIYI 2028 Convertible Notes and the iQIYI 2030 Convertible Notes were US$590 million and US$344 million, net of issuance costs of US$10 million and US$6 million from the initial proceeds of US$600 million and US$350 million, respectively. In accordance with the facility agreements entered into in August 2024, upon the iQIYI PAG Convertible Notes total drawdown of US$400 million in August 2024, the iQIYI PAG Convertible Notes repurchase right for the US$523 million principal of the iQIYI PAG Convertible Notes on or shortly after the third anniversary of the issuance date was waived. It was accounted for as a debt modification pursuant to ASC 470-50, Debt—Modifications and Extinguishment (“ASC 470-50”), resulting in the effective interest rates of the iQIYI PAG Convertible Notes held by PAG decreased from 12.05% to 10.20%. Following settlement of the repurchase, a difference between the net carrying amount of the repurchased iQIYI Convertible Notes and the repurchased price was recognized as extinguishment gain and reported in “Others, net” in the consolidated statements of comprehensive income. The carrying amount of the iQIYI Convertible Notes as of December 31, 2024 and 2025 were as follows: As of December 31, 2024 As of December 31, 2025 RMB RMB US$ (In millions) Principal 8,161 7,583 1,084 Less: unamortized discount and debt issuance costs (432 ) (588 ) (84 ) Net carrying amount 8,593 8,171 1,168 For the years ended December 31, 2023, 2024 and 2025, the amounts of interest cost recognized were as follows: For the years ended December 31, 2023 2024 2025 RMB RMB RMB US$ (In millions) Contractual interest expense 644 571 462 66 Amortization of the discount and issuance costs 292 278 236 34 Total 936 849 698 100 As of December 31, 2025, the iQIYI PAG Convertible Notes, the iQIYI 2028 Convertible Notes and the iQIYI 2030 Convertible Notes will be accreted up to the principal amount of US$679 million (130% of the principal amount of the iQIYI PAG Convertible Notes held by PAG), US$208 million and US$350 million over a remaining period of 2.00 years, 0.21 years and 2.21 years, respectively. The amount repayable within the next twelve months are classified as “Convertible senior notes, current portion” on the consolidated balance sheets. The aggregate amounts upon scheduled maturities of US$0.1 million, US$887 million and US$350 million of the iQIYI Convertible Notes will be repaid when they become due in 2026, 2028 and 2030, respectively, assuming there is no conversion of the iQIYI Convertible Notes, no redemption of the iQIYI Convertible Notes prior to their maturities, the convertible senior notes holders hold the iQIYI Convertible Notes until their maturities and iQIYI elects to fully settle the iQIYI Convertible Notes in cash. Cash Flows As of December 31, 2024, and 2025, we had RMB237.7 billion and RMB239.4 billion (US$34.2 billion) in cash, cash equivalents, restricted cash, short-term investments and long-term time deposits and held-to-maturity investments. As of December 31, 2024, we had RMB60 million in long-term restricted cash, which was included in “Other non-current assets” in the consolidated balance sheet, and long-term restricted cash was immaterial as of December 31, 2025. 167 Table of Contents In 2021, we made payments of US$1.9 billion and deposited US$1.6 billion into escrow in connection with a proposed acquisition of YY Live at the time. As the original transaction did not close, these amounts were recorded as receivables related to the proposed acquisition and restricted cash, respectively, on the consolidated balance sheets. On February 25, 2025, Baidu (Hong Kong) Limited entered into new agreements with JOYY Inc and completed the acquisition of 100% equity interests in YY Live. The purchase consideration included the US$1.9 billion previously paid and an additional cash payment of approximately US$240 million. Upon closing, the US$1.6 billion held in escrow was fully released back to us. The results of YY Live’s operations have been included in our consolidated financial statements since the acquisition date. See “Item 3.D. Key Information—Risk Factors—Risks Related to Our Business and Industry—We may not be able to achieve the anticipated benefits of our acquisition of YY Live, and face other risks associated with the acquisition and the operation of YY Live.” The following table sets forth a summary of our cash flows for the years indicated: Year ended December 31, 2023 2024 2025 RMB RMB RMB US$ (in millions) Net cash provided by/(used in) operating activities 36,615 21,234 (3,013 ) (431 ) Net cash used in investing activities (50,397 ) (8,555 ) (25,136 ) (3,594 ) Net cash provided by/(used in) financing activities (14,162 ) (13,759 ) 17,142 2,451 Effect of exchange rate changes on cash, cash equivalents and restricted cash 282 95 (751 ) (107 ) Net decrease in cash, cash equivalents and restricted cash (27,662 ) (985 ) (11,758 ) (1,681 ) Cash, cash equivalents and restricted cash at beginning of the year 65,236 37,574 36,589 5,232 Cash, cash equivalents and restricted cash at end of the year 37,574 36,589 24,831 3,551 Operating Activities Net cash used in operating activities was RMB3.0 billion (US$431 million) in 2025, compared to net cash provided by operating activities of RMB21.2 billion in 2024. This change was primarily due to a net decrease of RMB14.5 billion (US$2.1 billion) in changes in working capital. Net cash provided by operating activities decreased to RMB21.2 billion in 2024 from RMB36.6 billion in 2023. This decrease was primarily due to a net decrease of RMB14.4 billion in changes in working capital. Investing Activities Net cash used in investing activities was RMB25.1 billion (US$3.6 billion) in 2025, consisting primarily of RMB13.0 billion (US$1.9 billion) in net purchase of wealth management products and deposits and RMB12.1 billion (US$1.7 billion) in acquisition of fixed assets, partially offset by RMB3.9 billion (US$563 million) in proceeds from disposal of equity investments. Net cash used in investing activities was RMB8.6 billion in 2024, consisting primarily of RMB6.3 billion in net purchase of wealth management products and deposits, RMB8.1 billion in acquisition of fixed assets, RMB2.4 billion in loans provided to third parties, RMB6.7 billion in proceeds from disposal of equity investments, and RMB2.5 billion in distribution from equity method investees. Net cash used in investing activities was RMB50.4 billion in 2023, consisting primarily of RMB198.7 billion in purchase of held-to-maturity investments, RMB11.2 billion in acquisition of fixed assets, RMB3.3 billion in purchase of available-for-sale investments, RMB1.5 billion in purchase of equity investments, RMB152.9 billion in maturities of held-to-maturity investments, RMB6.9 billion in proceeds from disposal of equity investments, RMB3.9 billion in repayments of loans provided to related parties and RMB2.2 billion in sales and maturities of available-for-sale investments. 168 Table of Contents Financing Activities Net cash provided by financing activities was RMB17.1 billion (US$2.5 billion) in 2025, consisting primarily of net proceeds of RMB20.8 billion (US$3.0 billion) from long-term notes and proceeds of RMB2.4 billion (US$339 million) from issuance of redeemable noncontrolling interests, partially offset by RMB5.5 billion (US$792 million) used to repurchase of our shares. Net cash used in financing activities was RMB13.8 billion in 2024, consisting primarily of net repayment of RMB4.6 billion for short-term and long-term loans, RMB6.3 billion used to repurchase of our shares, and repayment of RMB2.9 billion for convertible senior notes by iQIYI. Net cash used in financing activities was RMB14.2 billion in 2023, consisting primarily of repayment of RMB11.7 billion for convertible senior notes by iQIYI, repayment of RMB11.0 billion for short-term loans, repayment of RMB7.3 billion for long-term loans and RMB4.8 billion used to repurchase our shares, offset by RMB15.9 billion proceeds from short-term loans, RMB4.4 billion net proceeds from the issuance of convertible notes by iQIYI and RMB3.5 billion proceeds from issuance of shares of our subsidiaries. Capital Expenditures We made capital expenditures of RMB11.2 billion, RMB8.1 billion and RMB12.1 billion (US$1.7 billion) in 2023, 2024 and 2025, representing 8%, 6% and 9% of our revenue, respectively. In the years of 2023, 2024 and 2025, our capital expenditures were primarily attributable to the purchase of servers, network equipment and other computer hardware to increase our network infrastructure capacity and support Gen-AI research and development inputs. Our capital expenditures may increase in the future as our business continues to grow, in connection with the expansion and improvement of our network infrastructure and the construction of cloud-computing based data centers. We currently plan to fund these expenditures with our current cash, cash equivalents, restricted cash, short-term investments, loans and anticipated cash flow generated from our operating activities. Material Cash Requirements Our material cash requirements as of December 31, 2025 and any subsequent interim period primarily include payments due for our debt obligations, purchase obligations, lease obligations and investment commitment obligations. Our debt obligations primarily consist of short-term loans, long-term loans, notes payable and convertible notes and estimated interest payments. Our purchase obligations include purchase obligations for fixed assets, purchase obligations for bandwidth and property management fees, and purchase obligations for content assets. Our lease obligations primarily represent our obligations for leasing internet data center facilities and office premises. Our investment commitment obligations primarily relate to capital contribution obligations under certain arrangements which do not have contractual maturity date. We intend to fund our existing and future material cash requirements primarily with anticipated cash flows from operations, our existing cash balance and other financing alternatives. We will continue to make cash commitments, including capital expenditures, to support the growth of our business. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any off-balance sheet derivative instruments. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us. 169 Table of Contents The following table sets forth our contractual obligations by specified categories as of December 31, 2025: Payment Due by Period Total Less Than 1 Year 1-3 Years 3-5 Years More than 5 Years (In RMB millions) Debt obligations 95,740 28,704 24,710 20,381 21,945 Purchase obligations 27,875 16,791 9,077 1,959 48 Lease obligations 8,908 3,519 3,871 885 633 Investment commitment obligations 1,289 N/A N/A N/A N/A Total 133,812 49,014 37,658 23,225 22,626 Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2025. Holding Company Structure Baidu, Inc. is a holding company with no operations of its own. We conduct our operations in Chinese mainland primarily through our subsidiaries and the variable interest entities in Chinese mainland. As a result, although other means are available for us to obtain financing at the holding company level, Baidu, Inc.’s ability to pay dividends to the shareholders and to service any debt it may incur may depend upon dividends paid by our Chinese mainland subsidiaries and license and service fees paid by the variable interest entities in Chinese mainland. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Baidu, Inc. In addition, our Chinese mainland subsidiaries and the variable interest entities are required to make appropriations to certain statutory reserve funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. Our Chinese mainland subsidiaries, being foreign-invested enterprises established in Chinese mainland, and the variable interest entities, must make appropriations from their after-tax profits as reported in their PRC statutory accounts to non-distributable reserve funds, namely a statutory surplus fund and a discretionary surplus fund. Each of our Chinese mainland subsidiaries and the variable interest entities is required to allocate at least 10% of its after-tax profits to the statutory surplus fund until such fund has reached 50% of its respective registered capital. Appropriations to the discretionary surplus fund are at the discretion of our Chinese mainland subsidiaries and the variable interest entities. Under the laws and regulations of Chinese mainland, our Chinese mainland subsidiaries and the variable interest entities are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. The amounts restricted include the paid-up capital and the statutory reserve funds of our Chinese mainland subsidiaries and the net assets of the variable interest entities in which we have no legal ownership. C. Research and Development We have a team of experienced engineers who are based mostly in Beijing, Shanghai and Shenzhen, China. We also have development centers in Sunnyvale, California. We compete aggressively for engineering and recruit most of our engineers locally and have established various recruiting and training programs with leading universities in China. We have also recruited experienced engineers globally. In the years ended December 31, 2023, 2024 and 2025, our research and development expenditures were RMB24.2 billion, RMB22.1 billion and RMB20.4 billion (US$2.9 billion), representing 18%, 17% and 16% of our total revenue, respectively. Our research and development expenses primarily consist of salaries and benefits for research and development personnel, server depreciation expenses and server custody fees. We expense research and development expenditures as they are incurred, except for capitalized software development costs that fulfill the capitalization criteria. 170 Table of Contents D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material and adverse effect on our total revenue, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions. E. Critical Accounting Estimates For our critical accounting estimates, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies and Estimates.”