Core Insights - Michael Burry, known for "The Big Short," has raised concerns about Baidu Inc. following its Q3 2025 earnings, pointing out questionable accounting practices that may indicate financial instability [1][2]. Financial Performance - Baidu reported a significant impairment charge of RMB 16.2 billion ($2.2 billion), acknowledging that much of its infrastructure is now considered obsolete, contradicting previous claims about asset longevity [3][4]. - The company's net income increased over 50% in 2024 due to extending the estimated useful life of servers, which artificially reduced depreciation expenses and created a misleading impression of growth [5]. - In Q3 2025, Baidu's total revenue fell by 7% year-over-year to $4.38 billion, and free cash flow turned negative amid rising AI investments [7]. Management Commentary - Baidu's management defended the impairment as a necessary adjustment for their AI transition, stating that existing assets did not meet current computing efficiency standards [6][7]. - CEO Robin Li claimed that AI is generating transformative value, although Burry's analysis suggests that the company's earnings history is influenced by changing accounting practices [8]. Stock Performance - Baidu's shares have increased by 41.64% year-to-date, outperforming the Nasdaq Composite and Nasdaq 100 indices, which returned 16.35% and 16.82%, respectively [9]. - Despite a recent drop of 2.64% overnight, Baidu's stock has gained 36.18% over the year [9].