China’s Baidu started layoffs this week that will hit multiple business units, six sources briefed on the matter said, as the company struggles with intensifying competition in artificial intelligence and declining advertising revenue.

The move by the company, which runs China’s largest search engine, comes shortly after it reported a third-quarter loss on November 18. The sources added that the layoffs were expected to run until the end of this year. Reuters was not able to establish the companywide number of jobs being cut but the sources said it was internally perceived to be large-scale.

The layoff numbers varied by business unit and performance ratings and could reach as high as 40% for some teams, two of the people said.

The mobile ecosystem group will bear the brunt of the cuts, two sources said.

However, roles tied to AI and cloud computing will largely be protected, said four of the people. One of the sources said more resources would be directed to AI. The sources declined to be named as the information is private.

Baidu’s workforce stood at 35,900 at the end of last year, down from 39,800 in 2023 and 41,300 a year earlier, according to its annual reports. Baidu did not immediately respond to a request for comment.

The cuts follow Baidu’s second straight quarterly revenue decline; total revenue fell 7% and online advertising revenue dropped 18% in the third quarter. It also posted a loss of 11.23 billion yuan ($1.59 billion) for the period.

Baidu has spent years investing in AI, but those efforts have yet to revive growth in its core online advertising business, which has ceded market share to social media platforms like RedNote and ByteDance’s Douyin.

Although Baidu was the first major Chinese tech firm to roll out a ChatGPT-style service in 2023, it has struggled to maintain an early lead against competitors including Alibaba and AI start-up DeepSeek.

Baidu’s Ernie large language model is trailing offerings from rivals including Alibaba and DeepSeek after multiple strategy shifts, including a move to open source it earlier this year.

Adoption has also lagged. In September, Baidu’s Ernie Bot app had 10.77 million monthly active users, lower than 150 million for ByteDance’s Doubao and 73.4 million for DeepSeek, according to AI product tracker Aicpb.com.

Baidu has focused its AI push on embedding the technology into existing products, including search, and says more than half of its mobile search result pages now include AI-generated content.

Job reductions have become a common tool for major Chinese internet companies seeking to cut costs in a highly competitive sector.

Alibaba and Tencent slashed tens of thousands of jobs in 2022 to cope with a broad regulatory crackdown on China’s major internet platforms. In addition, several tech companies in the U.S. like Amazon and IBM are cutting thousands of jobs globally.