Baidu (BIDU) 22 Nov 222022 Q3 Earnings call transcript

Thank you for standing by, and welcome to the Baidu Incorporated Third Quarter 2022 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your host for today, Juan Lin, Baidu's Director of Investor Relations. Please, go ahead.

to quarter welcome call. earnings and everyone, Baidu's XXXX third conference Hello, on earnings today, our copy as earlier was website services. you well Baidu's distributed a and release can find as Newswire on

today we On our charge Baidu of SVP Luo, Shen, AI Securities note will remarks, have the prepared will Group; Dou call a Robin that our Zhenyu CEO; we under CFO; charge Co-Founder the in Please safe EVP the discussion Act in forward-looking Driving. and provisions After our Baidu Li, XXXX. our Cloud Intelligent the Rong contain and Q&A hold of made Litigation our statements of session. today, of harbor US Reform Li, Private

cause to current statements from our materially actual results to are that Forward-looking subject expectations. differ risks and may uncertainties

these to any of with documents other and Exchange. Baidu undertake risks report applicable under refer does Hong Stock uncertainties, except filed annual latest law. to Kong update discussions not detailed forward-looking obligation For statements, our as and required the and SEC please any

press release and measures. of financial non-GAAP earnings include call unaudited certain discussions this Our

Our most of ir.baidu.com. measures comparable non-GAAP the is press site and directly IR on available our GAAP to the contains release at a measures reconciliation unaudited unaudited

recorded. As reminder, conference a is this being

this on call will available our addition, I a In webcast of IR Baidu's to Robin. conference CEO, website. will be now over turn

environments. Businesses both challenging line year-over-year especially in AI margin third a environment, ready for positive quarter from affected resurgence long-term on relentless Driving stronger, meaningfully, to of period on line we a Baidu's ecosystem for to growth. resumed delivered Cloud using Periods given emerge growth. despite the terms, We're basis. have operating current and COVID. challenging And loss our challenges the ourselves we Cloud, broad mobile Recapping have been everyone. Hello, to conditions a and quarter-over-quarter the macro year-over-year mobile Throughout profit Intelligent experienced improved enabled to across improve. to have by this many the bottom results operating us for negatively history, however, ecosystem, improved effort of business AI building

tasks are which continuous new key efficiency, Our optimization investments unchanged, in businesses. short-term and AI the remain

such XX% with tech Driving and Our innovation In By Intelligent and and initiatives. AI China's retail strengthen in growth QX, AI Baidu Cloud revenue we doing Core will down well June. reaccelerate year-over-year as in from aligned the growth. year-over-year X% business ad has gradually Encouragingly, macro business recorded quarter. national but are AI quarter's business positive the the and year-over-year, healthcare from was improved new our leadership new further since improved second decline, so, revenues

in franchising travel, situation across Going forward, and different major COVID rebound. when verticals ad local alleviates revenues such should services cities as

on has total ago. Revenues year-on-year total new Baidu year provider completed Go automakers year-over-year. public report has a year-over-year. Cloud XX% XX% quarter, XX% the up XX% from by XXX,XXX largest RMB continued We we rides Go gain highlights. more the the Apollo growing projected up [ph]. X.X our and believe I XXX% the traction of QX, increased major service completed among to recently, X.X proud for million reached than solutions sales the some a of to revenue, driver end autonomous AI leading am accounted for In Core AI non-advertising non-advertising billion Cloud billion ride-hailing been remain auto XX.X Baidu that's Apollo revenue. growth in Baidu Apollo globally. sales QX, For to Core in RMB from accumulated business, AI By rides quarter.

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intelligent two, design pain know-how our their stack to ranging solve models, capabilities AI number full based end-to-end one, believe control. the number deep insight market early-stage, to and on application-level our our our to our due cost capabilities about will transformation. establish and take chip and Cloud, fast-growing our language capabilities from to solutions them We to frameworks, help customers' will and with remain capabilities customers productivity be We in learning of better we positioned positioned points empower increase customers With well large to growing software; on AI profits. AI advantage to digital to

team's implementation contract project we sales in unchanged. digital the new wins, our and remains delays efforts, trend transformation caused complicated long-term intelligent believe hampering of and COVID While

margins bearing the quality AI major we fruit. and begun in on Cloud. next expected and our launched Apollo third are auto several with will intelligent driving and the Baidu to quarter investing solutions, Looking and current continue our year. marked driving, total improve ANP recently. sales models accumulative for in billion to half growth some our projected the aim on equipped be focus of of years key AVP Based to intelligent in second RMBXX.X In highlights of exceeded pipeline, profitability ahead, to achieve car we

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which been X autonomous We through Level investments. driving, of years with established world-leading have has differentiated ourselves

adopted, we year-over-year we up XXX,XXX, and Map we and autonomous shopping rides largest of proactively us our by of solutions OEMs and synergies hours, provided autonomous our vast have passengers auto Now, believe allowing already to our transportation -- Baidu obtained the quarter-over-quarter. driving. and have partners' worldwide. progress covering service we Map between subway solutions for and the the months app map XX% in Baidu transportation buildings intelligent we like also majority ago, mobility few the continue are scale to Apollo were stations, increasing Go Since for to we third for high-quality widely been Baidu Map, to the remain office mobile ride accelerate an rush operations, malls. our group insights A On the drive-hailing Apollo reached during integrated driving A provider building number strengthen quarter, In partnerships XXX% sector. serving places create our auto Go, into the increasing more the with in mass industries. industry,

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mobile to Moving the ecosystem.

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pages using ecosystem. result produce the the expect to for For search search were progressing more rapidly. of of our on short Baidu clicks Search, mobile September, prevalence short we And continue results videos. videos to video in AI in XX% We're

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you, Thank Robin.

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equivalents, restricted cash short-term Free cash, RMBXXX.X cash XX, and RMBX.X billion. to on quarter. With was were had cash, basis restricted September employees in and acquisition flow excluding non-GAAP free billion. XX,XXX cash and now XX, Core in XXXX. approximately flow both were September flow separate cash cash as excluding of iQIYI As GAAP of free open RMBXXX.X investments quarter. positive operating equivalents, ACE short-term ACE and profits cash cash billion XXXX, investments iQIYI RMBX.X this that, call this was the billion generated also generate a The questions. of operator, and On let's note, Baidu positive

session. from Please with Citigroup. the The now will Alicia question comes today We [Operator begin ahead. question-and-answer go Yap Instructions] first

evening, Thank questions. questions. Thanks two my for management. taking you. Good I have

First, can management in what on, near-term also forward? Baidu think next will the landscape you it's going demand would advertising management about secondly, quarters? And comment the in the recovery comment how you. the Thank how market And can should in we then market and advertising long-term be? look the share at evolve China competitive

This is Alicia. Robin. Hi

roundup Guangzhou When will it in quarter, situation of the cloudy since closely Beijing. and bit entered there a impacted because round by November, which develop. sensitive Baidu our it but answer are me decreased improved fourth COVID much August. the watching the than like growth control lot COVID September, QX, Yes, another because early in of were because measures. Core's there again, Let recovery disruptions a a returned ad to we quarter some COVID. But got October, questions. how QX in very was the in your caused year-over-year positive revenues regions, revenues from situation resurgence. better were We're second of to Overall, new COVID

the short-term volatile, been I and mid-term be the the ongoing gaining probably fighting will the should this next been for few experience. should improve overall three COVID see disruptions almost economy in Well, improve in China beyond. over situation the think quarters. has has direction a years country quite but move should -- and still we're going certainly some uncertainties. and to The positive against

by verticals macro. of ad As COVID affected many know, were you our and

situation will verticals positive COVID a as closely to back ad local franchising our develops, from as situations or to Again, revenue different and bring once we rebound. how we services year-over-year travel, as growth revenues will our and hard So macro COVID improve, such ad should work possible. very watch soon

AI new our intelligent addition, COVID In the disruption. Cloud driving, and by also business impacted negatively

past types various relevant is So in impact Baidu we Many and businesses of competition service important ad mobile our regarding local thirdly, On users' be the top maturing. efficient intent supplies, run. still pandemic. before. because the connect many all, And positioning grow Search our most one these advertisers we real quarters. sector lot of in With the with the its most I first is super internet channel that, advertising should to is managed your much over few competitive and down to the also of apps And ads if and businesses box. user This them And mobile than market backdrop, work audience. run explicitly most being the is volatile users is enjoying gradually And SMEs, the the see market, the growth as performance of in China's product well-recognized Baidu to App their of why services, a by advertisers search ROI with industry, internet search, of are service to Baidu base the the able in COVID China's and our User among non-advertising services the should and in Search in offerings. as the business unique nicely sustain App the This believe landscape business advertising online intentions consider long their express very targeted search on of is this most question improvement. online travel. market hurt secondly, less best such our ads most share economy. over reach slowing unlike the of think well-established. peers,

when stand should rebound and So share And Baidu overall gain the COVID to impact in advertising . quickly. industry. revenue subside,

Robin. Thanks,

of The next from Leung Please question Bank go with Eddie America. comes ahead.

have quarter good all solid questions guys. Hi, Pretty couple macro a evening, cloud of despite services. I the on headwinds.

have a seen seems industry. like in So it slowdown we the --

you all competitive talk useful. market thinking little past So reasons on rates about could growth a So and a gains little could the have lessor seen mentioned talk about tie of quarters upcoming the cloud And the are by a the share then you slowdown will also years, cloud. set we you how margin on term? in the finally, competitive Internet the medium -- the or And about in secondly, the companies behind bit about guys bit Robin, right? the -- landscape remember, media landscape two then I the any reporting one color be improvement you

Any So you to role profitability? line be Thank helpful. on time about the you. your talk also thoughts would could

a Hello, answer I'll Dou. your lot to questions. Thanks This questions. is your Eddie. try for

So from for time, could on growth and impact. restrictions, bidding we part, that COVID-XX I slowing our down travel for Apart implement sustainable for mainly the low-margin even affected. was healthier I of to by the projects contracts on also not think highlight the the growth the because and want that, more businesses. are cutting due new some we to focused also it's example, right, revenue

is to the believe just beyond has industries and cloud business development. as public train So onto mentioned, we Actually, this current for sector the the use remains and China's quarter, for long-term unchanged. the move approach AI crucial their looking the Robin traditional

transportation. should more Baidu companies they are capable the that are AI future using money spend pandemic, confidence in efficiency growth we post improve very already and that has intelligent more of to demonstrated gain to willing their more upgrades. in digital so think I the So on

rapidly, market As Transportation share accordingly. to have gain our already revenues you growing continue see, been we Smart can and ACE

for because increase continue the we are to and meanwhile, transportation continue So loss in to scale we operating expand operating the small leverage. reducing

our transportation in So traditional and in next utilities. our excited in repeating other are so about manufacturing like steps, we success industries

the the grow And of of solidly. end-to-end in our largely – AI quarter, it's and revenues from cloud the understanding improving these fundamental industries. utilities the past So the -- continuous actually, needs and efforts quarter industries so manufacturing capabilities both just our because the our in in

So sustainable this to answer or to questions, we our compete other your competitive players. advantages believe against

addition, In peer expanding alternative opportunities in for is the the grow and over market to our companies us their long-term.

So improve personal talking generating about the on profitability, faster so because than loss operating mentioned loss efforts of I expand margin. this part the To of cloud, our to cloud to reduction the our very Baidu profit earlier. AI and and just Cloud quarter. that, see we're trend reduced enterprise continue personal margin grow decent loss operating operating kept happy And and

strategy standardize to fruit. the -- bear in in key the So use solutions our our user started cases to for industries

user one So solutions to another scale from margins. to more business grow to and we worked hard replicate very case have improve

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important So improve margins AI is the to business will very forward. and Baidu, going Cloud we business and new grow for continue

Thank you.

Yao Alex ahead. from comes with question JPMorgan. next go Please The

improvement. several Thank job In of Core I have Baidu terms my the in a margin guys questions past good management did the very you question. of taking cost control you margins. for on and quarters, couple

XXXX? headcount think if situation further cutting in forward? for question much Thank should think the macro Core is and you. slow cost Lastly, and driving related autonomous about how deteriorates? And down, Baidu should has more how Baidu in streamlining further Core investments the already about operating the room would down coming going margin we the been we BU quarters large-scale As and the Baidu cloud

questions. Thank Alex, your for you,

Let me try Julius. to is figure your questions. This

us we tasks. and think said operating is actually the our In time, the in from I this expenses last the we beginning think we period prepared of future same This of efficiency, the macro not and short-term continue same optimize the growth. kept QX, our believe quarters. new as that numbers. Core, every I the XX% investing me margin the we weather continue And remarks, will to Baidu one past operational for improve costs changed businesses over. the the expanding is key Baidu Robin which strategy to to of it accelerated in At market has for AI once growth strategy through in has in let few prepare XX% non-GAAP for environment, downturn the profit year. us to allow recast again some challenging cost

I year-over-year growth XXXX. QX made efforts operating in since margin think lot the has perspective it achieve represented and we a profit first results. non-GAAP of And to such

You'll our once from SG&A our year. same again the probably quarter this has last decreased early see from release, quarter QX, in

decline. And forward, continue very to consecutive with achieved promotional year-over-year channel expenses been going have did We disciplined the quarter that we the costs past. same as in will and as SG&A less spending activities. already a the variable to we was and And just control add it what that,

profit also just is of revenue the for mentioned was up made growth repeated know look which our business, mobile And impacted of each you COVID-XX. operating our basis, though the into by already have of Cloud. and we a year-over-year on actually part If efforts is by our for we going negatively Dou, even AI healthy we earlier a ecosystem, lot

both improved basis for significantly, loss separate, a basis. year-over-year This on quarter, Cloud If the AI part. we're quarter-over-quarter operating two margins and

well personal and the to our continue the solutions, started grow margins low-margin including we continue we a to Also, time, the for status, high-margin the cloud, standardize and For to continue quarter. cases key to IaaS, end-to-end allocating quite notably. enterprise fast And resources user improve at same profit business. this and much the the of one decent business public we in SaaS our examples, reduce expectations past, same generate PaaS, we're the as and as

Go, well Apollo chose we also Go measured at business, robotaxi to our grow Apollo For pace.

comprehensive costs. very the and cost -- business, costs forecast especially expenses have the We financial models labor in optimize very the to hardware and this and

for flow careful We have business. measure very estimate cash this been the to and

the in sector, to in Our and leading key in strategy in ride-hailing shares the profits generate in in acquire sizable China try robotaxi over is to more position ultimately the market all key the these future, our cities especially strengthen world, and areas.

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Zhenyu revenue solutions, generate business contribution have cars available or sales to meaningful billion revenue our already it at with a to expect market. revenue from I estimate half profit. as year in a OEMs OEMs. projects, is And industry, it in our auto this then once cumulative small auto us sign second keying letters our the supplier mentioned the and would is will of contracts also small means contract projected from the and and clear certain Li make XXXX, while letter we still received now, RMBXX.X nomination up around of nomination affected become stage, with the should we billion, For RMBXX.X see In next this to like side the including solutions in, in start can we very for more kicks the is first. maybe just early

made understanding volumes. I of launch, Our of future estimate of is calculations. the timing how you pricing, have hope these based this gives the we assumptions a better on the our

the and expenses. question. in new you future, narrow AI flow continue Looking generate the to our for business. cost growth, be different continue to short our long-term Cloud investments continue term. will we the AI very the ecosystem and environment intelligent Cloud. the with driving to our to support for And of disciplined your to And profits at much to loss mobile the forward, work we'll hard in and same will also in cash AI challenging Thank we'll so believe in in the our we despite very continue invest time, And

with The next ahead. question comes go Please from Gary Yu Stanley. Morgan

Hi. you opportunity I congrats Thank solutions. your expanded on network growing ADS a question for and and business. have the backlogs for the auto partner on

the meaningful Apollo's of a peers? OEMs solutions? Apollo's you market revenue us the Baidu solutions? significant And when space towards Just self-developing is, we question you auto underlying solution to help wondering, the gains? intelligent should you. change in understand for And to start for differentiate driving And the could your Thank how auto attitude do from expect you have related noticed a that

is Gary, market. solutions in of auto in market China. We're by from half months seen than more the XX year, trend. EV sales accounting In EV auto this the than We've the Baidu first in now more the for this vehicle huge is clear XXX% opportunities global benefiting sales. Hi, largest of increased this Robin. is the intelligence. A EV world, trend for industry the

A lot ASD. AI investments Apollo's from models of we for auto driving used in be core to years Baidu bear begun fruit. solutions can of technologies. Our autonomous for robotaxi build derived our have

develop meet to also testing point these note used thanks by accumulated leader, of millions our that needs. autonomous Another And in this best but roads is to as not valuable urban to have investment, a a great about of insights auto tens on XX years. market we that investing This and completed we provided public have experience on we the basis. the daily miles fleet very driving insight, for on running solutions has only us the been customers' robotaxi largest have roads,

short to solutions, automakers adopting compatible We popular models. time. within our first in car is available ANP very use R&D market solution We were from we ANP to solution with for example, that it advance be experienced driving on technology, with intelligent X.X. amount our make autonomous to the and we a X.X believe car advanced for more is our Robo personnel solutions Because more to XX derived So become believe four the most X.X. making will this a able auto the limited ANP the more more market. use first city roads of will driving Jidu's one

on and we'll other with more improve our hand, the continue solutions with auto are our go, cars On to will be the grow solutions. and uses experience auto from everyday more we able to

some sales mentioned second year. is of launched Based earlier, in than that current RMBXX.X equipped pipeline, car major total ANP, year. our solutions auto the next from starting I As of last models be should on cumulative Apollo's are AVP half reached the for with billion, more our which projected XX%

So, meaningful begin and will this in XXXX revenue contribution follow. for should business profit

many brand afford massive cannot before, technology look of technology. trust in investment. solutions at require most the developing and speaking, we talent. advanced companies if as this the side, you On our and differentiation, investment intelligent times cost kind Frankly mentioned Automakers

partner have chosen to them of solutions. lot a with intelligent Baidu So,

made intelligent we strong a technology our reliable generate cash For we trustworthy position support in investment to them, we have because and driving investments. are and flow strong cash and business supplier years of have a continue our advertising

why the with many automaker broadened more and partnership us more support large scale. with leading and That's have have Baidu. Going forward, automakers will this to recognized at operation continue

China's companies, in auto Maps. example, one to plan ASD expanded And our the into yet ASD of use and for the their largest solutions HD model. of AVP, used popular partnership For car we our another we solution and with ANP, quarter,

Going more and with forward are partnerships Thank to we internationally. you, OEMs, both forward, domestically Gary. looking

comes question ahead. Credit Kenneth go next from Please The Suisse. Fong with

when in fully that longer we near-term? for the on I taking cash On progress milestone about question Apollo to Hi, Go. key achieve impact will milestone, for quarter a the my in flow? kind of good in P&L, evening and will Thank achieve And well management term? seen question. follow-up Apollo a achieve and autonomous the management. as as the Congrats about Could have should about business expect should we even how a solid Go thanks Go be also And Apollo you. your think talk breakeven? to driving, XXXX this what

Zhenyu. is This question. your for Thanks

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Thank It's very clear. you.

Lincoln comes Please The from go Goldman with question Kong ahead. next Sachs.

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Thank you. Great.

ahead. from Mizuho. Please Lee The with today last go comes question James

questions. Great. I Thanks for my have here. two taking

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presentation. This call. you concludes attending our for question-and-answer the concludes Thank conference and session, today's

may now disconnect. You