Baidu (BIDU) 22 Aug 232023 Q2 Earnings call transcript

Hello and thank you for standing by for Baidu's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded.

If you have any objections you may disconnect at this time.

to Juan meeting Investor Lin, like for to Relations. now conference, today's Baidu's, would turn over the host I Director of

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

ACG; our the Zhenyu AI, Luo, our Rong call and Co-Founder CEO; Baidu, in-charge SVP, today, On our of Dou Li, we EVP, Shen, of our cloud Driving. charge have Group, Robin Li, Intelligent in CFO; Baidu's

remarks, session. Private the U.S. prepared will Safe-Harbor the our contain we note today the of Securities After will Litigation hold Q&A discussion under provisions Please Reform a forward-looking Act made statements XXXX. that of

to results and the and cause Annual our current risks may Report risks of our from to other subject to with Exchange. materially for uncertainties, documents that actual SEC detailed expectations discussions latest Hong-Kong and and Stock these uncertainties statements Forward-looking refer differ please are filed

Baidu, statements under except update applicable law. does as any forward-looking obligation undertake required not to any

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

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

As conference a is reminder, this being recorded.

of In be available call webcast conference addition, on a will this Baidu's IR website.

turn I to Robin. call will CEO, the now our over

we delivered by tremendous profit. reflecting financial continued cloud, our the year-over-year, operating with opportunities or positive again, from the increased foundation ecosystem for non-GAAP second marketing facing in time, broadly In At models mobile and pleased to more performance in I'm everyone. Hello, operating AGI. AI same in XX% profit advertiser QX, once are Revenue online strengthen improvement segment. quarter.

go as our share for to briefly as ongoing update After well the and like our Bot ERNIE business operational transformation business. would that, each our in I'll achievements of by over field. highlights utilizing ERNIE the I on Today, an

the transform will captured the productivity businesses models It few industry, increasingly models overall the the wider the world. across past becoming foundation imagination is of fundamentally around and work of accelerate democratization foundation Over innovation. AI have months, and boosting people that clear

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we Providing resulting improving building reinventing side, the and played years native in many innovation user products product our AI has driving apps. in a an experience, are role On search, important AI for third consistent page on results satisfied response can a by result increase in satisfactory first quarter provide the the percentage results. the displayed query. one-shot search a means to search It of search that

ERNIE questions search enhance to answering experience, search previously making We're Baidu of using that Bot were unanswerable. capable complex

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than Our business growth. healthier laying for solid has become future ever foundation a

which This of implies by QX, increased closest and safety provided year-over-year in that driving, intelligent resulting accumulated is the rights leadership XXX,XXX, operation ratings. quantity in by exceeding in and rights to model million, advantages order competitive XXX% than our On greater about better competitor around Goal magnitude. in quality, RMBX.X by greater Apollo data

to in conduct were has services And widened Go Apollo Apollo open footprint to more ride-hailing the ride-hailing July, fully Pingshan addition, settings. driverless public. government to fully In a on testing mid-June, in allowed in well. XX road offer as early driverless services received we Shanghai, driverless from in permit Shenzhen In Go

quarters. of In expansion fully ride-hailing driverless the fully few the the to along growth average witnessed particular, UE daily services highlights the for efficiency, orders size driverless one within in driverless overall portion economics fleet order in autonomous the total a ago, the operational portfolio. only improvement improving we continued of in we for not promising also area of initiated of fully in the operation with but With year where pathway and the This driving. the unit improve Wuhan, past orders,

On revenue the revenue propelling side, Meanwhile, and have kilometer efficiency. cost is the the revenue car operational per average order well, volume to per decreasing thanks as per to order improved daily grow. total surged

content The information, same in Apps, to are services, RMBXXX with wide rate our year-over-year by grow revenue strengths achieved Finally, our in increasing strength million services healthcare, time, continue videos App verticals a in At travel. of and quarter. in mobile including platform to products online X% such year-over-year. from who June, outperformed accelerated as marketing Baidu e-commerce by remained and for with business MAUs distributed ecosystem, growth offline the Baidu demonstrated the users, range in double-digit seeking QX users exposure, Also a and revenue by local wireless growth aided services. significant Baidu for June.

our to Non-GAAP in particularly robust in foundation continued ecosystem quarter. operating investments ecosystems year-over-year flow profit the generated models AI, steadily and fund AI. for generate to cash grew in Mobile mobile

our will revenue, that confident are generated in from cash We mobile the flow remain strong profit and future. ecosystem

to results. let go over financial turn me call that, the Rong to our With through

you, Robin. Thank

let me financial of the our through us second details results. walk quarter Now

was XX%, RMBXX.X online RMBX.X Total by revenue billion, was AI billion, year-over-year year-over-year. QX, XX%, increased Core's revenue Core XX%, up was to marketing was marketing non-online In XX% billion, year-over-year. revenue Baidu Baidu cloud year-over-year. increasing RMBXX.X Core's year-over-year, RMBXX.X one-five one-four Baidu increasing revenue RMBX.X one-five billion. X% revenue increasing from billion,

billion, Revenue revenue increasing IT RMBXX.X RMBX.X year-over-year. Baidu was increasing year-over-year. XX%, of was billion, one-seven increasing Core's cost X% Cost for year-over-year. RMBXX.X X% billion, was of revenue

research one-four marketing XX% supports depreciation due improves promotional spending RMBXX.X expenses, primarily to Bot increase were in by expenses. expenses billion, decrease in expenses an partially Operating cloud-related personnel-related offset channel expenses, a and which server increasing and ERNIE year-over-year,

Baidu the for Baidu same cost and XX% XX% RMBX.X helps last Core one-five accounting were for of XX% expenses R&D, operating quarter R&D accounting quarter Core billion, SG&A in last to year-over-year period period XX%, in expenses Core year-over-year. revenue Baidu RMBXX.X year. decreased billion, year. same Core one-seven compared expenses increasing billion, XX% SG&A X% Baidu from the year-over-year. increasing XX%, the RMBX.X Baidu revenue was increasing were

operating RMBX.X operating Baidu operating income Core's Baidu was income margin operating non-GAAP Baidu billion Non-GAAP was Core's RMBX.X incomes billion, Operating RMBX.X and was one-seven. was Core's margin billion, Core income XX%, operating billion Baidu RMBX.X non-GAAP XX%. was and

billion in income, the Total same-period other RMBXXX net RMBX.X the increase value long-term million loss year, increase by towards exchange offset partially primarily to fair compared in of and foreign investments. net net income from last gain due the interest to

is level due the in reversals, the of income tax period to RMBX.X tax compared Apart XXXX net The income expenses before-tax for profit second year. primarily return. in for of the XXXX the increase reason the was RMBXX on tax reversal million tax the in expenses to the expenses The certain increase billion, expenses same based the lower year-over-year. is last of from tax income quarter

Net XX%, RMBXX.XX. income attributable non-GAAP and for Net was net attributable net Core attributable Non-GAAP was billion, ADS was income RMBX per one-nine. to ADS income and billion Baidu was RMBXX.X. to Baidu Baidu margin diluted Core billion to was earnings RMBX.X Baidu earnings diluted was RMBX per

Non-GAAP income was RMBX.X net was Non-GAAP billion. attributable for Core Core net Baidu XX%. Baidu to margin

iQIYI, short-term As equivalents, restricted in cash investments of billion cash, June were RMBXXX.X XX, cash cash billion. cash equivalents, RMBXXX.X and short-term XXXX, and excluding restricted cash, investments

iQIYI billion and XXXX. cash XX, as flow solid was had employees Free June RMBX.X billion. Baidu Core free excluding XX was RMBX.X approximately cash of flow

that, let's questions. to operator open With now call the

you. Thank

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

management, evening, Good on you. for Congrats taking thank results. my the Hi, thanks questions. solid

share update online recovering? industry, the have management recovery current pace including on Can about can stronger are of how seasonality? which the one also state for key offline the So platforms provide and and of advertising management industry

discuss then at now targets pandemic growth Thank behind what medium-term growth And the in and situation? management current macro with finally, And in for the addition, also you. main the already are drivers this industry? the can we latest are the for as

Hi, Robin. Alicia, this is

question. your answer me Let

marketing online by XX% Our quarter. revenue increased last year-over-year

number a to travelers this think I contributed growth. of

to local the On as pandemic, business we of travel and many vertical coming offline are healthcare, services the out services, side continue verticals like outperform.

to and We growth online Offline we a trends. continue. queries solid contributes think healthcare, this in total saw to search example, For year-over-year to sector momentum both sizable ECPM, leads of Baidu. which revenue amount marketing revenue

and And grow meantime, QX the revenue top in e-commerce to contributors. in continue remain

highly e-commerce, like market For it's competitive.

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a effective business. users intent relevant ads should allows the clear to pretty we For directly for a the the us with to remains performance-based second-half of search trend this intention see search search year, product the is offerings. with service most online clear our marketing continue recovery most because This connect approach form remember, ad. Also of and

search In effectiveness. in China's to formats should QX, fact, the growth. relatively outgrow for ECPM other growth the QX, Due the comp rate might be high the the our outperform it well quarter, not in GDP as base high but as ad reflecting

videos watching on by and Baidu. grew through we QX. More Baidu more in Additionally, distributed App, again the immersive have videos short users are more the features. video Short double-digit

quite As growth. contributing videos to from meaningfully online continue to a the overall marketing revenue result, short grow well, revenue

our believe it the business. online I year-over-year mid- growth growth to month on in And upgrades long important rate June by user in user App marketing in monetization and Baidu side, both MAU, the growth talked -- grew X% for June. drivers I into traffic Looking about our are of term, the

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major growth personalized that Along Generative some of lots and more have we starting in in quarter you. made advertising mentioned room in believe from I this Such contribute and AI. ECPM for and are using I further and growth monetization technology Thank aspect, LLM QX. look technology improvement ads, have to breakthroughs. improvement there revenue forward to for to in earlier innovative this by I started

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

question for and couple I you solid to questions product on AI of Hi, set the of a ask related and results. congrats to have thank opportunity the monetization.

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have part the Gary, the about me Hi, enterprise business. question, especially talk and of let side, I'll answer your consumer-facing Dou cloud products

business this to a our we are in clear coming. saw commitment AI, in it's paradigm with think our time early I shift we

AI-native our with an reinventing products are consumer-facing We mindset.

to Baidu search we ERNIE mentioned experience. is from search that and were I we testing past rebuilding the in and Therefore, Baidu our opening us. for traditional quite more questions This enabled not my search. who Users are tend app it's our ask different As Bot frequently an user conversation for remarks, to multi-round tend the and incremental business behavior have interaction. searched in are

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just computing also applications our customers AI Bot as such or providing to consider ERNIE to the addition ERNIE we using infrastructure mentioned. for of AI customers, [Indiscernible], in usage our and So charging Robin

project their can operating customers we basis. the charge or models to or our customers' can also, on our we deploy foundation our cloud private retraining for platform And the models own on

So opportunity build such from we be is long-term expect to [Indiscernible]. revenue but gradual, generated the the new we potential

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

quarter. the question Thank and [Technical the Difficulty] congrats you, taking on management for

my So business. question cloud the is about

So profitability the the play the expected of on slowdown ahead curious And the sustainable? could into this we revenue sort on level whether to the operating when side, is is revenue the again? a non-GAAP profit year management up expect trajectory profitability? this cloud to factors the cloud help And AI second-half entire XXXX. revenue also breakeven out? And accelerate for for what's growth looking driving will When for I'm main current also us be quarter? what trend And that? pick understand How our of do the reason we're of

the for you it. take I'll Thank Okay. question.

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

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go next with Wei Xiong comes The question ahead. UBS. from Please

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conclude session question-and-answer Thank our our you concludes This and participating. conference today. for for does

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