Baidu (BIDU) 22 Aug 242024 Q2 Earnings call transcript

Hello, and thank you for standing by for Baidu's Second Quarter and Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. [Operator Instructions] I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations.

Hello, everyone, and welcome to Baidu's Second Quarter 2024 Earnings Conference Call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website as well as our Newswire services.

Cloud we our Li, our CFO; charge Baidu today, CEO, Co-Founder EVP call of Li, Robin and AI the have our Robin and in On APG. Group Dou Shen,

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

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

discussions filed detailed and Stock please and For these of uncertainties, report Kong refer risks annual latest and to Exchange. Hong with our other documents SEC

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

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

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

reminder, As is recorded. a this conference being

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

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

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to has enhancing previous at June Wuhan, pickup It of Apollo Nationwide, for distance number the July, increased in In and rate million significantly station provided by to provided driving has In XXX,XXX In and a cumulative the rise the vehicles, our offer market daily The haling available addition end to quarter, passengers. reach take service for continue from Even entire market to expedient is per more cost surpassed points propelled services public many million. services. now The to footprint of the about rights increased year-over-year accessibility reduction, marking these its operations milestones, elsewhere. of Apollo for density with or people. our operational second is over the very Go the X deepening the small. China X and threefold convenience our the vehicle up years share to Go in in us public ride the meaningful share quarter, will Apollo rides a Go XX% provide. increase. utilization

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deep usage good. developers, by and in a the belief ongoing the customers contribute extrapolating to driven revolutionize by operations users, innovation, product we society and our aim for create to to and for summary, leveraging In greater transform value progress and from ERNIE business technological

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

Thank you, Robin.

results. of me quarter let was second flat from year. XX.X which walk revenue our Now through was Total details billion, the last RMB financial basically

RMB revenue Core's Core XX.X Baidu cost online marketing X.X AI year-over-year. Our RMB the marketing XX% year-over-year, revenue decreasing from was by RMB business. up billion, Baidu was non-online billion, revenue driven Baidu increasing XX.X mainly year-over-year. X% was Cloud X% billion,

value increase were year-over-year, Operating channel due period compared credit billion, to primarily Core Cost expected in to RMB Core's expenses spending period margin were Operating billion, a marketing acquisition Core's costs income due expenses Core's revenue XX% decreasing expenses. RMB billion. last other X.X RMB AI revenue was billion, exchange Baidu R&D core operating of was Baidu year-over-year, Cloud decreasing primarily for RMB impairment and operating investments. were XX% income the decreasing expenses XX.X year-over-year. Baidu and XX%. RMB billion, was was expenses, XX% RMB Baidu's and and to a expenses revenue in was X% Total year. decrease million, non-GAAP accounting losses X.X costs operating RMB XX% decrease long-term Baidu was from for XX.X to Baidu traffic X.X billion. income margin was XX%. and to SG&A year-over-year. gain, year-over-year. same decreasing this loss decrease year. X.X quarter promotional in in of for XXX in related same operating net XX% in billion, RMB RMB XX.X accounting income Baidu foreign billion, was Our X partially fair quarter in compared billion, income the due the decreasing operating XX% X% the billion, costs and primarily X.X to RMB business. personnel-related revenue Non-GAAP last gain were loss offset a SG&A operating X% core decreasing IT X.X increasing by Baidu XX% RMB year-over-year. and Non-GAAP X% in the net was an year-over-year, of

billion. Non-GAAP net XX%. attributable for net RMB Core Income billion, billion was RMB net in Baidu and per diluted RMB was billion same to X.X margin Baidu XX%. Baidu income and to Baidu RMB was were period last X.X earnings billion Non-GAAP Core X.X Core attributable RMB attributable to income were Net billion tax RMB margin Core attributable Baidu ADS RMB Non-GAAP X.X Baidu year. XX.XX. was compared per Net was expenses for income non-GAAP ADS X.X net income RMB and earnings X.X to was the diluted was to XX.XX%.

billion; cash RMB investments, Free XXX XXX shopping billion, equivalents RMB excluding XX, billion. free RMB As cash flow, flow and investments cash, was IT X.X X.X restricted cash excluding cash was and equivalents, IT, June RMB XXXX, and billion. were cash and cash, were short-term of restricted cash

Finally, had XX, operators. XX,XXX Baidu the June employees approximately as with Core of XXXX,

open the Let's questions. call to now

Alex [Operator Instructions] comes Your with from first question JPMorgan. Yao

few developments. a AI have on I

do all, foresee evolving over the of guys X to next in how first you years? AI X So the competition

first-mover leadership, the you How do among Kimi, to factors addition for a AI example, Baba to other competitive current technology in or and guys Tencent to, will compared build in players are time. technology the key crucial Baidu's advantage the gap Will over narrow ecosystem sustain current successful view what industry. landscape

X think Last Alex, survive. to this Ultimately from to fierce years -- years. able can while the Robin. Competition China's it was over is so-called make the X we're will X industry money be I next at year, period, few only industry go foundation survive. AI would the when consolidation, of predicted still formation that and war through model a would whoever models

demand I'm strong proud products, will forward. confident going to our And that its for maintain seeing I'm our market are We and leadership lead. has continued Gen-AI ERNIE strengthens we

our launch keep June, GX superior provided model. investment leveraging the architecture decade-long capabilities GPT-like in a AI And the us of Our company to were launched globally since we China's first-mover offers advantage, first type in model model leadership. we X.X. October, technological with We last this year. March ERNIE public for self-layer we And over first Turbo, which ERNIE X.X upgrade. X.X. launched Last That's and

built widely application-driven believe apart are versions sets models. that hold continue used by models advantage upgraded our out That And practical real We little We our users foundation further upon of our expand us roll and approach, competitive customers. will others. the with them. applications value to foundation from flagship our and

calls XXX about So believe which and is generates trillion X highest about the every earlier ERNIE API day, currently China. million tokens that in I mentioned we handles

solutions Search and customers this working native been the hard valuable And products create and accessible to heavily our experience ERNIE, this they a users gain At us to continuously has using external Wenku ERNIE. increasingly we use to of AI upgrade by the make time, scale. same us allows been supported on ERNIE when for our better have helped really Baidu ERNIE affordable. approach into have own We applications insights or from and like Baidu renovate large

can used So to be it address needs. real-world widely

the model that are efficiently utility of application-driven helped developer around expand and highlighting June, our and developers We develop end of dynamic the and us and building PaddlePaddle a of of app XX.X and of cost this ERNIE partners, has effectively. the a expanding create ecosystem. to so community our building of and And inference, power ERNIE continue model customers, for to ecosystem. approach enterprises more thousands toolkits model million. our lower us, leverage has now can engaged hundreds expanding Meanwhile, grown with By the the portfolio

will Looking ahead, be we patient.

ensure We this resources forefront valuable we and AI applications will continue By we the real-world ecosystem and of to from approach, continuously this stay to iterate capabilities among synergy our you. feedback insights strengthen rapidly partners, in ERNIE wave. will AI and new our gain leveraging landscape. to The at capabilities to our Thank application-driven vibrant advanced leadership our refine model. an ecosystem, continue evolving model rapidly

next Yu Your comes Stanley. Gary from Morgan with question

questions and related to are AI My search.

traditional AI Gen-AI kind user the the and that, to changes search the forward? percentage either of AI for What coming year? AI generated in this aims business? the of end using what plan made any Search Related have search specific is For been progress Any kind So achieve company the end renovating implementing monitoring -- what a you AI the in in behavior of has we in language by for KPI certain in of search? observed since models? search the And years? the year example, that is of rollout KPI by by company to by large moving

Yes.

search using with AI are capabilities our One technologies We app. blend and committed to very in to transform speed cutting-edge search

search override only So to accelerated our app leveraging pace we renovating second ERNIE. the quarter, Baidu KPIs by the search related Since will of TPIs.

and engagement primary is Baidu. to user offer user Our more experience, goal improve on capabilities boost

we important made remarks, progresses. in several highlighted As my opening

are XX% First, Currently, Gen-AI. pace. are expanding an of providing results at search by search provided results smarter we

the system. and results, enables around information relevant can These traditional offering the places. unavailable or effectively decline open that than previously hedge and scattered Gen-AI Furthermore, results was are more web search on supply content demand of different infinite comprehensive of

current recommend can meet the user in or users' retention. user we like and spend would just time enhance newsfeed will find a already contents needs services results other Gen-AI This from a typical context. query, will when Second,

refine Third, search Baidu allows the more experience and needs, their multi-round Search express and through and to efficient. follow-up natural questions new how users interactive making conversations, the users function reshaping in their

out would agents provide results I create up wide assistance like point By we agents, to search Additionally, range within that ERNIE to our intelligent of our rolling needs to can the of each every rapidly user. to and out a developers are users. tailored opening meet unique platform,

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challenging in On early meet, create top a now value demands of multifunctional were using range editing platform, once While and offering writing content, uncharted of services images. to can text efficiently the We're a are addressed. wider still and transforming of also into to that, opportunity. they yet search stages creative these users as be users. such Baidu is Gen-AI exciting to an

the As partners. we from We're sustainability to monetization. product, and on short-term long-term creators over feedback focused are we remain users, listening

metrics. we deliver closely foundation be ecosystem will new value and greater that for -- the will user this track patient approach set to sure believe all our We and make our shareholders. We right

Sachs. with Kong Goldman Lincoln question next comes Your from

on business. cloud So is my question the

this growth. the traditional how of of long-term revenue the this revenue How are this accelerating this AI Also, cloud does business. this incremental the cloude's contribute cloud compared AI cloud what's to related? cloud drivers revenue AI much what the the So to margin year? behind And program for year's growth

intense different longer-term the how the in And optimal think should ultimately, So business. should players or about be market? car what among our competition we pricing of

is your Lincoln, thanks question. for Dou. This

as our decline kept from in growth QX may in AI last year and then to have shifted a revenue cloud accelerating. QX a positive you noticed, So year-over-year

and quarter, AI strong industries. is AI Gen-AI reputation the infrastructure and our cloud to driven by year-over-year. this most The for growth for record XX% platform. by revenue in various book LLMs powerful across the cost-effective MaaS having demand So Thanks grew

range online as Grid, recognition Express companies from like also and adopters the and services financial the automotive, pension education and Shinshu providers, rising products gaining of SF a early we're So Leading and technology. to Internet Goldman sectors across companies such wide State industries like and utilities. insurance like

partnership intend us, AI with capabilities. leveraging So industry-leading our they a all in-depth to form

mentioned, fast-growing Robin our as Gen-AI just about foundation solutions. for total X% we meet the to model almost and driver revenue AI QX year key diverse of related increased has the this is of X% products revenue Cloud a range So in needs the Cloud, To quarter. and last It of from revenue. wide offer customers, AI a

for hosting AI and So the those seeking cost-effective powerful we and training provide infrastructure. model services, most

endorsement reinforces confidence to This high quarter, this we observed customer in their our increase reflecting customers, satisfaction in continuing share. in public So have a notable strong gain our spending on market cloud from GPU

China looking custom models also LLMs power LLM toolkits market development easy tailored in its of as ease specific needs. offer who Gen-AI family, powerful very comprehensive API the early the fine-tuning most see stages. and also the adoption the model the For the to earning available of applications includes educating depends We're which are the platform and where through capabilities provides of the of for or We some making still top affordability. market. the use, is key. on of AI MaaS the harness we On LLMs market and customers to and cores, in accessible

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capitalize and maintain revenue significant So opportunities. AI our confident on that in pretty momentum overall, growth we cloud quarters, will coming strong growth are long-term the

committed the on profit growth. sustainable to healthy are So and a we side,

consistently than AI our improving the we and business ever non-GAAP is operating margins. So generating and been cloud profit, healthier have

price is question, market. Gen-AI all market and that and issue we accessibility the very superior early regarding price So with growing essential know our is the stage in completion and in your its for performance still

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comes Your Jefferies. question with Thomas next Chong from

we Can this growth the impact by beyond, to monetization by distinguishing If advertising macro, the the impact a the rate? trend macro core revenue more around in of what's as or competition, the search weak is and management quantify it the better XXXX half from sustainable as year? What at well year-end, separately? see generative driven is soft expect particularly cannibalization AI advertising implementation growth between the second AI? better Looking in for

Yes.

pressure AI-driven proactive by caused factors advertising opening weakness efforts my pressure our the combination macro of a to in currently the mentioned renovation competitive and search. I primary business facing As Externally, accelerate and is of our external remarks, challenges. are

adopt medium-sized the activities their heavily franchising rely small- been weak. offline sluggish, very macro such and verticals So its to advertisers, and many been particularly on causing real a and as has ad Certain spending consumer especially who front, to sectors, spending. estate automobile have cautious on the the approach advertisers related recovery of

social video our are can has selected the to leading The few a loss media user increasingly concentrating changed addition advertising and platforms. change Internet Users a short share business. spend on this, In behavior time be Chinese proxy users time into their lot. a online of

And I XX% time. our as over contain increase content, is at number will monetized of which this This earlier, not mentioned results time. Gen-AI search

rollout revenue in here. system, our course, Gen-AI features the Of monetization partly aggressive sacrificed offset the of

being, technological the future be we success. all big are believe time challenges these While key strongly for our the will innovation for the

opportunities new strengths within focus need we system and on our reach and can leveraging time. to a over the resources and actively Specifically, faster growth to seize inflows, we our what shape

Gen-AI this renovating our with end, mobile to are entire ERNIE. ecosystem we and So

revenue the renovations grow during The talked in due continue Gen-AI QX. our of by about improved previous ad and the capabilities. This some the the efficiency. exploring conversion advertising in We actively And is already showing to For top advertising for to ERNIE and ad results. system, which enhance system, have to quarter. are incremental further generated on agents the improvement mainly LLM monetization we're that, opportunities this

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potential New results, features rapidly. short such rolling not a search as high out it's will in time. interactive something features search agents ERNIE but and within renovation that has This be been completed have AI-generated

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than Thank it ultimately noticeable confident rather some search a product, before the see contribution create from long-lasting our may growth. user we short-term on time enhancements drive but creating value and you. value we revenue in focusing revenue while revenue AI are that tremendous take sustainable So

Your with comes America Securities. of Zhang Bank next from question

is the So and monetization. agent about question AI the my

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Your next Citigroup. . Yap comes with from question Alicia

I have a question on margin. the

achieve expansions the operating in quarter. to continue the Core Baidu in second So the margins

this Just What is outlook Core trend XXXX? the sustainable? margin for in your Baidu wondering, expansion is the entire on profit year

your Thank question. you for

Let me take your question.

margin a As know, guidance on we continue phase the operating priorities. quarters margins I For would to AI for basis. for could mean what and we out low into and our expenses? our you to we you profit businesses, non-GAAP Cloud, that can the give ahead, but generating insights don't try cost give continue business so And some

margins normalized than AI-related X% is long the business. should And this revenue. to cloud higher of kind cloud businesses cloud today term, Looking legacy be for the total our already the of generative revenue the

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top future and basis. this For have record with intend track to resolute building of now, continue a many and years cost the the revenue growth we delivered discipline solid line our on

growth. high-quality the runs course, investment Sometimes, though, of ahead of the

businesses pressures challenges. It's this focus our and tackle experiences, for offering ad search to revenue kind a a experience to our Baidu challenging search We environment. improve the users in of important continue whole operate AI-based legacy particular, Search. in to very That on new

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some So our in short native put on term. search the will the inevitably accelerated AI pressures transformation of margins

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Xiong Next question UBS. Wei with comes from

robotaxi regarding business. My is the question

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we For anyone would it. a forward. But in whether or else long kept world make moving this time, many dialed we

a Now as our breakeven vision we approaching, see becoming is reality. regional scalable

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we But the question various for CapEx to business vehicles As hardware regarding to your and by are partnerships. business Currently, models owned of future open and and our are us, model. depreciation we all costs. are

licensing While and we the you. to better in our solutions. like fleet focus aim to society capture benefiting long transportation market models key asset-light cities. its huge innovate and ultimately, achieving with operation immediate In the run, Thank breakeven opportunities is still technology

and for that today. Ladies participating. our does conference gentlemen, conclude for Thank you

You may all disconnect.