Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Baidu Inc (BIDU, Financial) reported stable non-GAAP operating profit and margin, demonstrating resilience despite macroeconomic challenges.
- AI cloud revenue grew by 11% year-over-year, driven by strong momentum in GenAI-related revenue.
- The ERNIE model has shown significant improvements, with API call volume increasing from 600 million in August to 1.5 billion in November.
- Baidu's autonomous driving service, Apollo Go, provided 988,000 rides in Q3, marking a 20% year-over-year increase.
- Baidu Inc (BIDU) has maintained a strong cash position with RMB144.5 billion in cash, cash equivalents, and short-term investments as of September 30, 2024.
Negative Points
- Total revenues decreased by 3% year-over-year, with Baidu Core's online marketing revenue declining by 4%.
- The macroeconomic environment remains challenging, impacting advertising demand, particularly from small and medium enterprises.
- Baidu's personal cloud revenue faced a temporary impact due to short-term business adjustments.
- The company is experiencing short-term pressures due to its strategic focus on long-term AI transformation, affecting near-term margins.
- Despite advancements, image generation still faces issues with hallucinations, leading to inaccurate outputs in certain scenarios.
Q & A Highlights
Q: How should we think about the ramp-up pace for the generative AI results penetration rate in search, and what is the timeline for monetizing AI search results?
A: Rong Luo, EVP of Baidu Mobile Ecosystem Group, explained that over 20% of pages and 60% of monthly active users have engaged with GenAI content. The focus is on revolutionizing search experiences with personalized content through ERNIE. While there are early monetization results in verticals like legal and education, the priority remains on enhancing user experience before monetization. Improvements in advertising are expected next year.
Q: What are the key drivers behind the rapid growth in ERNIE's API calls, and what is the outlook for its adoption?
A: Robin Li, CEO, stated that ERNIE's API growth is driven by improved intelligence, reduced inference costs, and tailored toolchains for customers. While most API calls come from consumer products, there's strong enterprise adoption in sectors like education and healthcare. ERNIE's capabilities are expected to unlock new revenue streams and strengthen market leadership.
Q: Can management comment on the underlying ad demand trend and the macro-outlook heading into 2025?
A: Rong Luo noted that advertising is closely tied to the macro environment, particularly affecting small and medium enterprises. Despite current weaknesses in sectors like real estate and healthcare, recent policy measures are encouraging. Baidu remains optimistic about recovery, expecting advertisers to return once confidence rebounds.
Q: Could management share more about the business focus, investment priorities, and margin trends for Q4?
A: Junjie He, Interim CFO, emphasized Baidu's commitment to AI-focused strategy, particularly in search and AI cloud offerings. While near-term margins may be under pressure, the focus is on long-term value creation. Resource allocation will target high-growth opportunities in 2025.
Q: What is the outlook for Baidu's AI cloud business, particularly regarding GenAI contributions and long-term margins?
A: Dou Shen, EVP, highlighted that GenAI revenue has doubled to 11% of total AI cloud revenue. While personal cloud revenue faced short-term adjustments, enterprise cloud services maintained strong momentum. Baidu's AI cloud is expected to continue strong revenue growth and deliver healthy operating profits.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
