Baidu Posts Q2 Earnings Beat with 43% Growth, Vows to Double Down AI Bet

BEIJING, August 24 (TiPost)— Financial results showcased Baidu Inc shrugged increased worries over China’s economy off and its big bets on artificial intelligence (AI) began to pay off.

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Baidu said revenue for the quarter ended June 30 rose 15% year-over-year (YoY) to RMB34.06 billion (US$4.7 billion), beating the Wall Street estimated RMB33.28 billion. Non-GAAP diluted earnings per American Depositary Share (ADS) surged 43% YoY to RMB22.55 that quarter, much more than the analysts’ expectation of RMB16.86. The non-GAAP quarterly net income stood at RMB8.0 billion, representing a 44% YoY growth from the same period a year ago. The improvement in profit and margins as well as strong cash generation was primarily driven by revenue acceleration and efficiency gain, said Baidu chief financial officer (CFO) Rong Luo.

Baidu extended a strong recovery trend in the start of the year. The YoY increases in both total revenue and earnings per ADS in the June quarter were in line with the previous quarter. Baidu Core, which includes search-based advertising sales, cloud offerings and its autonomous driving initiatives, generated RMB26.4 billion with a 15% YoY increase, exceeding the growth of 8% in the first quarter. Revenue from online marketing revenue jumped 15% YoY to RMB19.6 billion, compared with a 6% yearly growth in the March quarter that saw positive growth following a consecutive fourth quarterly decline in revenue. The non-marketing segment, driven by Baidu AI Cloud businesses, brought RMB6.8 billion in the second quarter, up 12% YoY. iQIYI, the streaming service unit, reported revenue of RMB7.8 billion with a 17% YoY increase.

The two-digit growth of online marketing revenue reflected improvement in advertiser sentiment, and AI Cloud once again delivered positive operating profit in the second quarter, Baidu CEO Robin Li, or Li Yanhong, said at an earning call. Baidu AI Could revenue increased 5% YoY to RMB4.5 billion after the unit earned RMB4.2 billion with an 8% YoY increase in the first quarter, for the first time achieving profitability on a non-GAAP operating level.

Baidu officially launched Ernie 3.0-powered chatbot Ernie Bot on March 16, a day after OpenAI released the multimodal pre-training large model GPT-4. Two months later, the Chinese internet giant rolled out Ernie 3.5, the latest foundation model powering Ernie Bot. Robin Li said in May that planned to steadily incorporate into all of its businesses, and was rapidly integrating Ernie Bot into all the businesses for testing. Ernie 3.5has been well recognized by our cloud customers, AI developers, and industry experts, and Baidu is reinventing our products and offerings for innovative experiences, and to support various enterprises to capture this opportunity, by adopting an AI-native mindset, Robin Li said at the financial report for the second quarter.

“Baidu has invested in AI for over a decade and is well-positioned to capitalizon the opportunities arising from generative AI and LLM,” Rong Luo said. “As we look ahead, we remain steadfast in investing in AI, in particular large language models and generative AI inthe upcoming quarters.” Robin Li said his company is committed to build a new engine around generative AI and large language model (LLM) to drive sustainable long-term growth. He told analysts at an earnings call that Ernie 3.5, which can produce safer, more responsible, and more creative responses, is now powering ERNIE Bot with plugins to expand its functionality to cover real-time and precise information, long text summary, data analysis and visualization, text-to-video conversion, and facilitate dialogues that include images.

Ernie 3.5 excels in many areas, such as algorithm, industry coverage, developer tools, and ecosystem, according to IDC's latest report on the technological abilities of AI models, issued in July 2023. Ernie bot has been limited to invite-only tests since inception in March. While Baidu is still waiting regulatory approval for a large-scale launch of Ernie bot to the public, the company has observed that Chinese government has been increasingly supportive of the development of gen AI and LLM, Robin Li said.