Baidu Q1 Earnings Beat with 48% Increase as AI Cloud First Achieves Profitability

BEIJING, May 16 (TiPost)— The American depositary receipts (ADRs) of Baidu Inc soared about 4%, outperforming market on Tuesday, after the Chinese tech behemoth posted stronger-than-expected recovery in the first three months of the year.

Source: Visual China

Baidu’s total revenue grew around 10% year-over-year (YoY) to RMB31.14 billion (US$4.5 billion) in the quarter ended March 31, beating the analysts’ expectation of RMB30.01 billion. Excluding items, the Non-GAAP diluted earnings per American Depository Share (ADS) jumped 43% YoY to RMB16.10, surpassing the estimated RMB12.93. Non-GAAP net income that quarter surged 48% YoY to RMB5.727 billion, while the net income a year earlier declined 9.3% to RMB3.9 billion.

The first quarter saw Baidu’s key businesses made a remarkable comeback. Revenue from Baidu Core, which includes search-based advertising sales, cloud offerings and its autonomous driving initiatives, increased 8% YoY to RMB23.0 billion, better than the Wall Street forecast of RMB22.3 billion. The online marketing revenue returned to a positive yearly growth of 6%, following the decline in revenue for all four quarters last year. Baidu artificial intelligence (AI) Cloud earned RMB4.2 billion with an 8% YoY increase, and first achieved profitability on a non-GAAP operating level. iQIYI, the streaming service unit, reported revenue of RMB8.3 billion, better than the expected RMB7.88 billion. Revenue from the unit increased 15% YoY, the fastest growth since the second quarter, 2019.

Baidu CEO Robin said the online marketing business benefited from improvement in China’s economic recovery and commercial environment as a result of China’s reopening. He noted many advertisers in offline sectors such as travel, healthcare, experienced a quick recovery after the Chinese New Year.

As to the AI Cloud business, Li attributed the first quarterly profitability to its phasing out low quality projects and developing standardized AI solutions for key user cases. “Generative AI represents a new paradigm shift in the AI, and Baidu is poised to take advantage of this massive market opportunity. Baidu will continue to invest unwaveringly in this area in the coming quarters,” said Rong Luo, Chief Financial Officer (CFO) of Baidu, in a press release on Tuesday.

Baidu officially launched ChatGPT-like chatbot Ernie Bot on March 16, a day after OpenAI released the multimodal pre-training large model GPT-4. The generative AI product enables to generate texts and integrate other capabilities of Baidu in the field of AI, such as the ability to create pictures, and the ability to automatically generate videos according to the copywriting, which can generate content with pictures.

Robin Li said Baidu planned to steadily incorporate into all of its businesses, and was rapidly integrating Ernie Bot into all the businesses for testing. The executive disclosed at the earnings call that his company was making a beta-test for an upgraded version of Baidu Search, which is powered by Ernie Bot, and testing the integration of the bot with Baidu Wenku, an online document-sharing platform, to enable the bot to work alongside users and assist with searching, summarizing, and generating content using natural language. He added that Baidu has applied for review and approval of Ernie Bot to meet regulatory requirements, since any new tech offering has to undergo government review and approval prior to large-scale deployment.

Li said Baidu has witnessed more and more enterprises from various industries started their model training on the company’s cloud. He believes generative AI is expanding the addressable market of the cloud industry, because cloud service providers can use generative AI to add or enhance capabilities to their current offerings, develop new solutions and applications to address unfulfilled market demand, and drive productivity and efficiency.

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