Shulou(Shulou.com)11/24 Report--

Sina Science and Technology News Beijing time August 30 evening news, Baidu (Nasdaq:BIDU) today released as of June 30, the second quarter of 2022 financial results. Baidu's total revenue in the second quarter was 29.6 billion yuan ($4.43 billion), down 5% from a year earlier, according to the results. The net profit attributed to Baidu was 3.6 billion yuan ($543 million), while Baidu Core made a net profit of 3.7 billion yuan ($555 million) in the second quarter. Without Non-GAAP, Baidu's net profit was 5.5 billion yuan ($827 million), while Baidu Core's second-quarter net profit was 5.4 billion yuan ($814 million).

After the announcement, Baidu Chairman and CEO Robin Li, CFO Luo Rong, Senior Vice President Shen Qiu and Senior Vice President and General Manager of Intelligent driving Group Li Zhenyu attended the subsequent earnings conference call to interpret the main points of the results and answer analysts' questions.

The following is the main content of the question and answer session:

JPMorgan Chase analyst Alex Yao: management mentioned that the advertising business has shown signs of recovery since June, which industries have resumed their advertising business growth? How to look forward to the growth of advertising business in the second half of the year? If it is no longer affected by the epidemic, what is the growth trend of the advertising business in the medium to long term?

Robin Li: in the second quarter, due to the challenges of the macro environment, the advertising revenue of Baidu's core business decreased by 10% compared with the same period last year, including a big drop in advertising revenue in April and May because of the impact of the epidemic on major cities in China. Shanghai, in particular, Beijing has been slightly less affected. As the impact of the epidemic diminished in June, advertising revenue began to recover, and the performance in July was even better than that in June. In terms of vertical sectors that contribute revenue, some industries were more affected in April and May, such as retail, tourism, local services and health care, where advertising has recovered rapidly since June. In the second half of the year, we will also face macro uncertainties. At present, it is difficult for us to predict the development of the epidemic. For example, some popular tourist destinations, including Sanya, end the summer tourist season early because of the epidemic. The growth of our search business is closely related to the growth of GDP in China and the growth of small and medium-sized enterprises in China, so we believe that the company's advertising revenue will improve after the epidemic is alleviated.

In addition, we also see some opportunities from e-commerce and short videos in the mobile ecosystem, such as integrating e-commerce and short videos with our search and information flow business. in fact, we provide users with more and more short videos, which helps to improve the user experience. In the medium to long term, with the continuous enrichment of content related to key vertical industries and our growing ability to promote transactions in Baidu App, as long as we can continue to improve the user experience, we can deepen advertisers' understanding of users, help improve our revenue conversion rate, create value for advertisers, and support the long-term growth of online advertising business.

Credit Suisse analyst Kenneth Fong: could you ask management to talk about the drivers that the company's artificial intelligence cloud business is growing faster than its competitors? What are the growth prospects for the business in the second half of the year? Could you also ask the management to talk about the strategy of the artificial intelligence cloud business and when to break even?

Shen Qiu: despite the challenges of the macro environment, the company's artificial intelligence cloud business continued to grow in the second quarter, with an increase of 31% over the same period last year. Artificial intelligence cloud business accounts for 20% of Baidu's core business revenue. Our artificial intelligence cloud business has the advantage of differentiation compared with our competitors, and we have been committed to combining cloud computing with artificial intelligence technology to help users improve their experience.

More specifically, as a company providing cloud computing services, we have artificial intelligence capabilities, while on the other hand, as a company providing artificial intelligence solutions, we have strong cloud computing services capabilities. The growth of the company's cloud business is mainly driven by the enterprise and public cloud business. In China, the digital and intelligent transformation of these two parts of business is still in its infancy, which also means that organizations, large and small, want to use artificial intelligence to improve their efficiency and competitiveness. drive the growth of industry demand for high-performance cloud computing services. Total cloud revenue from manufacturing, energy, utilities and the public sector nearly doubled in the second quarter. In the field of intelligent transportation, we continue to give full play to the advantages of artificial intelligence, and with a deep understanding of autopilot technology, continue to promote business growth, intelligent transportation has become one of the largest growth variables in the company's artificial intelligence cloud business. We believe that the enterprise and public cloud business will continue to drive the growth of the company's artificial intelligence cloud business. Project implementation has improved further since early June, and of course, in the short term, there is still uncertainty about the epidemic, but we believe that the strong demand for cloud services in the Chinese market and the growth trend of the business have not changed. so we strive to grow faster than our competitors.

Luo Jung: the AI cloud business continued to achieve positive profit margins in the second quarter, and the company's operating margins improved as we focused on high quality and sustainable growth.

The company's artificial intelligence cloud business is divided into two parts, one is personal cloud services, which account for a relatively small proportion of the overall business and will continue to contribute to operating profits, but the revenue growth of this part of the business is slower than that of the overall cloud business. Second, enterprises and public cloud services continued to generate positive gross margins in the second quarter, with year-on-year and month-on-month growth because we continue to focus on high-quality growth and gradually phase out projects that do not operate healthily in the future. we will strive to narrow the loss rate. The intelligent transportation business in enterprise and public cloud business, which involves many elements of software and artificial intelligence, has achieved a relatively healthy gross profit margin. The intelligent transportation business, which focuses on autopilot, vehicle-road coordination and efficient travel, is expected to break even ahead of other vertical industries in the next few quarters.

Second, we also strive to replicate similar scenarios and usage situations in different industries. Cross-industry applications need to use artificial intelligence technology to discover the connections between scenarios. I believe that with our ability in artificial intelligence technology, this goal can be achieved. Overall, we will continue to pursue high-quality and sustainable growth to improve profit margins and achieve profitability in the next few years.

Goldman Sachs analyst Lincoln Kong: I have a question about the self-driving taxi business. According to the media, Baidu released the sixth-generation mass-produced unmanned car Apollo RT6, its cost is about 250000 yuan, this cost is much lower than the previous version, what is the reason for the sharp drop? What is the trend of cost change in the future? When will it make a substantial commercial contribution to the company's self-driving taxi business?

Robin Li: I think there are three reasons for the decline in costs. The first is our deep understanding of self-driving technology and operation. In the past nine years, Baidu has built a powerful L4 self-driving technology and gained expertise in car building. We have also become the world's largest self-driving taxi service provider. We have a good understanding of the industry, understand the needs of users, know where to simplify in-car functions, and where to invest and allocate more resources. For example, the RT6 is a car that prefers to consider the needs of passengers rather than meet the interests of drivers, so on the one hand, we have omitted some of the driver's functional design to reduce costs. As I mentioned in my previous introduction, RT6 does not install steering wheels, nor does it install accessories such as wide display screens. On the other hand, we have increased investment in safety and passenger experience to make the RT6 a passenger-centric car, such as the industry's first seven-fold fully redundant vehicle system, including computing unit redundancy, sensor redundancy, L4 redundant steering system, L4 redundant braking system, communication redundancy, power redundancy and architecture redundancy. RT6 has also designed more in-car space to meet a better in-car experience.

The second reason is scale, we plan to build RT6 for us through a third party, so RT6 is not the modification of a previous bus, this is also the biggest differentiation feature of RT6, we do not pay the retail price of this car. There are third-party car manufacturers willing to produce RT6 for Baidu because we need a large number of operating vehicles. The third reason is the development of the smart car market in China. The release of RT6 comes at a time when the functional smart car market is in the ascendant. Many electric vehicles and related parts manufacturers have emerged. Many accessories related to self-driving are produced locally and the cost is lower, so the price of intelligent electric vehicles is more friendly to the people than before. For example, optical detection and ranging system (LiDAR) is the most important part of self-driving solutions. Previously, the price was hundreds of thousands of dollars, but now it has dropped to 1000 dollars. I believe that the price of accessories will continue to decline in the future.

We have adopted a gradual strategy to gradually launch the self-driving taxi business in different regions and continue to expand the scale of our business. with the expansion of the scale and the continuous progress of technology, we believe that the cost of operating the service will also be reduced. in this regard, we have a first-mover advantage, and the barriers to entry into the market will be raised accordingly.

(constantly updating. )

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