Baidu Inc’s Earnings Call: AI Growth Amidst Revenue Challenges

Baidu Inc ((BIDU)) has held its Q1 earnings call. Read on for the main highlights of the call.

Baidu Inc’s recent earnings call presented a mixed sentiment, highlighting significant achievements in AI Cloud growth, AI search enhancements, and international expansion of autonomous driving. However, these positive developments were tempered by declines in online marketing and iQIYI revenue, as well as negative free cash flow due to substantial investments in AI.

AI Cloud Revenue Growth

Baidu’s AI Cloud revenue reached RMB6.7 billion in the first quarter, marking a 42% year-over-year increase. This growth was primarily driven by the adoption of Generative AI and foundation models, showcasing the company’s strong foothold in the AI sector.

AI Cloud’s Growing Share of Baidu Core Revenue

The AI Cloud now constitutes 26% of Baidu Core’s revenue, up from 20% a year ago. This increase underscores the growing significance of AI Cloud within Baidu’s overall business strategy.

Improved User Experience in AI Search

In April, 35% of mobile search result pages featured AI-generated content, an increase from 22% in January. This improvement indicates a significant enhancement in user experience, reflecting Baidu’s commitment to integrating AI into its services.

Expansion of Autonomous Ride-Hailing Service

Baidu’s Apollo Go service has expanded internationally, entering Dubai and Abu Dhabi. With over 1,000 fully driverless vehicles deployed globally, this marks a significant step in Baidu’s autonomous driving ambitions.

Non-GAAP Operating Margin for AI Cloud

The non-GAAP operating margin for AI Cloud has reached the level of teens, indicating improved profitability and operational efficiency within this segment.

Decline in Online Marketing Revenue

Baidu Core’s online marketing revenue saw a 6% year-over-year decline, impacting the company’s overall revenue growth and highlighting challenges in this area.

Revenue Decrease from iQIYI

Revenue from iQIYI decreased by 9% year-over-year to RMB7.2 billion, affecting Baidu’s overall financial performance and indicating a need for strategic adjustments.

Negative Free Cash Flow

Baidu reported a negative free cash flow of RMB8.9 billion, primarily due to increased investments in its AI business. This highlights the financial impact of Baidu’s aggressive investment strategy.

Forward-Looking Guidance

Looking ahead, Baidu forecasts a 7% year-over-year increase in Baidu Core’s total revenue for the first quarter of 2025, driven by a 42% rise in AI Cloud revenue. The company plans to continue its focus on AI advancements, including the release of new ERNIE models and the expansion of its autonomous ride-hailing service. Baidu also aims to enhance its AI search capabilities and maintain its investment in AI and autonomous driving, while returning value to shareholders through share repurchase programs.

In summary, Baidu’s earnings call reflected a mixed sentiment, with notable achievements in AI Cloud and autonomous driving balanced by challenges in online marketing and iQIYI revenue. The company’s forward-looking guidance suggests a continued focus on AI and technological advancements, aiming to drive future growth and shareholder value.