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On the evening of May 16, 2023, Baidu announced its unaudited financial results for the first quarter ended March 31, 2023. Data show that in the first quarter of 2023, Baidu achieved revenue of 31.144 billion yuan, a year-on-year increase of 10%; the net profit (non-GAAP) attributable to Baidu reached 5.7 billion yuan, a substantial increase of 48% year-on-year, and both revenue and profit exceeded market expectations.
Li Yanhong, founder, chairman and CEO of Baidu, said: "In the first quarter of 2023, Baidu Core delivered a solid performance answer sheet, with faster revenue growth than the previous quarter, improved operating margins, and achieved operating leverage. Effect. We believe that generative artificial intelligence and big language models have brought revolutionary potential to all walks of life, helping users and customers achieve their goals and have a positive impact on society. Based on this trend, Wenxinyiyan started internal testing. We We plan to gradually integrate Wenxin Yiyan into all our businesses, empower our products and services, and attract a wider range of users and customers. A new ecology will be built around Wenxin Yiyan in the new era. This will also help us achieve Long-term, sustainable growth."
Online Marketing Resumes Positive Growth, Profit Improves Significantly, Baidu Smart Cloud Achieves Profit
According to financial report data, Baidu’s total revenue in 2023Q1 was 31.144 billion yuan, a year-on-year increase of 10%.
Source: Baidu Financial Report
From the perspective of revenue composition, Baidu's revenue is mainly composed of Baidu Core and iQiyi. In the first quarter of 2023, iQiyi's revenue was 8.3 billion yuan ($1.22 billion), up 15% year-on-year, and accounted for 26% of total revenue.
In the first quarter of 2023, Baidu Core's revenue was 22.998 billion yuan, an increase of 8% year-on-year. Baidu core revenue accounted for 74% of total revenue.
Source: Baidu Financial Report
In Baidu Core, online marketing revenue was RMB 16.6 billion (US$2.42 billion), a year-on-year increase of 6%; non-online marketing revenue was RMB 6.4 billion (US$928 million), an increase of 11% year-on-year.
Cartography: Data Ape
From the perspective of the proportion of total revenue, in 2023Q1, online marketing revenue accounted for 53%, and non-online marketing revenue accounted for 21%.
Judging from the revenue performance during 2018-2022, Baidu broke through the 100 billion yuan revenue mark in 2018, and broke through the 120 billion yuan mark again in 2021.
Cartography: Data Ape
From the perspective of quarterly revenue performance, Baidu’s single-quarter revenue in 2022Q3 exceeded 30 billion yuan, and remained above 30 billion yuan in the following two quarters.
Cartography: Data Ape
In terms of profit, Baidu's operating profit in 2023Q1 was 4.98 billion yuan, a year-on-year increase of 91%, and a month-on-month increase of 8%; net profit was 5.825 billion yuan, a month-on-month increase of 18%, and a loss of 885 million yuan in the same period in 2022.
Source: Baidu Financial Report
Among them, the operating profit of Baidu Core was 4.091 billion yuan, an increase of 62% year-on-year and 8% month-on-month; the operating profit margin of Baidu Core in 2023Q1 was 18%.
In 2023Q1, Baidu Core's net profit was 5.513 billion yuan, a 16% increase from the previous quarter. In 2022Q1, Baidu Core's net loss was 963 million yuan. In 2023Q1, Baidu Core's net profit margin is 24%.
Source: Baidu Financial Report
iQiyi's 2023Q1 operating profit was 859 million yuan, and its net profit was 618 million yuan. The profitability of iQiyi is a huge benefit for Baidu. After all, iQiyi’s loss history has lasted for more than 10 years, and the huge amount of loss is impressive.
Source: Baidu Financial Report
From the perspective of net profit contribution, Baidu core accounts for about 95%.
Cartography: Data Ape
From this perspective, Baidu's core operating performance is the top priority for Baidu.
Among them, it is worth noting that Baidu Smart Cloud achieved profitability (non-GAAP) in this quarter, and its revenue increased by 8% year-on-year to 4.2 billion yuan. Starting from the second quarter of 2022, Baidu Smart Cloud will focus on sustainable growth and improving operating health. At the same time, Baidu Smart Cloud continued to build standardized and large-scale artificial intelligence solutions for key customers, which promoted the growth of smart cloud profits.
From the perspective of comprehensive revenue and profit performance, compared with the first quarter of 2022, Baidu's revenue in the first quarter of 2023 has achieved year-on-year growth. At the same time, operating profit and net profit have both turned losses into profits. Baidu said that the comprehensive cost reduction and efficiency increase measures in the past year have played a key role.
Smart driving is advancing steadily, AIGC empowers online marketing, AI reengineering is unstoppable
The good performance of the financial report is usually closely related to the operating data.
IQIYI's total average daily subscribers in the first quarter were 129 million, compared to 101 million in the first quarter of 2022 and 112 million in the fourth quarter of 2022.
In terms of smart driving (Apollo Go), in the first quarter of 2023, Baidu’s autonomous driving service, Carrot Kuaipao, received approximately 660,000 orders, a year-on-year increase of 236%, making it the world’s largest autonomous driving travel service provider.
On March 17, 2023, after Wuhan and Chongqing, Carrot Kuaipao was approved to start a fully unmanned autonomous driving travel service in Beijing, becoming the world's first fully unmanned fleet to land in a capital city.
In terms of the mobile ecosystem, in March 2023, the MAU of Baidu apps reached 657 million, a year-on-year increase of 4%. In the first quarter of 2023, hosted page revenue accounted for 49% of Baidu's core online marketing revenue. Baidu's mobile terminal search queries and information flow distribution have grown steadily.
It is reported that the recovery of Baidu's core online marketing business is mainly due to the empowerment of AIGC. At the end of 2022, Baidu will join AIGC in its cooperation with advertisers. The specific method is that according to the requirements specified by advertisers, the platform will provide them with customized options for them to choose. For example, a local travel agency created advertisements through Baidu's AIGC function, and Baidu AIGC ads provided them with an average of about 20% higher sales leads. The data shows that in the first quarter, the advertising expenditures of advertisers using AIGC on the Baidu platform increased year by year and quarter-on-quarter, demonstrating the effectiveness of AIGC technology in driving business results.
In addition, e-commerce revenue has become a new bright spot in the mobile ecosystem. In the first quarter, the quarterly GMV contributed by Baidu search increased by 55% year-on-year. He Junjie, senior vice president of Baidu Group and general manager of Baidu Mobile Ecosystem Group (MEG), said, "Baidu will not give up on video and e-commerce, and I will continue to do it unremittingly."
In terms of AI models, on March 16, 2023, Baidu will be the first to release a large-scale model product Wenxinyiyan that is benchmarked against ChatGPT among global manufacturers. It is understood that after more than a month of internal testing, Wenxin Yiyan has completed 4 major technical upgrades, and the performance of large-scale model reasoning has increased by nearly 10 times. Currently, Baidu is rapidly testing Wenxinyiyan across all of its businesses, using its capabilities to reshape the company's products and services for businesses and consumers. Baidu Wenku has been connected to Wenxin Yiyan for internal testing, and launched the "Baidu Wenku Document Assistant", which can generate a professional document for users in 15 seconds; Wenxin Yiyan has also been fully applied in the intelligent work platform "Ruliu". An average of 5 seconds can solve a difficult problem, greatly improving work efficiency.
In terms of Baidu Smart Cloud, in 2022, Baidu Smart Cloud will copy its self-developed artificial intelligence solutions for predicting water use and controlling water pressure from Quanzhou Water Supply Company to Guangzhou Water Supply Company. In the first quarter, most of the standardized solutions were successfully copied Go to the Water Supply Company of Lintao County, Gansu Province. In March, Baidu Smart Cloud sales leads increased by more than 400% year-on-year.
In the manufacturing industry, Baidu helped Changan Automobile build an artificial intelligence infrastructure platform and a digital human platform. The two parties are developing an intelligent product based on the Baidu Wenxin model to empower a mass-produced model of Changan Automobile and create innovative users. Experience and continuous R&D momentum.
The trend of AI reengineering industry triggered by large models has become unstoppable. On May 9, 2023, Baidu Smart Cloud demonstrated the world's first one-stop enterprise-level large-scale model production platform "Wenxin Qianfan Large-scale Model Platform" which is under internal testing to hundreds of corporate partners.
It is reported that Wenxin Qianfan will provide two kinds of enterprise services: first, with Wenxin Yiyan as the core, it will provide large-scale model services and help customers transform products and production processes. Second, as a large-scale model production platform, enterprises can develop their own exclusive large-scale models based on Wenxin Qianfan.
Up to now, more than 300 ecological partners have participated in the internal test of Wenxin Yiyan, and achieved test results in more than 400 internal scenarios of enterprises.
Luo Rong, Chief Financial Officer of Baidu, said: "Generative AI has brought about changes in the new model of artificial intelligence. Baidu is ready to launch this huge market opportunity. In the future, Baidu will continue to invest in this field unswervingly."
This can also be seen from the R&D investment and investment cash flow in the financial report. According to financial report data, in the first quarter of 2023, Baidu’s research and development expenses were 5.423 billion yuan, and the ratio of research and development expenses to operating gross profit was 34%. In terms of investment cash flow, the net outflow was 32.649 billion yuan.
Cartography: Data Ape
Judging from the net investment cash flow in 2018-2022, the net outflow in 2023Q1 basically catches up with the amount for the whole year of 2018, and far exceeds the single year of 2019-2022.
From the perspective of research and development expenses, Baidu's research and development expenses have remained at more than 20 billion yuan in the past two years.
Calculated, Baidu's total net outflow of R&D and investment in the first quarter was about 38.1 billion yuan.
By the end of the first quarter of 2023, Baidu's cash and equivalents will be approximately RMB 36.02 billion. In 2023Q1, the net inflow of operating cash flow was 5.84 billion yuan, and the net outflow of financing cash flow was 2.3 billion yuan.
From this perspective, Baidu may make some moves in terms of fundraising in the future. After all, although AI is a cash cow, it is also a gold swallowing beast.
From traffic monetization to AI empowerment, Baidu's singularity is coming
Through the above business analysis, and looking at Baidu's development history, we believe that Baidu will usher in a singular moment belonging to Baidu.
Baidu's previous business model, in simple terms, was the realization of traffic. The specific form was to provide Internet advertising services and charge advertising fees, driven by the dual engine of search + information flow.
In 2017, Baidu announced for the first time a complete AI ecological open strategy and officially announced "all in AI". In the same year, Baidu welcomed Lu Qi, the former global executive vice president of Microsoft, to join. After a round of drastic business structure adjustments, Baidu's original deep learning research institute, natural language processing, knowledge graph, speech recognition, big data departments and other core technology departments were integrated into the AI technology platform system (AIG), and the autonomous driving business The department was upgraded to the Intelligent Driving Business Group (IDG). Among them, the person in charge of the AI technology platform system is Wang Haifeng, the vice president of Baidu and the head of the search engine business.
DuerOS and Apollo are the two cores of Baidu's AI strategy. The former is the open output of Baidu's comprehensive artificial intelligence capabilities, and the latter is the output of Baidu's unmanned driving technology. Both are open and win-win strategies that share resources.
Today, six years later, Li Yanhong said that Baidu is currently one of the few companies that has four layers of artificial intelligence capabilities. Its "four-layer capability" refers to the Kunlun AI chip at the chip layer, the flying paddle deep learning framework at the framework layer, the Wenxin large model at the model layer, and the search, automatic driving, smart home and other products at the application layer.
From the perspective of the AI industry, Baidu's "four-tier capabilities" correspond to the three major elements of AI technology development: data, computing power, and algorithms. Among them, the Kunlun chip provides computing power, and the Flying Paddle deep learning framework helps train and optimize the model, and ultimately promotes the application of Baidu AI's capabilities in various actual products and scenarios.
In other words, Baidu has successfully transformed from an Internet company that relies on search business to an AI company.
This is also reflected in the financial report.
With the empowerment of AGCI, the online marketing business, which is facing heavy competitive pressure, has achieved new growth, with a year-on-year growth of 6% in this quarter. The first quarter of 2022 will be a 4.4% decline, the second quarter will be 10%, the third quarter will be 4%, and the fourth quarter will be 6%. Growth will resume in the first quarter of 2023, and the growth rate in the second quarter is expected to further increase. As Baidu integrates Wenxin Yiyan into various apps, especially the search app, user engagement and traffic are expected to further increase, thereby supporting the growth of online marketing business revenue.
Baidu Smart Cloud's quarterly revenue reached 4.2 billion yuan, accounting for 13.5% of total revenue, and it also achieved profitability. For Baidu, this is a very important growth node.
In terms of smart speakers, IDC and Canalys data show that in 2022, Xiaodu will rank first in China's smart display shipments and smart speaker shipments.
In terms of intelligent driving business, the Apollo brand has been formed. The platform includes three major businesses: intelligent transportation, autonomous driving, and Internet of Vehicles. Up to now, Baidu intelligent transportation products, services and solutions have been used in more than 50 cities including Beijing, Shanghai, Guangzhou, Chongqing, Chengdu, Nanjing, Wuhan, Dalian, Cangzhou and Hefei, as well as many roads in Hebei, Shanxi, Sichuan and Hunan. Take the lead in the practice of expressway implementation. In March 2023, Baidu's self-driving travel service platform "Carrot Run" will start a commercial pilot in Hefei City, providing the public with self-driving paid travel services. According to the plan, 10 Apollo Moon Weimar version self-driving models will be launched in the initial stage, and the service scope will cover key areas such as the Binhu area of Baohe District. 54 recommended boarding points will be set up, and the operation hours will last from 9:00 to 17:00. 00. On March 20, "Carrot Run" opened a commercial trial in Pingshan District, Shenzhen, providing self-driving paid travel services to the public.
It can be seen from the above that AI has been fully implanted in Baidu's various business segments, including the transformation of traditional marketing business.
A few days ago, the editor analyzed JD.com's first-quarter financial report. For details, see "JD.com Enters the "Xu Ran Era". " , it can be seen that Baidu's coping strategy when faced with the dilemma of increasing revenue from its main business is not the same as that of JD.com.
Baidu chose to use technology to carry out strategic transformation, which is a relatively risky offensive strategy; while JD.com chose to focus on business and optimize profits, a relatively safe defensive strategy. Of course, there is no good or bad strategy in itself, as long as it suits you.
There is a saying in the market that Baidu is technology-oriented, Tencent is product-oriented, Ali is market-oriented, and JD.com is operational-oriented. The core temperament of each giant is different. The system is brought into the blood of the company.
At present, the commercial use of ChatGPT + Bing marks the official start of the AI war. And Baidu's "all in AI" in 2017 will usher in a singularity moment belonging to Baidu.
The reason why Tang Seng is Tang Seng is not only because he knows that he will go to the west to learn scriptures, which is the future he sees; but also because he is extremely firm, even if countless monsters along the way want to eat him.
Text: Qiqi / Data Ape
