Shared todayArtificial Intelligence SeriesIn-depth research report: " Special Research on AI Cloud Computing in 2024 Report: Changes brought about by intelligent computing》.
(Report produced by: Huatai Securities)
Total report: 32 pages
Al Cloud Computing 2024: Pay attention to new changes brought by intelligent computing
By tracking major cloud vendors at home and abroad and their upstream and downstream industry chains, we have observed the following key changes in the cloud computing industry:
1) Intelligent computing demand may become a new driver of future growth in the cloud computing industry. In the overseas market, the total revenue of the three major cloud vendors (Amazon, Microsoft, and Google) in Beiguan increased by 19.6% week-on-week in 3Q23, the same growth rate as in 2Q23: In the domestic market, the total revenue of the domestic vendors' laas sector in 3Q23 was 110.9 billion yuan. The year-on-year growth was 28%, which was basically the same as in 2Q23. The driving role of Al's commercialization has been gradually realized. Microsoft said that Al contributed about 3 percentage points to the revenue growth of Azure and other clouds: Baidu said that the traditional cloud business is slowing down, and research on generative AI and large language models is looking forward to competition in the cloud business. pattern.
2) BAT capital expenditure shows signs of recovery. In 3Q23, BAT's total capital expenditure increased by 0.8% year-on-year to 15.6 billion yuan. After nearly a year of cost reduction and efficiency improvement, capital expenditure showed signs of recovery for the first time, mainly due to Baidu/Tencent's increased investment in the AI field.
3) Capital expenditures of North American cloud vendors will be weak in 2023, but driven by Al investment, companies are optimistic about their capital expenditure guidance for 2024. 3Q23 MAAMG total capital expenditures (Meta/Amazon/Apple/Microsoft/Google) fell 7.9% year-on-year to US$38 billion. Although capital expenditures in 23 were weak, Al promoted investment in servers and data centers, and various cloud vendors invested in capital expenditures in 2024. Expenditure guidance is optimistic. According to Bloomberg's consensus forecast, MAAMG's 24-year capital expenditure will be US$179.67 billion.
laas: Overseas laaS revenue growth rebounded, and domestic operator cloud continued to grow at a high rate
Domestic operators' cloud continues to grow rapidly, and Internet manufacturers' capital expenditures have picked up.
In 3Q23, the total revenue of domestic manufacturers' IaaS sector was 110.9 billion yuan, a year-on-year increase of 28%, which was basically the same as in 2Q23. According to our review of the financial reports of domestic manufacturers that have laid out the IaaS business such as BAT (i.e. Baidu, Alibaba, Tencent), the three major operators (China Mobile, China Telecom, China Mobile), and combined with Canalvs data calculations, the major domestic Internet cloud manufacturers Total revenue in 3Q23 was 58.2 billion yuan, a year-on-year increase of 9.2%. Driven by Shuyu China Construction and State-owned Assets Cloud, the total revenue of the three major operators in 3Q23 is expected to be 52.7 billion yuan, a year-on-year increase of 58%: The total revenue of the domestic IaaS sector in 3Q23 is 110.9 billion yuan, a year-on-year increase of 28%. According to data from institutions such as Canalys, Huatai forecasts and consensus estimates from Bloomberg/Factset, the total revenue of the domestic IaaS sector is expected to grow by 37.9% year-on-year in 2023 and 24.6% in 2024.
BAT's total capital expenditure in 3Q23 increased by 0.8% year-on-year to 15.646 billion yuan, and AI-driven investment demand gradually stabilized and rebounded. BAT's total capital expenditure in 3Q23 was 15.646 billion yuan, a year-on-year increase of 0.8% and a month-on-month increase of 23.5%. Since 2Q22, BAT has implemented a strategy of cost reduction and efficiency improvement, and the year-on-year growth rate of capital expenditures has continued to slow down. Starting from 3Q23, the year-on-year growth rate of total capital expenditures has turned positive, mainly due to the increase in investment in artificial intelligence-related computing power. Looking forward to 2024, we It is believed that BAT's capital expenditures will gradually pick up, driven by the growth in demand for AI cloud and the company's own AI application development needs. At the 3Q23 results meeting, Tencent stated that its operating capital expenditures will account for approximately 3%-3.5% of total revenue in 2023. If more GPU chips can be purchased in 2024, this proportion will increase to 4%-4.5%. Baidu said that the main investment in generative artificial intelligence and large models is computing power. In the past few quarters, the company has invested a lot of money in training new models, and now the initial investment has gradually begun to be realized on the revenue side.
Domestic cloud vendors' efforts to reduce costs and increase efficiency may come to an end. In 3Q23, the number of Alibaba employees decreased by 7.77% year-on-year, marking six consecutive quarters of negative year-on-year growth. Tencent stated at the 3Q22 results meeting that by optimizing non-core and underperforming businesses, personnel and employee costs have improved. At the 3Q23 performance meeting, the company's existing business has an appropriate workforce size and most efficiency optimizations have been completed. We are selectively recruiting to develop the company's new business. Tencent's number of employees continued to show negative year-on-year growth in 3Q23, with a decrease of 3.24%, an increase of 2.37pct from 2Q23.
3Q23 performance review of key domestic companies
Alibaba (9988 HK): 2QFY24 revenue and profit are in line with expectations, Cloud Intelligence Group’s spin-off and listing will no longer proceed
Alibaba's total revenue in QFY24 was 224.79 billion yuan, a year-on-year increase of 8.5%, basically in line with Bloomberg's consensus expectation of a year-on-year increase of 8.2%: Non-GAAP net profit attributable to the parent company was 40.12 billion yuan, a year-on-year increase of 16.8%, corresponding to Non-GAAP net profit margin attributable to the parent company 17.8%, basically in line with Bloomberg’s consensus estimate of 17.7%. In terms of profitability, Alibaba's 2QFY24 adjusted EBITA increased by 18.5% week-on-week to 42.85 billion yuan, and the adjusted EBITA profit margin was 19.1%, a year-on-year improvement of 1.6pp, mainly due to the significant improvement in operating efficiency of Taotianwai's other business segments.
Among them, the Cloud Intelligence Group segment revenue increased by 2.3% year-on-year to 27.65 billion yuan, and adjusted EBITA increased by 43.6% year-on-year to 1.41 billion yuan, mainly due to improvements in product structure and operating efficiency. Management stated in the performance meeting that in the future, Cloud Intelligence Group will continue to improve the quality of revenue by reducing low-margin businesses. In addition, on May 18, Alibaba announced that it will completely separate Cloud Intelligence Group from Alibaba Group and complete its listing in the next 12 months, forming a new company that is completely independent from Alibaba Group in terms of equity and corporate governance. In view of the recent tightening of chip supply and the potential impact on cloud computing business, Alibaba has decided not to promote the complete spin-off of Cloud Intelligence Group.
Tencent (700 HK): 3Q23 Herong Technology and Enterprise Services Revenue +16% YoY
Tencent's 3Q23 revenue increased by 10.4% year-on-year to 154.6 billion yuan, in line with Bloomberg's expectations: adjusted net profit increased by 39.3% year-on-year to 44.921 billion yuan, 12% higher than Bloomberg's expectations. The company's gross profit margin improved by 5.3pp year-on-year to 49.5%, and its adjusted operating profit margin increased by 6.7pp year-on-year to 35.9%. Looking at different businesses, revenue from value-added services, online advertising, and financial technology increased by 4%/20%/16% respectively, corresponding to a year-on-year increase in gross profit margin of 3.8/5.9/7.6pp. In the financial technology segment, the year-on-year growth of enterprise service revenue accelerated compared with 2Q, mainly due to the increase in live broadcast e-commerce transaction commissions from video accounts and the gradual recovery of cloud revenue growth. Gross profit margin improved by 7.6pp year-on-year, mainly due to improvements in revenue proportion and bandwidth costs. At the AI application level, Tencent continues to optimize its self-developed general-purpose large-scale model Hunyuan. Currently, 180 internal applications have been accessed for testing and have been opened to external customers for use.
Baidu (9888 HK): Baidu Smart Cloud revenue is expected to resume growth in 4Q23
Baidu achieved revenue of 34.45 billion yuan in 3Q23, a year-on-year increase of 5.9%, and the growth rate was in line with Bloomberg’s consensus forecast of 5.1%. Non-GAAP net profit was 7.27 billion yuan, corresponding to a Non-GAAP net profit margin of 21.1%, a year-on-year increase of 3.0pp, which was better than Bloomberg’s consensus estimate of 18.4%. The main reason was that the high-margin advertising business revenue maintained positive growth. Baidu's core part, 3Q23 total revenue increased by 5.3% year-on-year to 26.57 billion yuan, a growth rate slightly better than Bloomberg's consensus estimate of 4.4%: Non-GAAP operating profit was 6.67 billion yuan, a year-on-year increase of 0.3%, corresponding to Non-GAAP operating profit margin 25.1%, a year-on-year decrease of 1.2pp, due to the company’s investment in A cloud and large models and other fields. In the core part, AI Cloud revenue fell by -2% year-on-year, but AI Cloud continued to have positive operating profits on a non-GAAP basis. Management said Al Cloud revenue is expected to return to positive year-over-year growth in 4Q23, and the trend is expected to continue in 2024.
Three major operators: Cloud computing business growth increased significantly in October 2023
According to the Ministry of Industry and Information Technology, operators' cloud computing business revenue grew 41.5% year-on-year from January to October 2023, 6.5pct higher than the growth rate from January to September. Under the premise of a high base and weak overall cloud computing market demand, operators The growth rate of cloud business has increased again, demonstrating its superior position and competitiveness in the cloud computing market. China Telecom has fully implemented the "cloud to digital transformation" strategy and promoted thousands of industries to go to the cloud and use data to empower intelligence. In 9M23, the company's industrial digital revenue reached 99.741 billion yuan, a year-on-year increase of 16.5%. China Unicom continues to enrich its cloud product categories and serve the construction of digital government clouds in many places and the digital transformation of central enterprises. In 9M23, China Unicom Cloud achieved revenue of 36.7 billion yuan, a year-on-year increase of 36.6%. China Mobile continues to promote the integrated development of "network + cloud + DICT". In 9M23, the company's DICT business revenue reached 86.6 billion yuan, a year-on-year increase of 26.4%. The three major operators are leveraging their advantages such as cloud-network integration and higher data security credibility to continue to make efforts on the digital economy track. According to IDC's latest "China Public Cloud Service Market (First Half of 2023) Tracking" report, China Telecom's market share in China's public cloud IaaS reaches 12.2% (Tencent: 9%: Huawei: 13.2%: Alibaba: 29.9%).
In 3Q23, the total revenue of the overseas IaaS sector increased by 19.6% year-on-year, and the capital expenditure guidance for 2024 is optimistic.
In 3Q23, the revenue growth rate of the three major cloud vendors in North America has rebounded. In overseas markets, according to our review of the financial reports of Amazon, Google, Microsoft and other cloud vendors, the total revenue of the three North American cloud vendors reached US$49.6 billion in 3Q23, a year-on-year increase of 19.6%, and the growth rate was the same as in 2Q23. Among them, Amazon AWS/Microsoft Azure/Google Cloud 3Q23 revenue growth rates were 12.3%/29.0%/22.5% respectively. Compared with 2Q23, Amazon AWS’s week-on-year growth rate increased by 0.1pct, Microsoft Azure’s year-on-year growth rate increased by 3.0pct, and Google Cloud’s year-on-year growth rate increased by 0.1pct. The growth rate slowed down by 5.5pct. According to consensus expectations from Factset and Bloomberg, the total revenue of the overseas aaS sector in 2023 is expected to increase by 20.2% year-on-year, down 12.7pct from 2022, mainly affected by the uncertainty of overseas economic growth, but in the long term, the reasoning brought by AIGC applications And training needs may be carried out in the cloud.
Capital expenditures of overseas cloud vendors slowed down in 3Q23, but cloud vendors are optimistic about the outlook for 2024. The total capital expenditures of MAAMG (Microsoft, Amazon, Apple, Meta, and Google) in 3Q23 decreased by 7.9% year-on-year to US$37.98 billion. Among them, the capital expenditures of Amazon/Microsoft/Google/Meta/Apple in 3Q23 were 113.0/99.2/80.6/65.4/21.6 respectively. billion, with year-on-year growth rates of -24.9%/+57.8%/+10.7%/-30.1%/-34.2% respectively. According to consensus expectations from Bloomberg, 4Q23 MAAMG's total capital expenditure is expected to increase by 8.9% year-on-year to US$45.88 billion. MAAMG's total capital expenditure in 2023 is expected to decrease by 2.5% year-on-year to US$154.13 billion, while total capital expenditure in 2024 will increase by 16.6% year-on-year. to $179.67 billion. The companies' guidance for 2024 is relatively optimistic: Microsoft guided that capital expenditures will increase quarter by quarter in FY24 (consistent with the previous quarter's guidance); Google guided that the total capital expenditures in 2024 will be higher than the full year of 2023; Meta guided that capital expenditures in 2023 will be 270 -US$29 billion, growing to US$30-35 billion in 2024.
In 3Q23, the number of employees of various manufacturers continued the downward trend in the previous quarter, and layoffs focused on non-technical departments. Compared with 2Q23, the number of Meta employees has further declined, while the number of Amazon and Google employees has increased slightly. Compared with the same period in 2022, the changes in the number of employees of each manufacturer were divergent. Amazon, Apple, Google and Apple declined slightly, and Meta fell by 24% year-on-year. Among them, Meta stated that it will continue to focus on the AI field as an investment focus and shift the staffing of non-AI projects to the AI field. In terms of headcount, as of 3Q23, Meta has basically completed the planned employee layoffs, while continuing to evaluate facility integration and data center reorganization plans. Staff numbers will grow faster than planned next year as the staffing backlog is gradually dealt with. In addition, other cloud vendors continue to lay off employees, but the focus is on non-technical development departments.
2Q23 performance review of key overseas companies
Amazon (AMZN US): 3Q23 AWS revenue +12% year-on-year, expected to increase capital expenditures on AI
Amazon achieved total revenue of US$143.1 billion in 3Q23, a year-on-year increase of 13%: net profit was US$9.9 billion, a year-on-year increase of 244%. The growth was due to strong major retail data, while falling inflation led to a decrease in the company's costs. Among them, AWS cloud services achieved revenue of US$23.1 billion, a year-on-year increase of 12%. The company stated at the performance meeting that although customers are still optimizing cloud spending, it has slowed down. In terms of capital expenditures, as of September 30, 2023, capital investment (CapEx plus financial leases) in the past 12 months was US$50 billion, lower than US$60 billion in the same period last year. The company expects that the full year of 2023 will be approximately US$50 billion (2022 full year $59 billion per year). The decline in capital investment comes as the company forecasts year-over-year declines in fulfillment and transportation capex, partially offset by higher capex in the AWS business, including additional investments related to generative A and large language model efforts.
Microsoft (MSFT US): Continue to invest in cloud and AI, CapEx will gradually improve in FY24
Microsoft's FY1Q24 revenue was US$56.5 billion (higher than Bloomberg's consensus estimate of US$54.5 billion), a year-on-year increase of 13%. Intelligent cloud revenue was US$24.3 billion, a year-on-year increase of 19%, of which Microsoft Azure and other cloud service revenue increased by 29% year-on-year. %, the growth mainly comes from the strong demand for consumer services, and the growth rate is 3pp higher than that of FY4Q23. The company expects FY2Q24 smart cloud segment revenue to be US$25.1~25.4 billion, corresponding to a year-on-year growth rate of 17%~18%, of which Azure business operating income growth will reach 26%~27%: As A's contribution continues to increase, FY2Q24 Azure's revenue will increase. The speed is expected to be maintained in FY2H24. In terms of capital expenditures, Microsoft's FY1Q24 CapEx was US$9.9 billion (Bloomberg consensus expected US$9.3 billion): CapEx including financial lease assets was US$11.2 billion. To support investments in cloud and AI, the company guided that capital expenditures will increase quarter-on-quarter in FY24.
Google (GOOG US): 3Q23 Google Cloud revenue +22% year-on-year, capital expenditures in 2024 will be higher than in 23
Google’s 3Q23 revenue was US$76.7 billion (higher than Bloomberg’s consensus estimate of US$75.5 billion), a year-on-year increase of 11%. Among them, Google Cloud revenue was US$8.4 billion (lower than Bloomberg’s consensus estimate of US$8.6 billion), a year-on-year increase of 22%, which was the company’s lowest single-quarter growth rate since the company disclosed cloud revenue in 4Q18. However, the operating profit margin turned positive for the third consecutive quarter. Google's 3Q23 CapEx was $8 billion (Bloomberg consensus expected $8.8 billion), with the largest component being servers, followed by data centers, reflecting the company's significant increase in investment in AI computing. Cash capex growth slowed in 3Q23 due to the timing of supplier payments, and the company expects investment levels to increase in 4Q23, with total capex in 2024 higher than in all of 2023.
Meta (METAUS): 3Q23 revenue +23% year-on-year, servers and data centers drive capital expenditure growth in 24 years
Meta achieved total revenue of US$34.1 billion in 3Q23, a year-on-year increase of 23%. The year-on-year growth rate increased by 12.2pp compared with 2Q23. It also gave guidance that revenue in 4Q23 will be US$36.5-40 billion. In terms of the Yuanverse business, Reality Labs achieved revenue of US$210 million in 3Q23, a year-on-year decrease of 26%, mainly due to the decrease in sales of Quest2: In addition, Reality Labs had an operating loss of US$3.7 billion, and due to the company's continued development of ARR products and investments to expand Ecosystem, operating losses are expected to increase significantly year-on-year in '23. In terms of capital expenditures, Meta 3Q23 CapEx was US$6.8 billion (Bloomberg consensus expected US$7.6 billion), mainly driven by investment in servers, data centers and network infrastructure, a year-on-year decrease of 28.6%. The lower capital expenditures were mainly due to preparations for the shift to new data centers. and payment timing implications. The company expects full-year CapEx in 2023 to be US$27-29 billion (lower than the previous forecast of US$27-30 billion): Capital expenditures in 2024 will be US$30-35 billion, with growth mainly coming from server investment (including AI and non-A hardware ), and data center investments. The company is gearing up to build out its new data center architecture announced late last year.
Al: Domestic large model iteration, overseas giant hardware-basic model-application all-round alignment
Domestic: Continue to select new generations of basic large models, and actively explore applications.
In the domestic market, model selection and upgrading and application implementation are advancing rapidly:
1) Iterative advancement of new versions of large models: Wenxin Large Model, Tongyi Qianwen 2.0, Spark Cognitive Large Model V3.0, and ChatGLM3 will be launched successively;
2) Continuously explore new application areas: Baidu plans to launch AI native maps, Alibaba Damo Academy’s large-scale experience model to help agriculture, SenseTime cooperates with China Southern Power Grid and releases an upgraded version of the “Big Doctor” large model, which all reflect the efforts of each manufacturer. try.
Baidu: Wenxin Big Model 4.0 is released, applications are accelerated, and Comate, Al native maps, etc. are launched
Wenxin large model version 4.0 released, open for beta testing
On October 17, Robin Li released version 4.0 of Wenxin Large Model at Baidu World 2023 and opened invitation testing. He said that this is the most powerful Wenxin large model to date, achieving a comprehensive upgrade of the basic model and significantly improving its understanding, generation, logic and memory capabilities. Its comprehensive capabilities are "nothing compared to GPT-4." Not inferior." Robin Li introduced that Wenxin 4.0 has also begun invitation testing simultaneously. Enterprise customers can apply to test Wenxin 4.0 API through the Baidu Smart Cloud Qianfan large model platform.
Launched the world's first Al native map, and also launched the industry's first large-scale terrain generation model
On October 17, Robin Li released a series of AI native applications. Among them, Baidu Maps was completely reconstructed from the two dimensions of "new interaction" and "new navigation", becoming the world's first AI native map, and launched a new "Al Guide" function. It can conduct "real-person communication" with users, and on the basis of understanding the needs, intelligently call many map functions and services, and provide solutions quickly and accurately. In terms of basic navigation skills, Baidu Maps’ recently upgraded urban lane-level navigation 3.0 can provide clearer and three-dimensional navigation guidance to improve driving safety and experience. At the same time, Baidu Maps has also launched the industry's first large-scale map generation model, significantly accelerating the large-scale mass production of lane-level maps. It not only allows more users to experience upgraded navigation services, but also helps car companies reduce the complexity of the autonomous driving research and development process. Cost, to achieve "low cost and good use of pictures".
Baidu Comate SaaS version officially launched, open for limited-time free trial
On October 24, 2023, the SaaS version of Baidu Comate intelligent code assistant was officially launched. Comate is a new generation of intelligent programming tool created by Baidu Intelligent Cloud based on the Wenxin large model. With the understanding and reasoning capabilities of the Wenxin large model, Baidu Comate can support more than 10 coding functions such as code explanation, technical Q&A, real-time continuation, unit test generation, code optimization and repair, and intelligent CLI, helping enterprises reduce costs throughout the entire R&D process. Increase efficiency. The SaaS version of Comate allows enterprises and developers to significantly reduce usage costs, truly enable out-of-the-box use, and quickly improve R&D efficiency. On November 13, Baidu announced a limited-time free trial of the Al programming tool Comate, which can be used for one month for free. You can also get more free trial time through recommendations. The activity period is from November 11 to November 20.
Alibaba: Tongyi Qianwen 2.0 may surpass GPT3.5 in performance and release the industry’s first mask-sensing AI large model
Alibaba Cloud launches Tongyi Qianwen 2.0, a large model with hundreds of billions of parameters, surpassing GPT 3.5 in performance
On October 31, 2023, Alibaba Cloud officially released Tongyi Qianwen 2.0, a large model with hundreds of billions of parameters. In 10 authoritative evaluations, the comprehensive performance of Tongyi Qianwen 2.0 exceeded GPT-3.5 and is accelerating to catch up with GPT-4. Compared with version 1.0 released in April, Tongyi Qianwen 2.0 has significantly improved its capabilities in complex command understanding, literary creation, general mathematics, knowledge memory, and hallucination resistance. According to the Alibaba Cloud official account, in 10 authoritative evaluations, the comprehensive performance of Tongyi Qianwen may have exceeded GPT-3.5, accelerating to catch up with GPT-4. In addition, Tongyi Qianwen APP is officially launched in major mobile application markets, and users can directly experience the latest model capabilities through the APP.
Alibaba DAMO Academy launches the industry's first large-scale mask-sensing AI model, allowing AI to sink into the fields
On October 20, 2023, Alibaba DAMO Academy released the industry's first sense-tracing AI large model (AIE-SEG), which was the first to realize the unified task of image segmentation in the field of sense-tracing. One model can achieve "zero samples of everything" quickly. Extraction can identify nearly a hundred remote sensing land object classifications such as farmland, water, and buildings, and can also automatically tune the recognition results based on user interactive feedback. This will allow AI to further penetrate into the fields and greatly improve the analysis efficiency of sensing applications such as disaster prevention and control, natural resource management, and agricultural production estimation.
Tencent: The Hunyuan large model has newly opened the "Wen Sheng Diagram" function, and the QQ browser PDF Yangdu Assistant has received the Hunyuan bonus
Tencent’s Hunyuan large model officially opens the “Wen Sheng Tu” function to the public
On October 26, 2023, Tencent’s Hunyuan large model was completely upgraded and the “Venture Picture” function was officially opened to the public. Tencent said that the overall effect of the upgraded Tencent Hunyuan Chinese exceeds that of GPT3.5, and the code capability is significantly increased by 20%. Compared with other large models, Tencent Hunyuan's Wenshengtu application focuses on the realism of portraits and scenes. At the same time, it has advantages in the generation of Chinese landscapes, animation games and other scenes. Tencent data shows that Tencent’s Hunyuanwenshengtu capabilities have been used in many businesses such as material creation, product synthesis, and game graphics. In addition, in multiple rounds of evaluations under the advertising business, Tencent’s Hunyuanwenshengtu cases have been outstanding. The rate and advertiser adoption rate reached 86% and 26% respectively.
QQ browser launches PDF reading assistant supported by Hunyuan large model
On October 12, 2023, QQ Browser will open a new feature called PDF Reading Assistant experience test application. Both mobile phone and computer users can apply. PDF Reading Assistant is supported by Tencent Hunyuan Large Model, which can provide functions such as one-click intelligent summary generation, intelligent question and answer, multi-round questioning, and original text positioning. Users can get the information they want by opening the PDF file with QQ Browser and clicking on the PDF Reading Assistant function in the upper right corner of the screen.
Total report: 32 pages