Baidu Q1 2025 Earnings Call Transcript

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May 21, 2025
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Operator

Hello, and thank you for standing by for Beidou's First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juwan Lin, Baidu's Director of Investor Relations.

Juan Lin
Juan Lin
Director, Investor Relations at Baidu

Hello, everyone, and welcome to Baidu's first quarter twenty twenty five earnings conference call. Baidu's earnings release was distributed earlier today, and you can find a copy on our Web site as well as on newswire services. On the call today, we have Rod Li, our Co Founder and CEO Julius Rong Luo, our EVP in charge of Baidu Mobile Ecosystem Group, Lamiji Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG and Jackson Junjiehe, our Interim CFO. After our prepared remarks, we will hold a Q and A session. Please note that the discussion today will contain forward looking statements made under the Safe Harbor provisions of The U.

Juan Lin
Juan Lin
Director, Investor Relations at Baidu

S. Credit Security Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other filings with the SEC and Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward looking statements, except as required under applicable law.

Juan Lin
Juan Lin
Director, Investor Relations at Baidu

Our earnings press release and this call include discussions of certain unaudited non GAAP financial measures. Our press release contains a reconciliation of the unaudited non GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.Baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Hello, everyone. We kicked off 2025 with a solid start. In the first quarter, Baidu Core's total revenue reached RMB25.5 billion, representing a 7% year over year increase. The growth was primarily attributable to the robust performance of our AI cloud business. In Q1, AI cloud revenue reached billion, increased by 42% year over year, representing a significant acceleration for our cloud business.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Such performance reinforces the widespread market recognition of our distinctive AI capabilities, underpinned by our unique four layer AI architecture, while affirming the ongoing demand for our full stack end to end AI products and solutions. Notably, AI Cloud accounted for 26% of Baidu Core revenue, up from 20% a year ago, reflecting the growing significance of our AI Cloud business within our business portfolio. Throughout the first quarter, amid rapid evolution across the AI landscape, advancing our AI capabilities remains our core priority. We have accelerated the iteration of our foundation models, allowing us to maintain our leading position as one of the top players in this dynamic field. In March, we released Earning 4.5 and Earning X1.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Earning 4.5 is our first flagship model with multi model capabilities, and it excels at understanding, analyzing and processing multimodal content precisely. Early X1, our first reasoning model, brings advanced reasoning capabilities with best in class function calling, tackling complex problems with extended chains of thought. Notably, both Earning 4.5 and Earning X1 come with highly competitive pricing. Furthermore, in April at Baidu Create twenty twenty five, we unveiled their upgraded version, Earning 4.5 Turbo and Earning X1 Turbo, which feature enhanced performance and dramatically lower pricing, making them among the most cost effective options on the market. Our rapid and continuous cost reductions stem from our unique four layer AI architecture and full stack capabilities.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

This distinctive architecture enables end to end optimization at every layer, spanning infrastructure, framework, models and applications, allowing us to holistically enhance both performance and efficiency. As a result, we deliver superior performance and stability at highly competitive pricing, positioning us to offer industry leading foundation models and AI solutions with exceptional price performance ratios. With stronger capabilities and lower pricing, foundation models are becoming increasingly accessible, enabling diverse applications at scale and unlocking significant value across industries. Beyond the model iterations, we are also taking steps to make AI more open and collaborative. As previously announced, we plan to open source our most advanced Earnie 4.5 series of models on June 30, a move that reflects both our technological confidence and our efforts to make learning more accessible.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

In parallel, we are proactively embracing open standards such as the model context protocol or MCP, which provides easier access to AI powered tools and further lowers barriers to AI development. As development becomes simpler, we expect to see a growing number of AI applications emerging platform. Together, these efforts echo our consistent application driven approach to innovation and our determination to make AI more accessible, applicable and impactful. In our AI cloud business, we are strengthening Qianfan, our industry leading mass platform, to better support developers and enterprise clients in building models and facilitating AI applications. Qianfeng boasts a comprehensive model library of foundation models, covering nearly all mainstream options on the market.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

It offers not only our own early family of models, but also a wide range of open source and third party models, including the latest reasoning and multi model models. This breadth allows individual developers and enterprise clients to choose suitable models with greater flexibility. Importantly, Qianfan provides these models with industry leading cost effectiveness. When running models like DeepSeq, Qianban achieves what we believe to be some of the lowest inference costs in the industry today, with lightning speed and massive concurrency. TianXin also delivers an expanding tool chain, continuously enriched to provide the most comprehensive and user friendly toolkits for AI development.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

This quarter, complementing our existing app builder, model builder and agent builder, we introduced Data Builder to support AI data processing and preparation, while rolling out system wide upgrades across the entire tool chain to further improve efficiency and ease of use. First, we enhanced the model builder to support the customized development of reasoning models by incorporating advanced training techniques, including reinforcement learning methods like RFT and GRPO. Second, we extended our fine tuning capabilities to multi model models, offering multi model reinforcement learning techniques and enabling full process support from model building and training to evaluation and development. Third, as foundation models grow in size, model distillation has become essential for enterprise adoption. Hence, we introduced a one click distillation feature that streamlines process.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

With our expanded model library now covering reasoning models, enterprise clients can effortlessly build smaller models that maintain reasoning capabilities with reduced costs, making it easier to adopt advanced AI technology. Together, these enhancements significantly strengthen Qianfeng's tool chain, lowering the barriers for AI adoption and enabling faster, more efficient innovation across diverse use cases. On our legacy consumer facing product, Baidu Search, we accelerated its AI transformation with an unrelating focus on enhancing user experience. Our journey exemplifies how complex AI capabilities can be applied to create meaningful improvements that directly benefit our hundreds of millions of users. After exploring and validating for several quarters and with consistent positive user feedback, we established a relatively mature and scalable product framework for our for our Gen AI enabled search early this year.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Building on this, we are determined to further accelerate the AI transformation of search. In April, about 35% of mobile search result pages contain AI generated content, increasing from 22% in January. We are further enhancing the search experience by prioritizing multimodal content, including images, videos, agents, digital humans, and live streaming. We believe this is a more effective way to present search results, as it aligns with evolving user preferences and better addresses the growing complexity of search queries. The distribution of multimodal content has been rapidly increasing.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

This trend reflects our continued progress in delivering a more intuitive and effective search experience. Also, the volume of content accessible within Baidu has continued to expand, particularly with the empowerment of foundation models. One example is AI generated digital human videos, which have surged over 30 fold from the beginning of twenty twenty five through April, in just a few months. The growing volume of content enriches what users can discover and provides access to a more expansive information landscape. Our efforts have led to consistent improvements in user experience.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Users exposed to AI generated search results find their search intent fulfilled more easily and quickly, indicating they get the desired information more efficiently. These users are also increasingly inclined to search for more varied questions or topics, have demonstrated higher retention over time. We are delighted to see more users can enjoy this improvement. In March, the MAU of Baidu App increased by 7% year over year, reaching RMB724 million. We firmly believe that agents and intelligent digital humans represent promising real world applications of AI technology that will open up vast market opportunities ahead.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Last quarter, I introduced the convergence of agents and intelligent digital humans, a powerful combination that brings together foundation models, capabilities and digital human technology. Today, they are already widely deployed throughout our mobile ecosystem, effectively supporting different scenarios across industries. At our recent Baidu Create twenty twenty five, I further introduced an upgraded version of intelligent digital human with hyper realistic interactions, delivering natural conversation with vivid facial expressions and fluid human like gestures. In the future, we believe they can match or even outperform humans in certain scenarios. We're preparing to launch and scale our next generation hyper realistic digital humans into production soon.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Now turning to intelligent driving, which represents another compelling frontier of our AI applications in the physical world. As highlighted last quarter, Apollo Go, our autonomous ride hailing service, has successfully validated its BINS model in the key operational region with highly complex transport conditions and cost sensitive local passengers. And it has achieved 100% fully driverless operations in Mainland China. This gives us strong confidence to expand into international markets with higher pricing for ride hailing service, where we aim to replicate and further optimize our proven approach. In Q1, we reached critical milestones in international expansion, with Apollo Go entering both Dubai and Abu Dhabi, aiming to provide safe, comfortable and affordable autonomous ride hailing services in this booming market.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

In May, we began open road validation testing in Dubai, and we expect to start testing in Abu Dhabi soon. Meanwhile, we have also expanded our testing area in Hong Kong and obtained permission to conduct open road testing with designated passengers in April. With over 1,000 fully driverless vehicles now deployed globally, we continue to solidify our position as world's leading autonomous ride hailing service provider. We are scaling up our services globally. Looking ahead, we will deepen our presence in existing markets while strategically entering new ones, capturing broader growth opportunities worldwide.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Now, let me review the key highlights for each business for the first quarter. AI Cloud revenue reached billion in Q1, delivering a strong year over year increase of 42% with non GAAP operating profit remaining positive. GenAI and Foundation Model related revenue recorded triple digit year over year growth, as accelerating AI adoption across multiple sectors drove a notable increase in customer demand for our highly cost effective AI cloud services. As mentioned earlier, we also upgraded our mass platform, Qianfan, with an expanded model library and more comprehensive toolkits, extending support for the training and fine tuning of multi model and reasoning models to further facilitate AI native application development. On applications, we you may recall that at Baidu World last October, we previewed MiaoDa, which delivers no code capabilities.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

In this quarter, we officially launched MiaoDa, making it available to everyone, programmer or not. Meota reflects our mission to democratize AI and empower more people outside the developer community to create innovative applications with natural language inputs. The growing market recognition of our AI expertise continues to drive strong customer growth. In Q1, we deepened our collaboration with existing clients, while also expanding our customer base with new partnerships. We worked with a wide range of leading enterprises such as China Merchant Group and a top e commerce company in China, further validating our position as the AI partner of choice.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Our client pipeline remains healthy. We saw strong growth in the automotive sector and began expanding into emerging verticals, such as embodied artificial intelligence, where we recently entered into a strategic partnership with Beijing Humanoid Robot Innovation Center, the developer of the Tiangong Ultra Humanoid Robot. For our mobile ecosystem, we accelerated the AI transformation of search in Q1, while continuing to improve the efficiency of our monetization approaches. Agents continue to demonstrate enhanced efficiency as a monetization channel for our advertising business. In March, over 29,000 advertisers had daily ad spending through agents, with many demonstrating increased willingness to allocate more of their ad budget to our agents.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Adoption spans sectors like health care, education, lifestyle services, B2B, real estate and business services, including legal services. In Q1, revenue generated by our agents advertisers increased 30 fold year over year, accounting for 9% of Baidu Core's online marketing revenue. On the other hand, our industry leading intelligent digital human have proven their transformative value across business scenarios. For example, our digital humans serve as live streaming hosts for merchants on our platform. Over the past few quarters, tens of thousands of such digital humans have been live streaming on our platform every month, serving not just merchants, but also expanding into fields like legal services, healthcare, education, and more.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Turning to intelligent driving. As just highlighted, Apollo Gold made solid progress with its international expansion. Following our entry into Dubai and Abu Dhabi, our global footprint now spans 15 cities. Backed by our validated business model and proven operational expertise, we aim to further broaden our presence across more cities globally. In terms of ride volume, we are seeing clear acceleration.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Apollo Gold provided approximately 1,400,000 rides to the public in Q1, representing a robust year over year growth of 75%. As of May 2025, the cumulative rights provided to the public have exceeded RMB11 million. Meanwhile, we continue to scale up our service capabilities in cities where we have long been operating. Also, we are exploring asset light business models as a key strategic direction for our future growth, and we have started to see early adoption in certain areas recently. In May, Apologol entered into a long term strategic partnership with Car Inc, China's leading auto rental service provider, to introduce fully autonomous vehicle rental services and explore new models for smart mobility together.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

As our technology and operations mature at scale, we see significant opportunities and commercial sustainability across more use cases and regions. Combined with our regionally validated business model and global expansion efforts, we believe we are well positioned to create substantial value and reshape the future of mobility in the coming years. Looking back at the quarter's divestments, we are seeing encouraging progress in AI applications across the board, from enterprise services to consumer facing products and intelligent mobility. AI technologies are beginning to generate tangible, meaningful value through applications, which embodies the ultimate goal of our application driven innovation and aligns perfectly with our long standing strategic focus on AI. With that, let me turn the call over to Jackson to go through the financial results.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Thank you, Robin. So now let me walk through the details of our first quarter financial results. Total revenues were RMB32.5 billion, increasing 3% year over year. Revenue from Baidu Core was RMB25.5 billion, increasing 7% year over year. Baidu Core's online marketing revenue was RMB16.0 billion, decreasing 6% year over year.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Baidu Core's non online marketing revenue was RMB9.4 billion, up 40% year over year, mainly driven by AI cloud business. Within Baidu Core's non online marketing revenue, AI cloud revenue was RMB6.7 billion, increased by 42% year over year and accounted for 26% of Baidu Core's revenue. Revenue from iQIYI was RMB7.2 billion, decreasing 9% year over year. Cost of revenues was RMB17.5 billion, increasing 14% year over year, primarily due to an increase in costs related to AI cloud business and traffic acquisition costs. Operating expenses were billion, decreasing 3% year over year, primarily due to a decrease in personnel related expenses, partially offset by the increase in channel spending and the promotional marketing expenses.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Baidu Core's operating expenses were billion, decreasing 4% year over year. Baidu Core SG and A expenses were RMB4.9 billion, increasing 10% year over year. SG and A accounted for 19% of Baidu Core's revenue in the quarter, which is basically flat from last year. Baidu Core R and D expenses were billion, decreasing 16% year over year. R and D accounted for 16% of Baidu Core's revenue in the quarter compared to 21% in the same period last year.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Operating income was RMB4.5 billion, Baidu Core's operating income was RMB4.2 billion and the Baidu Core's operating margin was 16%. Non GAAP operating income was RMB5.3 billion. Non GAAP Baidu Core operating income was RMB4.9 billion and non GAAP Baidu Core operating margin was 19%. Total other income net was billion, increasing 260% year over year, mainly due to an increase in fair value gain and the pickup of earnings from long term investments, partially offset by the decrease in net foreign exchange gain arising from exchange rate fluctuation between renminbi and the U. S.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Dollar. Income tax expense was RMB1.2 billion compared to $883,000,000 in the same period last year. Net income attributable to Baidu was RMB 7,700,000,000.0 and diluted earnings per ADS was RMB 21.59. Net income attributable to Baidu Core was RMB 7,600,000,000.0 and net margin for Baidu Core was 30%. Non GAAP net income attributable to Baidu Core was 6,500,000,000.0.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Non GAAP diluted earnings per ADS was RMB18.54. Non GAAP net income attributable to Baidu Core was RMB6.3 billion and non GAAP net margin for Baidu Core was 25%. As of 03/31/2025, cash, cash equivalent, restricted cash and short term investments was billion and cash, cash equivalents, restricted cash and the short term investments excluding iQIYI were RMB136.7 billion. Free cash flow was negative billion and the free cash flow excluding iQIYI was negative RMB9.2 billion, mainly due to an increase of investments in AI business. We define net cash position as total cash, cash equivalents, restricted cash, short term investments net, long term term deposits and held to maturity investments and others.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

That's total loans, convertible senior notes and notes payable. As of 03/31/2025, net cash position for Baidu was RMB159.0 billion. Baidu Core had approximately 31,000 employees as of 03/31/2025. Finally, since last year, we have accelerated our share repurchase program. From the beginning of Q1 twenty twenty five, we purchased a total of US445 million dollars of our shares, reflecting our long standing commitment to delivering long term value to shareholders.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

With that, operator, let's now open the call to questions.

Operator

Your first question comes from Alicia Yap with Citigroup. Please go ahead.

Alicia Yap
Alicia Yap
Analyst at Citigroup

Thank you. Good evening, Robin, Jackson, Chen and management. Thanks for taking my questions. I wanted to ask about the AI model. So given the rapid pace of the model iterations and also your upcoming open source strategy, can management share the latest update on your AI overall strategy?

Alicia Yap
Alicia Yap
Analyst at Citigroup

And then what is the technology roadmap for earning in 2025? Will Baidu continue iterating on the foundation model such as the earning five point zero for example? Can you further reduce inference costs, going forward? Thank you.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Hi, Alistair. This is Robin. Over the past few months, we've seen an accelerated, iteration of foundation models. But no matter how fast the models advance, I think one thing is always clear, the true value of foundation models ultimately lies in applications built on the models. That's why we stick to an application driven approach for innovation.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

The foundation model space is very broad, so we don't necessarily have to make early lead in every possible direction. Instead, we we strategically focus our model iteration efforts on areas with, real application value, where we can build the most competitive capabilities. For example, we make sure our model development matches what our products actually need. For over one year, we've been using foundation model to drive AI transformation across our mobile ecosystem, including search. This hands on, experiences have shown us which model capabilities bring real value and are worth prioritizing, like multimodality.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

We've also spotted some promising application areas. Take our digital humans for instance. By combining different model capabilities, we've created hyper realistic digital humans that can even perform better than real human in certain situations. We'll be rolling them out at scale soon, opening up their value in many new, new scenarios. On earnings technology roadmap, we're set to continue, the the evolution of earning.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

We're already working on the next generation of models, and, we expect to further accelerate our pace of model iteration. And back to your question on inference costs, yes, we absolutely believe we can keep driving down costs. In fact, each new model we've launched recently, have come with significant price cuts. As I mentioned before, we released Earning 4.5 and X1 in March. X1 matched DeepSeq R1's performance at only half the price.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Then about a month later, we rolled out turbo versions with better performance and even more aggressive pricing. ERNIE four point five turbo at 80% lower price than 4.1, and, ERNIE X1 turbo at half the price of Ernie x one. These price cuts are supported by our, you know, full stack AI capabilities to continuously lower inference costs, making our model one of the most cost effective options on the market today. We're also opening up our best capabilities to the broader community. So we are on track to open source, earning 4.5 series on June 30.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

And we are excited to see market's response and look forward to more people exploring what EARN can do. Ultimately, we hope this helps more users experience the true value of our models and explore new real world applications. Thank you.

Operator

Your next question comes from Lincoln Kong with Goldman Sachs. Please go ahead.

Lincoln Kong
Lincoln Kong
Executive Director at Goldman Sachs

Thank you, management, for taking my questions. My question is about the cloud business. So we have seen a very strong growth in the first quarter for the cloud So what are the key drivers for this strong growth? So how should we think about sustainability here? And also could management provide us some breakdown in terms of the by category, for example, like infrastructure, industry solutions, project based service, and as well as this personal cloud.

Lincoln Kong
Lincoln Kong
Executive Director at Goldman Sachs

So how should we think about the outlook for the growth as well as the profitability within 2025 for cloud business? And lastly, you know, with the recent tightening of our US export restrictions on those advanced AI chips, So what are the potential impact here on Baidu Cloud operation and our growth plan? Thank you.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

This is Edou. Thank you for your question. In Q1, our AI cloud revenue growth further accelerated to from 26% year over year growth in Q4 last year to 42% year over year, mainly driven by surging demand for gene AI and foundation models across industries for both training and inference. So, as foundation models have undergone faster iteration recently, we have seen a fast increase in the model training needs, not just for large language models, but also for other types of models. Customers are increasingly choosing Baidu AI Cloud for our recognized leadership in AI infrastructure and our enhanced mass platform Qianfan, which consistently lowers inference costs and improves tutoring efficiency.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

In terms of the revenue breakdown, Baidu AI Cloud primarily consists of two parts: personal cloud and enterprise cloud. And enterprise cloud contributes to the vast majority of AI cloud revenue, which has consistently outgrown overall AI cloud. And then within the enterprise cloud, we have subscription based and project based revenue. For the subscription based revenue, it currently accounts for the majority of the enterprise cloud revenue, providing a sustainable revenue stream. Among subscription based revenue, Gen AI related revenue has maintained triple digit year over year growth for several consecutive quarters.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

Project based revenue may fluctuate from time to time, but in the long run, we believe the proportion for our subscription based revenue will continue to rise, supporting more sustainable and healthier long term growth for our cloud business. On the profit side, AI Cloud's non GAAP operating margin continues to expand year over year in Q1, maintaining its upward trend. This was driven by an improved revenue mix towards higher value offerings as we focus on opportunities that align with our strategic priorities. As a result, our AI cloud's non GAAP operating margin is now at the level of teens. Regarding AI chip export restrictions, as Robin just mentioned, we follow an application driven approach, because we believe the greatest value of AI eventually lines at the application layer.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

Even without access to the most advanced chips, our unique full stack AI capabilities enable us to build strong applications and deliver meaningful value. Also, our AI infrastructure is both scalable and highly efficient, enabling strong GPU utilization to support both training and inference with high cost performance. In parallel, we have the flexibility to select from a range of chip solutions based on different business scenarios, especially for inference. So looking forward, we believe that in the overtime domestically developed self sufficient chips along with increasingly efficient homegrown software stack will jointly form a strong foundation for long term innovation in China's AI ecosystem.

Lincoln Kong
Lincoln Kong
Executive Director at Goldman Sachs

Thank you.

Operator

The next question comes from Alex Yao with JPMorgan. Please go ahead.

Alex Yao
Alex Yao
Co-Head of Asia Technology, Media & Telecommunications at JP Morgan

Thank you management for taking my question. So, you accelerated AI search transition this quarter. What's management's rationale behind the move? What are your expectations for AI Answers penetration? And any updates on upcoming testing for AI monetization in 2Q?

Alex Yao
Alex Yao
Co-Head of Asia Technology, Media & Telecommunications at JP Morgan

And how should we think about the ramp up into second half this year in terms of monetization and consumer behavior? Thank you.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

Thank you, Alex, for your question. And let me take your question. In Q1, actually, we have seen significantly authority our AI transformation of search aiming to further enhance the user experiences through innovative technology. Our top priority remains the same, that is the user experiences as we believe that the high quality of the UE will contain the continuous user metric improvements are critical for sustainable long term growth. In April, we have seen that around 35% of the mobile search result pages content AI generated content, up from 32% generally, which has making our largest expansion so far.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

We expect this percentage to keep rising rapidly in Q2. And there are a couple of reasons behind them. In the first place, today's AI landscape is evolving very quickly and the users in information seeking behaviors continue to diversify. So it's more necessary than ever to make rapid innovations in such capabilities. Second, ongoing progress in the models capabilities has also helped us to keep improving the quality, quantity and the presentation format of the search results, while generating the multi model contents at massive level.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

And meanwhile, the average cost per query will keep falling as the inference costs drop. And we can roll this out across more queries more quickly. And in the third place, we have established a solid product framework at that was where with our capabilities to incorporate multimedia contents which playing a very important role in this whole process and which can help us to provide much easier to digest answers and aligns better with the user's behavior. We have seen very clearly signs of improvement in the user experiences. The users who have been exposed to the AI generating search results are finding the information much more efficiently, exploring the more types of queries and showing the stronger retentions.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

And therefore, we actively investing to accelerate our AI transformations of search. On monetization, however, still very early, had just starting to prepare for testing. Since our AI search differs significantly from the traditional search, the corresponding monetization approach needs to be rebuilt and refined and this takes some time. Like I said, we can see huge potential ahead. Currently, only a small percentage of the traditional search queries can be monetized, while the vast majority cannot.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

Over time, we anticipate AI search will greatly enhance our ability to monetize the long tailed queries and previously un tailed areas. And we expect the more queries to become monetizable as compared to the traditional search. Plus, AI search can likely create app formats that are more flexible and native and feed naturally into the new users experiences. They can be less intrusive, potentially even enhance overall expenses. And looking ahead, we believe that the long term potential of this expanding monetization capabilities is quite promising, opening up the possibilities that go beyond what traditional search can achieve.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

While our clear move towards the AI search will inevitably pull notable near term pressures on revenue and margin, I would still believe this is the right path to follow for the long growth. Thank you, Alex.

Operator

The next question comes from Gary Yu with Morgan Stanley. Please go ahead.

Gary Yu
Gary Yu
Analyst at Morgan Stanley

Hi. Thank you, management. I have a question regarding robotaxi. Given the recent development in the robotaxi space, including some of the players announcing their new robotaxi vehicles and partnership with Uber, how do you feel the evolving competitive landscape? And what differentiates, by two RT six, from other robotaxi vehicles?

Gary Yu
Gary Yu
Analyst at Morgan Stanley

Also, are you, exploring similar types of partnership like your peers? And should we expect faster expansion of, Apollo Gold this year? And lastly, what scale and unit economics are you targeting and how, to think about the long term profitability potential? Thank you.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Gary, we've been investing in autonomous driving for over twelve years. Today, Apollo Go is among the first and the very few players globally to operate autonomous ride hailing services at scale, making us both China's largest and global leader in this space. ARTI six is the world's first and as of today, the only purpose built mass produced level four autonomous vehicle. It is designed from the ground up, for fully driverless operations. It's, self developed hardware design, algorithms and software, and featuring top, safety redundancy.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

RD6 is now running at meaningful scale across multiple cities, and its unit cost is below 30,000 US dollars, far better than anyone else on the planet. With this unique, strengths and proven BINS model, Apollo Gold has been making steady progress in global expansion, most recently entering Dubai and Abu Dhabi. Altogether, our global footprint covers 15 cities as I mentioned during the prepared remarks. And our expansion strategy, are highly open and adaptive. We're ready to enter into any city worldwide.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

As long as regulations and conditions allow, we can enter quickly and scale efficiently. Our confidence comes from our long operating history, low cost structure, and excellent safety record. With over 1,000 fully driverless vehicles deployed, we are expecting to see faster growth in our global fleet size, geographic reach and wide volumes this year and beyond. Meanwhile, we are proactively exploring new business models through partnerships, especially, those that can scale fast and land quickly. We're in active discussions with various players, including ride hailing platforms, fleet operators and more.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

While serious partnerships usually take time to work through all the details, some of them are already taking shape. We are happy to share progress that is really meaningful and concrete. Our strategic partnership with Car Inc, Shenzhou Zhuqiao, our top auto rental China's top auto rental service provider, is one example. And, I'm sure there's more to come. Looking into the longer term, we see a clear path to profitability as hardware and labor costs keep coming down, and our growing operational scale brings more efficiencies.

Robin Li
Robin Li
Co-Founder, Chairman and Chief Executive Officer at Baidu

Given our leading position in both technology and, operations, we are confident Apollo Gold will continue to lead the field. We expect Apollo Gold to be a key driver of Baidu's long term growth. Thank you.

Operator

Your next question comes from Miranda Zong with Bank of America Securities. Please go ahead.

Miranda Zhuang
Miranda Zhuang
Analyst at Bank of America

Thank you for taking my questions, and congrats on the good results. My question is about the competition. So we see other, AI applications are ramping users with enhanced models, and offer more advanced functionalities like deep search or agent. And some are leveraging existing large traffic super app platforms. So to this, how will Baidu compete with other AI application and platforms? Thank you.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

Thank you for your question. This is Julius. As I mentioned earlier, with AI evolving very quickly, people now have different ways and choices to find information and enjoying the contents. So we are still early on that if we didn't take both steps to renovate such, we will be challenged sooner or later. That's why we were among the first major tech companies in China or globally to use AI to transform our legacy core business.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

In recent months, you have seen us accelerate these transformations. And as for AI chatbot specifically, for sure that they are one innovative form of AI applications. And we also have our own chatbot products like EarningBoss, and we have also integrated conversational AI capabilities in Baidu App. So I would say that AI chatbot represent one important explorations of applications, but they are now the ultimate form. Our goal is to find the most powerful AI applications that can create lasting values in these AI areas.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

So when we talk about the competition, it's not just about competing with trade wars. I think it's about rethinking the value of search in AI times. From there, we have identified two directions we are currently focused on. First, we believe that AI search efficiently meet the user needs while offering highly engaging experiences. Our AI search now looks very different from the traditional search.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

We prioritize the rich, impressive multi model content that is easier to understand and more nature to interact with. Second, we are reimagining the AI search to go beyond justifying information. And our ambition is to expand the search to help users make decisions, provide solutions and ultimately deliver results. To support this, I think a key strategy initiative for us is to make Baidu more capable through innovative approaches like agents. Our agents today can already have the users handle the complicated problems, support the decision making and connect them with the right facilities behind the scenes.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

Looking ahead, we aim to further enhance our services capabilities through agents. This will now only improving the user experiences by meeting more needs, but also help our customers and our partners connect much better with users than before. Besides, we're also making Baidu more open. This quarter, we proactively embrace MCP and the third party agents. On one hand, by connecting the third party tools and capabilities, we are enabling the users and customers and the partners to do even more things within our platform.

Rong Luo
Rong Luo
Executive Vice President of Baidu Mobile Ecosystem Group at Baidu

And on the other hand, we also try to open up our capabilities through MCP. For example, our e commerce MCP. By doing so, we are helping all parties in the ecosystem to benefit from greater flexibilities and unlock the broader opportunities, both within and beyond our platform. And in the face of today's increasingly dynamic market, and we believe our innovative approaches can expand both the depth and the breadth of what such can do and ultimately create the values for everyone in the ecosystem. Thank you.

Operator

Next question comes from Wei Dong with UBS. Please go ahead.

Wei Xiong
Wei Xiong
Equity Research Analyst at UBS Group

Hi, good evening management. Thank you for taking my question. I want to follow-up on the cloud side.

Wei Xiong
Wei Xiong
Equity Research Analyst at UBS Group

So with accelerating enterprise AI adoption, how should we think about the enlarged TAM for China's cloud market? And how is our cloud business differentiated from competitors in terms of strategy, technology and customer base? Also regarding the Tianfeng platform, could you please maybe share more some updates here, which industries are seeing the fastest AI adoption and where do we see the largest long term potential? Thank you.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

Thank you for the question. I'll take it. As AI adoption accelerates, the time for China's cloud market is expanding meaningfully driven by changes across the stack. With foundation models driving up the need for a massive computing power, the abilities to build and manage large scale GPU clusters and to utilize GPUs effectively has become key competitive advantages. Meanwhile, as models evolve with different strengths and AI applications bring increasingly diverse needs, the cloud platforms with broad model portfolios and full stack capabilities are best positioned to offer the flexibility and scalability customers require.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

This industry shifts align perfectly with Baidu's positioning, making our unique AI capabilities increasingly valuable. Baidu is one of the very few cloud providers globally with end to end full stack AI capabilities. So, we offer China's most efficient AI cloud infrastructure, backed by strong DPU cluster management. This allows us to deliver high performance, stable and cost effective AI services, while continually improving training and inference efficiency. Qianfan, our MES platform, is among the most advanced on the market.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

It offers a comprehensive model library covering both our earnings series and nearly all mainstream third party and open source models. This quarter, we further enhanced Qianfan's two team with extended support for training, fine tuning and distillation, especially for newly added multimodal and reasoning models. Strategically, we remain firmly committed to an application driven approach. So, as the AI landscape evolves, this approach positions us well to deliver differentiated value. We offer full stack end to end AI products and solutions tailored to the needs of specific industries and scenarios.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

By bringing AI into every aspect of their operations, So, it helps enterprises improve efficiency, reduce cost, and eventually transform their entire workflows. With this chance, we have captured the opportunity presented by industry shift and repositioned ourselves as China's top tier cloud provider in the AI era. The increasing market recognition of our AI expertise continues to drive strong momentum in our client pipeline, as we build and deepen partnerships with leading enterprises and we are also increasingly becoming the preferred choice for mid tier businesses. As for enterprise adoption, we were seeing rising interest across sectors. Early movers like Internet, Tech and online education companies are adopting AI quickly.

Dou Shen
Dou Shen
EVP, AI Cloud Group at Baidu

While others such as automotive, financial services, utilities and the public sector are also actively exploring with openness. So, as technology advances and costs decline, we're ready to lead the next wave of enterprise AI adoption and translate innovation into real world value. Thank you.

Operator

Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong
Thomas Chong
Managing Director at Jefferies

Hi, good evening. Thanks management for taking my questions. Can management elaborate about the overall capital allocation plan and the key priorities for Transcend five? Thank you.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Hi Thomas, this is Jackson. I will take your call. So we are firmly committed to our investments in AI. So as we believe this will generate meaningful returns over the long term. So when quantifying such investments, please note our AI investments are reflected not only in CapEx, but also in operating cash flow, outflow.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

So we're taking these two together, so our total AI investments in 2024 significantly increased from 2023, reflecting our conviction in the huge future growth potentials. In 2025, we plan to continue increase our AI investment to further solidify our AI foundation and prepare for future growth. So let me walk through the key areas that we are now focusing on. The first in AI cloud business. We are investing AI infra to meet rising market demand driven by accelerating AI adoption.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

So this is prompting us to quickly scale up our AI infra to capture emerging opportunities. As you've seen, our AI cloud revenue grew 42% year over year this quarter with non GAAP operating margin in the teens. Secondly, we continue to invest in advancing our earning models. Ongoing technical progress has enabled us to train better models more efficiently and at a lower cost. A result, we brought a series of high quality earning models to market in quick succession.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Also, we are investing in autonomous driving technology. Last quarter, Uplogo validated its business model in its large operational area in China. This milestone has motivated us to move faster in expansion, including entering the Middle East market, while ready volume will continue to accelerate across our existing operations. We will continue this momentum going forward. Lastly, we continue to invest in AI search transformation with a focus on user experience.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

Well, as Julia said, when we step up this investment, while monetization for AI search results remains at early stage, we do expect some margin pressure in the near term, but we see this as a necessary step to unlock long term growth. Another key focus of our capital allocation is shareholder returns. As I said earlier, since last year, we have significantly accelerated our share repurchase program. We further repurchased US445 million dollars from the beginning of Q1 this year. These are our strongest repurchase efforts in the past three years.

Junjie He
Junjie He
Interim Chief Financial Officer at Baidu

We expect to keep a similar pace this year, reflecting our long standing commitment to shareholders and our confidence in our long term growth. Thank you.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.

Executives
    • Juan Lin
      Juan Lin
      Director, Investor Relations
    • Robin Li
      Robin Li
      Co-Founder, Chairman and Chief Executive Officer
    • Junjie He
      Junjie He
      Interim Chief Financial Officer
    • Dou Shen
      Dou Shen
      EVP, AI Cloud Group
    • Rong Luo
      Rong Luo
      Executive Vice President of Baidu Mobile Ecosystem Group
Analysts
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Key Takeaways

  • Baidu Core revenue rose 7% year-over-year to RMB 25.5 billion in Q1, driven by AI Cloud revenue of RMB 6.7 billion (up 42% YoY), which now represents 26% of Core revenue.
  • Baidu released Ernie 4.5 and X1 foundation models and their Turbo versions with enhanced performance and aggressive pricing, and plans to open-source the Ernie 4.5 series on June 30.
  • The Qianfan AI mass platform was upgraded with a comprehensive model library (including multimodal and reasoning models), a new Data Builder, and one-click model distillation to simplify AI development.
  • AI transformation of Baidu Search accelerated, with 35% of mobile search pages featuring AI-generated multimodal content (up from 22% in January), contributing to MAU growth of 724 million (+7% YoY).
  • The Apollo Go robotaxi service expanded to 15 cities—including Dubai and Abu Dhabi—with over 1,000 fully driverless vehicles and 1.4 million rides in Q1 (+75% YoY), and launched a strategic partnership with Car Inc.
AI Generated. May Contain Errors.
Earnings Conference Call
Baidu Q1 2025
00:00 / 00:00

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