In a landmark revelation during Baidu’s Q2 2024 earnings call, the company’s founder, chairman, and CEO, Robin Li, disclosed impressive statistics about the performance of Baidu’s large language model, ERNIE (also known as WenXin), highlighting its dominance in the AI sector within China.
Explosive Growth in Daily Usage
Li revealed that the WenXin model is now being used over 600 million times daily, with an average of 100 billion tokens processed each day. These figures represent a staggering tenfold increase from the 50 million daily uses reported in Q4 of the previous year. This surge in usage underscores the model’s growing popularity and the company’s successful integration of AI technologies into its core business operations.
AI-Generated Search Results
Additionally, Li disclosed that 18% of Baidu’s search results are now generated by AI, marking a significant increase from the 11% reported in the first quarter of the year. This shift towards AI-generated content signifies a major transformation in the search industry, where traditional search engine results are being augmented by sophisticated AI algorithms that provide more direct and personalized responses to user queries.
Business Growth and Financial Highlights
The AI-driven growth has also had a positive impact on Baidu’s cloud business. Under non-GAAP accounting standards, Baidu’s intelligent cloud achieved sustained profitability, with a revenue of 5.1 billion yuan in the quarter, representing a 14% year-on-year increase. Furthermore, the contribution of AI to intelligent cloud revenue rose to 9%, up from 6.9% in the previous quarter.
For the quarter ending June 30, 2024, Baidu reported total revenues of 33.9 billion yuan, roughly flat compared to the same period last year. Net profit attributable to Baidu was 5.5 billion yuan, up 5% year-on-year, while non-GAAP net profit was 7.4 billion yuan, down 8% year-on-year.
Baidu’s core revenue for the quarter was 26.7 billion yuan, up 1% year-on-year. Online marketing revenue decreased by 2% to 19.2 billion yuan, while non-online marketing revenue, primarily driven by the intelligent cloud business, increased by 10% to 7.5 billion yuan. Baidu’s core operating profit rose by 23% to 5.6 billion yuan.
Impact on Search and Advertising Models
The integration of AI into Baidu’s search engine has profound implications for the advertising industry. As AI-generated content becomes more precise, providing direct answers to user queries, the traditional advertising model that has long been the backbone of search engine revenue may face significant challenges. Search industry experts suggest that the shift towards AI-generated content could disrupt existing advertising models, necessitating a reevaluation of monetization strategies.
Expansion in Autonomous Driving and Mobile Ecosystem
Beyond search, Baidu’s autonomous driving business also saw significant growth. In the second quarter of 2024, the company’s autonomous driving orders reached approximately 899,000, up 26% year-on-year. By July 28, 2024, Baidu’s autonomous driving services had provided over 7 million rides across China, and the company has initiated large-scale, fully无人 road tests for its latest RT6 vehicles.
In the mobile ecosystem, Baidu App’s monthly active users reached 703 million in June 2024, a 4% year-on-year increase. Managed page revenue accounted for 51% of the online marketing revenue for Baidu’s core business in the second quarter.
Financial Health and Future Prospects
Baidu’s financial health remains robust, with the company repurchasing $3.01 billion worth of shares since the second quarter of 2024, bringing the total repurchase amount under the 2023 plan to $12 billion. As of June 30, 2024, Baidu held total cash, cash equivalents, restricted cash, and short-term investments of 162 billion yuan ($22.29 billion), excluding iQIYI.
With these impressive figures and the continuous advancements in AI technology, Baidu appears well-positioned to navigate the evolving digital landscape and maintain its leadership in the Chinese search market.
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