Baidu (BIDU) Q2 Earnings call transcript Aug 22, 2024
AInvestThursday, Aug 22, 2024 8:19 pm ET
2min read
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In the latest earnings call, Baidu's leadership provided insights into the company's strategic direction and financial performance, highlighting the transformative power of artificial intelligence (AI) in driving growth and innovation. With a focus on making AI accessible and affordable, Baidu is at the forefront of leveraging AI to address real-world problems and create substantial value both internally and externally.

Strategic Shift Towards Affordable and Accessible AI

Baidu's commitment to making AI more accessible and affordable is a game-changer in the industry. The company's efforts to expand its model portfolio and enhance model capabilities have resulted in a significant increase in API calls, with ERNIE handling about 600 million API calls daily and generating over 1 trillion tokens every day. By making API costs free for three lightweight ERNIE models and lowering the price of API costs for flagship models, Baidu is democratizing AI, making it more accessible to a wider audience.

Scaling AI to Address Real-World Problems

Baidu's strategic move to address real-world problems with AI is yielding promising results. In healthcare, AI is being used to automate administrative tasks, reducing burnout among doctors and enhancing clinical efficiency. In the recruitment industry, AI is revolutionizing the matching process between job descriptions and resumes, significantly reducing labor costs while maintaining high-quality results. In public services, AI is being used to deliver personalized and scalable services, addressing challenges related to limited resources and efficiency needs.

Transforming User Experience with AI

Baidu's focus on integrating AI into its core products, particularly search, is transforming the user experience. With 18% of search result pages containing AI-generated content, Baidu is offering more accurate and direct answers, enhancing content quality, and providing previously unattainable information. This strategic shift is aimed at creating a more natural and efficient search experience, prioritizing long-term user experience over immediate revenue and profit.

Investments in AI Driving Long-Term Growth

Baidu's investments in AI are paying off, with the company reporting a 14% year-over-year growth in AI cloud revenue. The strong demand for Gen-AI and large language models (LLMs) across various industries is driving this growth, with leading companies in sectors like automotive, financial services, and utilities partnering with Baidu to leverage its industry-leading AI capabilities. The company's commitment to cross-selling CPU cloud services to existing GPU cloud customers is also contributing to the growth of its AI cloud revenue.

Competition and the Future of AI

Baidu's first-mover advantage in AI is expected to sustain, with technological leadership and an application-driven approach setting the company apart from competitors like Alibaba and Tencent. The company's focus on real-world applications and its expanding ecosystem of developers, enterprises, and partners is strengthening its position in the rapidly evolving AI landscape.

Conclusion

Baidu's strategic shift towards AI is transforming its business and creating significant value for its users, customers, and stakeholders. With a focus on making AI more accessible and affordable, the company is at the forefront of addressing real-world problems and driving growth in a rapidly evolving industry. As Baidu continues to innovate and invest in AI, it is well-positioned to capitalize on the growing demand for AI-driven applications and create long-term value for its stakeholders.

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