Q1 2024 Baidu Inc Earnings Call
Hello, and thank you for standing by what they do first quarter 'twenty to 'twenty four earnings conference call. At this time, all participants are in listen only mode.
Operator: Hello, and thank you for standing by for Baidu's first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode.
Operator: After management's prepared remarks, there will be a question and answer session. This conference is being recorded. If you have any objections, you may disconnect at this time.
Speaker Change: After managements 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 gentlemen, ladies director of Investor Relations.
Zhou Lin: I would now like to turn the meeting over to your host for today's conference, Zhou Lin, Baidu's Director of Investor Relations. Hello, everyone, and welcome to Baidu's first quarter 2024 earnings conference call. Baidu's earnings release was distributed earlier today, and you can find a copy on our IR website, as well as on Newswire services.
Hello, everyone and welcome to buy this third quarter 2024 earnings Conference call earnings release was distributed earlier today and you can find a copy on our IR website as well as on newswire services on the call today, we have Robin Li L. A cofounder and CEO, Don <unk>, our CFO and ocean.
Zhou Lin: On the call today, we have Robin Lee, our co-founder and CEO, Rong Luo, our CFO, and Dou Shen, our EVP, in charge of Baidu AI Cloud Group's ACG. After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Credit Security Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Speaker Change: Our EVP in charge of Baidu AD Chaco APG. After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward looking statements made under the safe Harbor position of the U S Credit Securities Litigation Reform Act of 1995.
Zhou Lin: For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed 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. Our earnings press release and this call include discussions of certain unaltered non-GAAP financial measures. Our press release contains a reconciliation of the unaltered non-GAAP measures to the unaltered most directly comparable GAAP measures, and it's available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded.
Speaker Change: We're looking statements are subject to risks and uncertainties that may cause actual results to differ maturity from our current expectations for detailed discussions of these risks and uncertainties. Please refer to our latest annual report and other documents.
Speaker Change: And the FTC in Hong Kong stock Exchange Baidu does not undertake any obligation to update any forward looking statements, except as required under applicable law. Our earnings press release and this call include discussions of certain unaudited non-GAAP financial measures <unk> press release contains a reconciliation of the unaudited non-GAAP measures.
Speaker Change: To the unaudited most directly comparable GAAP measures and is available on our IR website at IR Baidu Dot com as a reminder, these calls this is being recorded in addition, a webcast of this conference call will be available.
Robin Lee: In addition, a webcast of this conference call will be available on Baidu's website. I will now turn the call over to our CEO, Robin. Hello, everyone.
Speaker Change: I will now turn the call to our CEO Bobby.
Robin Lee: Our business continued to grow in the first quarter. Baidu Core's total revenue increased by 4% year-over-year to RMB 23.8 billion, and the non-GAAP operating margin reached 23.5%, an improvement from a year ago. In particular, revenue growth from Baidu AI Cloud accelerated to 12% year-over-year in 2024. It's the second year of our march on Gen AI. As we solidify our leadership position in foundation models, we are transforming the company from an internet-centric business to an AI-first business.
Bobby: Hello, everyone.
Bobby: <unk> continued to grow in the first quarter.
Bobby: And of course total revenue increased 4% year over year to RMB 23, 8 billion and non-GAAP operating margin reached 23, 5% an improvement from a year ago.
Bobby: Particular revenue growth from Baidu, AI cloud accelerated to 12% year over year, while continuing to deliver operating profit on a non-GAAP basis.
Bobby: 'twenty 'twenty four is the second year of our March on the agenda.
Bobby: As we start let me find our leadership position in foundation models, we are transforming the company from an internet things like fitness too.
Hi, Bert.
Speaker Change: Given that Bernie.
Robin Lee: Given that Ernie is the most powerful LLM in China, we are aggressively pushing the envelope for both our 2C bins and 2B bins to adopt Ernie, to provide a better user experience, to increase advertiser ROI, to enable developers to write agents and applications, and to let customers enjoy more effective and more efficient models. While we operate our legacy business in a challenging environment and experience lower revenue growth in the near term, we remain confident that AI will bring us sustained growth in revenue and profit in the long run. We expect our cloud bins to accelerate and the loss of our rubber taxi bins to narrow for the rest of the year.
Speaker Change: Our whole L. L M. In China, we are aggressively pushing the envelope for both our two seasons and to begin to adopt Ernie to provide better user experience to increase advertiser, Hawaii to enable developers to write agents and applications to.
Speaker Change: Customers are enjoying more effective and more efficient model.
Speaker Change: Well, we operate our legacy business in a challenging environment and excuse me the work, but no growth in the near term, we remain confident that well bring a sustained growth.
Speaker Change: And profit in the long run.
Speaker Change: We expect our carbon to accelerate and the loss of our rubber, Tennessee been too narrow for the rest of the year.
Robin Lee: We expect mobile to be soft in the near term and start to recover when Gen AI becomes the new core of our existing products next year. Looking beyond the near term, Gen AI and foundation models will bring us tremendous opportunities, ushering in a new innovation cycle and The Prize. And individual developers have swiftly transitioned from the fear of missing out on this opportunity to leveraging foundational models like Ernie to build AI applications. Baidu is well prepared to benefit greatly from this technological transformation.
Speaker Change: We expect multiple things to be solved in the near term and start to recover with gender.
Becomes the new core off our existing products next year.
Speaker Change: Looking beyond the near term journey, I and publish them all those well bring us tremendous opportunities.
Speaker Change: E U.
Speaker Change: The leasing cycle.
Speaker Change: Enterprise.
Speaker Change: And individually by the first half.
Speaker Change: Swiftly.
Speaker Change: And from the fear of missing out.
Speaker Change: On this opportunity to leveraging foundation models like learning to build AI applications.
Speaker Change: Baidu is well prepared to benefit greatly from the technology transformation.
Speaker Change: We believe one of the most important long term opportunity is modeled in for instance.
Robin Lee: We believe one of the most important long-term opportunities is model infrastructure, which will be a key growth driver for our AI cloud revenue in the future. In April, Ernie handled about 200 million API calls daily, a significant jump from around 50 million in December last year. This considerable growth indicates the increasing adoption of earnings and points to strong future revenue potential from model inflation. To accelerate the adoption of burning, we are building a vibrant and healthy ecosystem around it.
Which will be a key growth driver for our AI cloud revenue in the future.
Speaker Change: In April early and it was about 200 million API calls.
Speaker Change: Daily <unk>.
Speaker Change: Significant jump from around 50 million in December last year.
Speaker Change: This considerable gross indicate the increasing adoption of Barney and points to strong future revenue potential from model interesting.
Speaker Change: To accelerate the adoption of Bernie we are building, a vibrant and healthy ecosystem around it.
Robin Lee: We believe the burning ecosystem will, over time, contain millions of applications, especially agents, developed by a diverse community of enterprise and individual developers across various industries, meeting a wide range of needs in people's everyday life and work. Our large user base on mobile and desktop will enable us to distribute these agents and apps to whoever needs them, whenever appropriate. The anchor of this ecosystem is the early family of models, including our flagship models Ernie 3.5 and Ernie 4.0, as well as the lightweight models we introduced in Q1.
Speaker Change: We believe Bernie ecosystem, well overtime contains millions pulse application, especially agents Tabasco.
Speaker Change: The basket by a diverse community of enterprise and individual developers across various industries.
Speaker Change: Meeting a wide range of needs in People's everyday life and work.
Speaker Change: Our large user base in mobile and desktop well enable us to distribute this agent and perhaps to whoever needs. It would never a property.
Speaker Change: The ankle is ecosystem or any family of models, including our flagship models learning suite, one five and Bernie for pointed zero.
Speaker Change: That's all ask the lightweight models, we introduced in Q1.
Speaker Change: Throughout the quarter, we continued improving earnings efficiency, leveraging our unique proprietary foliar AI architecture, and our strong ability and.
Robin Lee: Throughout the quarter, we continued improving Ernie's efficiency, leveraging our unique proprietary four-layer AI architecture and our strong ability in end-to-end optimization. For example, Ernie has increased its training efficiency to 5.1 times, and its inference cost is only about 1% compared to the March 2023 version. To make earning increasingly accessible and affordable, we now offer three sets of tools on our math platform. Last quarter, we introduced App Builder and Model Builder for enterprise and individual developers to develop apps and build models.
End to end optimization.
Speaker Change: For example, already has increased its training efficiency too fine 0.1 times.
Speaker Change: And it's the infant cost is only about 1% compared to the March 2020 sweep version.
Speaker Change: To make learning increasingly accessible and affordable we now offer a suite of tools on our math, California.
Speaker Change: Last quarter, we introduced a filter and module view, there for enterprise and individual developers to develop apps.
Speaker Change: And B with models.
Robin Lee: In April, we took a step further by introducing AgentBuilder, a platform encompassing tools for easily creating AI agents. This is because WeInviction AI agents will become one of the most important forms of applications, powered by Gen-AI and FoundationMod. With the ability to use natural language as the programming language, developers will be able to build AI agents without the need to write a single line of code.
Speaker Change: In April we took a step further by introducing agent builder a platform encompassing tools for easily creating AI agents.
Speaker Change: This is because we English and AI agent will become one of the most important form of applications.
Speaker Change: Powered by Junior Guy and Foundation models.
Speaker Change: We used the ability to use natural language programming language developers will be able to build AI agent without the need to write a single line of code.
Robin Lee: Currently, new earning agents are created on our platform every day, and together they are distributed millions of times per day, serving a wide range of verticals, including education, legal, B2B, travel, and more. All these initiatives derive from our extensive experience and insights in building and running learning, as well as developing AI-native applications. We believe that Ernie's true value will only be realized when numerous applications built on top of it are widely used by users and customers.
Speaker Change: Currently new earning agents aren't created on our platform every day and together they aren't distributed millions of times per day.
Speaker Change: Serving a wide range of verticals, including education legal b to B travel and more.
Speaker Change: All this initiatives derived from our extensive experience and insights in building and running learning as well as developing AI native applications.
We believe that Ernie true value will only be realized when numerous applications built on top of edge are widely used by users and customers.
Speaker Change: I'm pleased to note that Ernie is extending its influence across smart Goodbye This school API.
Robin Lee: I'm pleased to note that Ernie is extending its influence across smart devices through APIs. Last quarter, we proudly announced partnerships with renowned smartphone brands such as Samsung China and Honor, assisting them in enhancing their native app experiences using our. This quarter, we are excited to extend our collaboration with more leading smartphone makers such as OPPO, Vivo, and Xiaomi, who leveraged Ernie APIs to elevate user experience. Moreover, our reach now extends beyond smartphones to include PCs and electric vehicles.
Speaker Change: Last quarter, we probably announced partnerships the screen the oldest smartphone brands, such as Samsung, China and owner.
Speaker Change: Assisting them in enhancing their native app experiences using hard.
Speaker Change: This quarter, we are excited to extend our collaboration with more leading smartphone makers, such as alcohol vivo and xiaomi.
Speaker Change: Who leveraged earning a pea is to elevate user experience.
Moreover, our reach now extends beyond smartphones to include P CS and electric vehicles.
Robin Lee: Learning APIs are now utilized by Lenovo, a top PC brand, to empower its AI assistant in the default browser of its PCs. NIO, China's leading smart EV manufacturer, began using the Ernie API to enhance the in-camping experiences for its vehicle.
Speaker Change: Learning a Z is now utilized by Lenovo a pop P. C brand to power its AI assistant in the default browser it's P. CS.
Speaker Change: Neil China's leading smart EV manufacturer begin using the <unk> API to enhance the in camping experiences.
Speaker Change: For its vehicles.
Speaker Change: This broadening of our partnerships into wherein smart devices okusanya ample opportunities for large scale user adoption.
Robin Lee: This broadening of our partnerships into various smart devices opens up ample opportunities for large-scale user adoption, paving the way for early AI-enabled applications to become the entry point into the world of generative AI. In addition to the brands I just mentioned, we have also acquired many notable new customers such as Trip.com, Saotu, Zhaoping, Suoyebang, and Singapore Tourism Board. Another long-term opportunity is in our consumer-facing business. We have been reworking all of our consumer-facing products.
Speaker Change: Paving the way for Ernie enabled application to become the entry point into the world.
Speaker Change: Generating yeah.
Speaker Change: In addition to the brands I just mentioned we have also acquired many notable new customers such as trip dotcom, So tool to all key Sawyer bone and Singapore tourism pool.
Speaker Change: Another long term opportunity is in our consumer facing bin.
Speaker Change: We have been reconstructing all of our consumer facing products.
Robin Lee: Our goal is to build our proprietary AI native applications, potentially killer apps for the early ecosystem. By doing so, we should be able to generate new growth opportunities. For example, after rebuilding with Gen AI and LLMs, Baidu Wenku, our one-stop shop for document creation, experienced a double-digit year-over-year increase in paying users in the first quarter. However, penetration of Ernie for Baidu's search and feed took longer than expected because the user base is in the order of hundreds of millions, and use cases are generally very sensitive to cost and response time. We needed a wide range of After trial and error for a few quarters, we are firming up our strategy.
Speaker Change: Our goal is to build our proprietary AI native applications potentially killer apps for the ecosystem.
Speaker Change: By doing so we should be able to generate new growth opportunities.
Speaker Change: For example, after rebuilding with chimney I N L L and Baidu, one cool our one stop shop for document creation experienced double digit year over year increase in paying users in the first quarter.
Penetration of Ernie for Baidu search and feed took longer than expected.
Speaker Change: Because the user base.
Speaker Change: The old or a hindrance of minutes and use cases are generally very sensitive to cost and response time.
Speaker Change: We needed a white winter early models being different sizes optimized for different scenario for best price performance ratio.
Speaker Change: After trial and error for few corners, we are affirming our strategy.
Robin Lee: Going forward, we plan to accelerate the launch and adoption of new product features, such as multi-model generative search results, multi-round interaction in search, and more recently, distribution of earning agents. We are at the forefront globally of this unique technological change, and we are confident in our abilities to innovate. By definition, we are operating in uncharted territory.
Speaker Change: Going forward, we plan to accelerate the launch and adoption of new product features such as multi model generating them search result, multi wrong interaction E search and more recently distribution.
Speaker Change: Agents.
Speaker Change: We are at the forefront globally. This unique technological change and we are confident in our ability to innovate.
Speaker Change: By definition, we are operating on.
Speaker Change: Uncharted territory.
Robin Lee: As always, we want to be flexible to make timely adjustments to evolving consumer needs and how users incorporate new product features into their day-to-day lives. Now, let me review the key highlights for each business for the first quarter. In the first quarter, AI cloud revenue reached RMB 4.7 billion, up 12% year-over-year, and it continued to generate operating profit on a non-gap basis. The revenue growth was mainly driven by Gen AI and foundation models.
Speaker Change: Always we wanted we want to be flexible to make timely adjustments.
Speaker Change: Evolving consumer needs.
Speaker Change: And how users incorporate new product features in their day to day lives.
Speaker Change: Now let me review the.
Speaker Change: Key highlights for each business for the first quarter.
Speaker Change: In the first quarter AI cloud revenue reached RMB, four 7 billion up 12% year over year and to continue to generate operating profit a non-GAAP basis.
Robin Lee: In the first quarter, such revenue accounted for 6.9% of total AI cloud revenue. Currently, the majority of this revenue is from model training, but revenue from model inferencing has been growing quickly. We believe revenue from GNI and foundation will continue to rise as customer adoption improves. For instance, within our internal cloud revenue, Baidu Core's other business groups, such as mobile ecosystem groups and intelligent driving groups, are increasingly leveraging the power of earnings. As a result, 15% of their payments to the AI Cloud group are allocated to GenAI and FoundationMod.
Speaker Change: The revenue growth was mainly driven by Gen AI and foundation models.
Speaker Change: In the first quarter search revenue accounted for 6.9% of total AI cloud revenue.
Speaker Change: Currently the majority of this revenue is from model 'twenty, but revenue from motto infancy has been growing quickly.
Speaker Change: We believe revenue from Shanghai on Foundation.
While continuing to life as customer adoption improves.
Speaker Change: For instance, within our internal cloud revenue Baidu course, other business groups, such as mobile ecosystem groups and intelligent driving group are increasingly leveraging the power of our.
Speaker Change: As a result, 15% of their payments to the yikes outgroup are allocated to Gen AI and foundation models.
Speaker Change: Enterprises choose Baidu AI cloud to tweak and host their models because they believe we have the most powerful and efficient AI infrastructure model training and inferencing in China.
Robin Lee: Enterprises choose Baidu AI Cloud to train and host their models because they believe we have the most powerful and efficient AI infrastructure for model training and inferencing in China. Compared to peers, we help enterprises to train models at all sizes on our AI cloud while also reducing model inference time. This is primarily attributable to two reasons. Number one, our self-developed four-layer AI architecture has allowed us to innovate and optimize at each layer, enabling Continuous Efficiency Gain.
Speaker Change: Compared to peers, we help enterprises to train models at all sizes, our AI cloud, while also reducing model infringing cost.
Speaker Change: This is primarily attributable to two reasons.
Speaker Change: Number one our self developed in Florida.
Speaker Change: Architecture allowed us to meet and optimize at each layer.
Speaker Change: Enabling continuous efficiency gains.
Robin Lee: And number two, we have superior capabilities and insights in GPU cluster management. Leveraging our technical expertise, we can now integrate deep learning and deep learning, various vendors into a unified computing cluster to train an LLM. Our platform has demonstrated very high efficiency with this setup on a GPU cluster that is composed of hundreds, even thousands of GPUs.
Speaker Change: Number two we have superior capabilities and insights in GPU cluster management.
Speaker Change: Leveraging our technical expertise, we can now integrate.
Speaker Change: Uh-huh wherewith vendors into a unified computing cluster two between an L. L N.
Speaker Change: Our platform has demonstrated very high efficiency, but it's that GPU cluster that is composed and tourists, even salt and Sop Gpus.
Speaker Change: This is an important breakthrough.
Robin Lee: This is an important breakthrough because of the limited availability of imported GPUs. Another growth driver for AI cloud is cross-selling of our CPU cloud services to our GPU cloud. Because of the high recognition of our GPU cloud among existing and new customers, we have seen customers increasingly switch more and more of their CPU cloud usage to Baidu. As I mentioned earlier, on the math side, we took many initiatives to make the early family of models increasingly affordable and efficient, then open source them all. Here are some highlights for this quarter.
Speaker Change: The limited availability of imported Gpus.
Speaker Change: Another growth driver for you got cloud cross selling up our CPU cloud services to our GPU cloud customers.
Speaker Change: It's a high recognition of our G. P O called.
Speaker Change: Among existing and new customers.
Speaker Change: We have seen customers increasingly switch more and more a b or C. P O cloud usage to Baidu.
Speaker Change: As I mentioned earlier on the mass side, we took many initiatives to make the Ernie family off mall those increasingly affordable.
Speaker Change: Patient then open sourced the model.
Speaker Change: Here are some highlights for this quarter.
Speaker Change: We have 10, we have expanded and enhanced our earning motto part of audio offering a total street a lightweight L. L M and two task specific Oh and muddled.
Robin Lee: We have expanded and enhanced our early model portfolio offering a total of three lightweight LLMs and two task-specific LLMs on model. This model helps enterprises and professional developers balance model performance with cost, enabling Ernie to reach a broader audience for model development. In addition, a mixture of expert or MOE approaches can partition a user query into distinct tasks, find the most suitable models to handle each task, and use Ernie 3.5 or 4.0 only for the most complex. This approach allows for faster responses and lower inferencing costs while maintaining similar performance levels to using more advanced models.
Speaker Change: This model health enterprise data and professional video bad first balanced model performance.
Speaker Change: Enabling ernie to reach a broader audience for our model development.
Speaker Change: In addition, mixed.
Speaker Change: A mixture of experts or M. O E approach can petition I use a quarry into distinct tasks.
Speaker Change: Many of the most suitable models to handle each task and youth Ernie sweep on five or 4.0 only for the most complex tasks.
Speaker Change: This approach allows for faster responses and lower insurance and cost while maintaining similar performance level to using more advanced models.
Speaker Change: Last quarter, we introduced a builder to do about it.
Robin Lee: Last quarter, we introduced AppBuilder to developers. Throughout the quarter, we continued enriching and refining the tools for app builder, enabling developers to easily create AI native apps in just three steps on our platform. With the launch of AgentBuilder in April, anyone can create an AI agent with just a few sentences on Baidu. Overall, we remain confident in the strong growth of our AI cloud revenue, and we aim to continue generating operating profit on a non-gap basis. The mobile ecosystem has continued to deliver healthy margins and strong free cash flow. Our online marketing revenue grew by 3% year-over-year. Revenue growth was impacted by the challenging macro environment.
Speaker Change: Throughout the quarter, we continued in reaching and refining the tools for App builder.
Speaker Change: Rippling developers to easily create T. I D T. Perhaps in justice, we stopped all of our Caf one.
Speaker Change: With the launch of agent builder in April anyone can create an AI agent is just a few sentences on baidu.
Overall, we remain confident in the strong growth for our AI cloud revenue and we aim to continue generating operating profit on a non-GAAP basis.
Speaker Change: Mobile ecosystem has continued to deliver healthy margins and strong free cash flow.
Speaker Change: Our online marketing revenue grow by 3% year over year.
Speaker Change: Revenue growth was impacted by a challenging macro environment.
Robin Lee: At the same time, we have been pushing hard to transform the user experience from a traditional mobile product to a generative AI experience. This transition is ongoing, and monetization has not yet begun. We also continued to leverage earnings to reconstruct our monetization system for better conversion and efficiency gains. During the quarter, we further enhanced our ad targeting capability and scaled up real-time at generation. This effort resulted in an improvement in conversion and generated incremental revenue...
Speaker Change: At the same time, we have been pushing hard to transform the user experience from a traditional mobile product to have generated a high experience.
Speaker Change: This transition is ongoing.
Speaker Change: The monetization has not yet.
Speaker Change: We also continued to leverage Ernie to reconstruct our monetization system for better conversion and efficiency gain.
Speaker Change: During the quarter, we further enhanced our AD targeting capabilities.
Speaker Change: Scaled up real time at generation.
Speaker Change: This effort resulted in an improvement in conversion and generated incremental.
Speaker Change: Or any agents stand for a long term opportunity.
Robin Lee: Early agents stand for a long-term opportunity for modernization upgrade. Recently, we have seen not only brand advertisers but also SMEs gradually adopting Ernie Yang. We have designed this agent for SMEs as a virtual storefront and service desk, serving consumers around the clock.
Speaker Change: Eastern upgrade to.
Speaker Change: Recently, we have seen not only rent advertisers, but also S N E gradually adopting or in Egypt.
Speaker Change: We have designed this agent or has that ive virtual storefront and service desk.
Speaker Change: Serving consumers the clock.
Robin Lee: We believe that the use of agents can improve SMEs' sales flow rate, enhance their productivity, and expand their reach among users. This will be an important step for us to transform our traditional CPC model to a significantly more efficient CPS model, and meanwhile, improve user experience on Baidu. Going forward, I believe greater opportunities will arise from AI-native apps, particularly for chain AI enabled Baidu search. GNI complements traditional search, expanding the total addressable market. Since Q2 last year, we have been reconstructing Baidu Search with Erlang. Now, more and more search results are generated by Ernie in a growing variety of formats, like text, image, links, points of interest, and citations.
Speaker Change: We believe that the use of agent can improve F N E.
Sell through rate.
Speaker Change: Hence the productivity and expand their reach among users.
Speaker Change: This will be an important step for us to transform our traditional CPC model to a significantly more efficient C. P. S model and Meanwhile, enhancing user experience on Baidu.
Speaker Change: Going forward I believe great opportunities will arise from AI native apps.
Speaker Change: Particularly Fortunately I enablement to Baidu started.
Jimmy: Jimmy I complement traditional search expanding the total addressable market.
Speaker Change: [laughter] things Q2 last year, we have been reconstructing baidu search with Orange.
Speaker Change: More and more search resolved aren't generated by Ernie eating a growing variety of formats like text image.
Speaker Change: Point of interest and citations.
Speaker Change: This result, you really produced in real time to directly address users' questions and problems.
Robin Lee: These results are usually produced in real-time to directly address users' questions and problems. By doing so, we have improved and will continue to enhance the search experience, which is crucial for increasing the popularity of Baidu Search. While user feedback on this product and feature renovation has been encouraging, it is important to note that we are still in the early stages of reconstructing Baidu Search. But overall, I believe that search will be one of the most likely killer apps in the AI era.
Speaker Change: By doing so we have improved and well continue to enhance the search experience.
Speaker Change: Which is crucial for increasing.
Speaker Change: Off Baidu search.
While user feedback on this product and feature renovations has been encouraging it is important to note that we are still in the early stages of reconstructing Baidu search.
Overall, I believe that search will be one most likely killer App engine AI era and we are.
Robin Lee: And we are on the right trajectory to capitalize on this potential. I mentioned earning agents as an important opportunity for monetization. With newly introduced agent builders, creators, publishers, and service providers, we'll find it increasingly easy to build agents on Baidu. This is key to enhancing Baidu's content offerings and ultimately provide an AI-native user experience on our path. Moving on to Intelligent Driving, we believe Apollo Goal stands as the largest autonomous ride-hailing service provider globally, measured by the right provided to the public. In the first quarter, Apollo Go offered 826,000 rides to the public, marking a 25% year-over-year increase. In April, the total number of... surpassed 6 million.
Speaker Change: On the right trajectory to capitalize on this potential.
Speaker Change: Yes.
Speaker Change: I mentioned Ernie agents as an important opportunity for monetization.
Speaker Change: With newly introduced.
Speaker Change: Agent beauty creators.
Speaker Change: Creators publishers and service providers, well find it increasingly easy to build agents on baidu.
Speaker Change: Yes.
Speaker Change: It is key to enhancing baidu its content offerings and ultimately provide an AI native user experience on our platform.
Speaker Change: Moving onto intelligent driving.
Speaker Change: We believe our polo golf stands as the largest autonomous ride hailing service provider globally.
Speaker Change: <unk> by the right provided to the public.
Speaker Change: In the first quarter of Pogo offered.
Speaker Change: 608.
Speaker Change: 826000 rides to the public.
Speaker Change: Marking a 25% year over year increase.
Speaker Change: In April the total number.
Speaker Change: Surpassed 6 million.
Speaker Change: We are continuing to move forward.
Robin Lee: We are continuing to move forward, and we are moved to work. Achieving Unit Economics Breakeven for Apollo Gold. To make this happen, our strategy is to reach UEE breakeven in key regions and then replicate the success in other regions. To reach the regional break-even point, we are focusing on scaling up the operation of the fully driverless ride-hailing service and enhancing the utilization of each vehicle. In Wuhan, Apollo Go's largest regional operation is progressing toward this goal.
Speaker Change: Move to work.
Speaker Change: Achieving unit economics break even or up logo.
Speaker Change: To make this happen our strategy is to reach.
Speaker Change: Breakeven in key regions and then replicate.
Speaker Change: Our success in other regions.
Speaker Change: To reach the regional break even point, we are focusing on scaling up accretion or fully ecolab released right heating surveys and enhance the utilization of <unk>.
Speaker Change: Each field.
Speaker Change: One our polo golf largest regional accretion is progressing towards this goal in Wuhan and Paul will go gradually becoming an integral part of the city's transportation network.
Robin Lee: In Wuhan, Apollo Go is gradually becoming an integral part of the city's transportation network. Apollogo more than doubled its operational area from a quarter ago, serving a population of over 7 million and achieving the remarkable milestone of crossing the Yangtze River with these vehicles as part of its expansion. Moreover, our vehicles started to operate 24 by 7 in Wuhan in early March, further expanding Apollo Goals' reach and improving vehicle utilization. All these progresses have led to the rapid growth of fully driverless driving.
Speaker Change: Upon will go more than doubled its operational area from a quarter ago, serving a population of over $7 million and achieving the remarkable milestone of crossing young C repaired with.
Speaker Change: Turning vehicles as part of its expansion.
Speaker Change: Moreover, our vehicles starting to operate 24 by seven one in early March further expanding our portal goes weak and improving the vehicle utilization.
Speaker Change: All of this progress it have led to the rapid growth of 45 are these strikes.
Robin Lee: In Q1, the rides provided by 40 driverless vehicles accounted for over 55% of total rides in Wuhan, which is up from 45% in the fourth quarter last year. This figure continues to rise, exceeding 70% in April, with expectations of sustained rapid growth ahead and reaching 100% in the coming quarter. Looking ahead, we plan to deploy RT6, our sixth-generation robot taxi, in our Wuhan-Apollo-Go operation this year, which will significantly reduce hardware generation costs with the scaling of driverless operations and continuous improvement of cost structure. We believe Apollo Go will achieve operational UEE breakeven in Wuhan in the near future. As Apollo Go continues to progress, we will closely monitor if it should be re-launched.
Speaker Change: In Q1, the rights provided by fully driverless vehicles.
Speaker Change: For over 55% of total ride huh.
Speaker Change: Which is up from 45% in the fourth quarter last year.
Speaker Change: This figure continues to rise exceeding 70% in April.
Speaker Change: With expectations of sustained rapid growth ahead, and reaching 100% in the coming quarters.
Speaker Change: Looking ahead, we plan to deploy our T. Six our sixth generation robot taxi E. R. One Apollo go operation this year, which will significantly reduce the clockwork.
Speaker Change: <unk> costs.
Speaker Change: With the scaling off driverless operations and continuous improvement of cost structure, We believe Apollo go well achieve operational you eat breakeven in Wuhan in the near future.
Speaker Change: And Apollo Gold continues to progress we will closely monitor efficiency.
Robin Lee: We just persist in optimizing the operation of our overall intelligent driving benchmark. All those solutions, Apollo self-driving for AFD technology, continue to evolve. I mentioned in our last earnings call that Apollo is a global pioneer in the use of visual foundation models in autonomous driving. Our state-of-the-art autonomous driving solution solely reliant on vision is made available to OEMs.
Speaker Change: Please.
Speaker Change: Persistence in optimizing the operation of our overall intelligent driving.
Speaker Change: Also solution, our Apollo self driving.
Or a S D technology.
Speaker Change: Continue to your box.
Speaker Change: I mentioned in our last earnings call that Apollo is a global pioneer in the use of visual foundation models in autonomous driving.
Speaker Change: Our state of the art on homes driving solution solely reliant on vision is made available to Oems.
Rong Luo: AFD can effectively navigate urban environments across over 100 cities in China, with plans to expand subsidies in the coming months. This allows us to make advanced autonomous driving attainable across a broad spectrum of passenger vehicles. From high-end to economy, priced as low as 150k RMB, it serves as another proof of our technology leadership. With that, I will turn the call over to Rong to go through the financial results. Thank you, Robin.
Speaker Change: E S D can effectively navigate.
Speaker Change: Urban environments across over 100 cities in China.
Speaker Change: Plan to expanding.
Speaker Change: Cities in the coming months.
Speaker Change: This allows us to make advanced autonomous driving attainable across a broad spectrum of passenger vehicles.
Speaker Change: From high end to economy.
Speaker Change: Priced as low as 150, K arm B and it serves as another proof of our technology leadership.
Speaker Change: With that let me turn the call over to him to go through the financial results.
Rong Luo: Now let me walk through the details of our first quarter financial results. Total revenues were RMB31.5 billion, increasing 1% year-over-year. Baidu Core revenues were RMB 23.8 billion, increasing 4% year-over-year. Baidu Core's online marketing revenue was RMB 17.17 billion, increasing 3% year-over-year. Baidu Core's non-online marketing revenue was RMB 6.8 billion, up 6% year-over-year, mainly driven by AI. Revenue from IT was RMB 7.9 billion, decreasing 5% year-over-year.
Speaker Change: Yeah.
Speaker Change: Now, let me walk through all the details of our first quarter financial results.
Speaker Change: Total revenues were RMB, one 5 billion, increasing 1% year over year.
Speaker Change: From Baidu core was RMB 28 billion, increasing 4% year over year Baidu cars online marketing.
<unk> been at one seven increasing 3% year over year Baidu cost not only marketing revenue.
Speaker Change: $6 8 billion up 6% year over year, mainly driven by that.
Speaker Change: Yes.
Speaker Change: Revenue for IC was RMB, seven 9 billion, increasing 5% year over year cost of revenue.
Rong Luo: The cost of revenue was RMB 15.3 billion, increasing 1% year-over-year, primarily due to an increase in traffic acquisition costs and the costs related to the AI cloud business, at a decrease in quantum causes. Operating expenses were RMB 10.7 billion, decreasing 2% year-over-year, primarily due to a decrease in personnel-related expenses and other R&D expenditures, partially offset by an increase in server depreciation expenses and server custody fees, which support joint AI research and development.
Speaker Change: The $15 3 billion, increasing 1% over the years, primarily due to an increase in truck acquisition causes and causes religion.
Speaker Change: Sloppy.
Speaker Change: The decrease in content costs.
Speaker Change: Operating expenses were RMB, 10, 7 billion decreasing 2% year over year, primarily due to a decrease in personnel related expenses.
Speaker Change: R&D expenditures, partially offset by Valeant crazy installment depreciation expenses and lower cost of these fees were just apologize yeah, there's such good development tools.
Rong Luo: Baidu Cost Operating Expenses for R&D were 9.4, raising 1% year-over-year. Baidu Corp's SG&A expenses were RMB4.5 billion, decreasing 1% year-over-year. SG&A accounted for 19.19% of Baidu Corp's revenue in this quarter, compared to 20% in the same period last year. Baidu's R&D expenses were RMB4.9 billion, decreasing 1% year-over-year.
Speaker Change: Baidu costs operating expenses were RMB mud pie.
Speaker Change: What are you seeing 1% year over year.
Speaker Change: SG&A expenses were RMB, four 5 billion, increasing 1% year over year SG&A accounting for 19% one night of Baidu core revenue in this quarter compared to 22% same period last year.
Speaker Change: Baidu call R&D expenses were RMB, four 9 billion decreasing one yeah.
I envy accounting for 21% of Baidu core revenue this quarter compared to 22% in the same period last year.
Rong Luo: R&D accounted for 21% of Baidu Corp's revenue in this quarter, compared to 22% in the same period last year. Operating income was RMB 5.5 billion, Baidu Core's operating income was RMB 4.5 billion, and Baidu Core's operating margin was 19%, 1.9%. And Nongat's operating income was RMB 6.7 billion.
Speaker Change: Operating income was RMB five 5 billion Baidu core operating income was RMB, four 5 billion and Baidu costs operating margin was 19% on nine.
Speaker Change: non-GAAP operating income was RMB six 7 billion non-GAAP core operating income was RMB, five 6 billion and non-GAAP Baidu core operating margin was 23, 5%.
Rong Luo: Nongat Baidu Core operating income was RMB 5.6 billion, and its operating margin was 23.5%. Total other income net was RMB1.2 billion, decreasing 52% year-over-year, primarily due to a decrease in fair value gain from long-term investments, partially offset by the increase in net foreign exchange gain. Yinkang Tax Census revenue was RMB883 million compared to RMB1.2 billion in the same period last year.
Speaker Change: Total other income net was RMB.
Speaker Change: Decreasing 52% year over year, primarily due to a decrease in February again from long term investments, partially offset by the increased net foreign exchange gain.
Speaker Change: Context expenses was RMB 883 million compared to RMB, one 2 billion same period last year.
Rong Luo: Net income attributable to Baidu was RMB 5.4 billion, and diluting earnings per ADS were RMB 14.91. Net income attributable to Baidu Corp was RMB 5.2 billion, and net margin for Baidu Corp was 2%. Nongat's net income attributable to Baidu was RMB 7 billion. Nongat's dilutive earnings per ADS were RMB 19.91.
Speaker Change: Net income attributable to Baidu was RMB, five 4 billion and diluted earnings trade, yes, well RMB 14, one net income attributable to Baidu core was RMB five 2 billion and net.
Speaker Change: Margin for Baidu core was 2%.
Speaker Change: non-GAAP net income attributable to Baidu was RMB 7 billion.
Speaker Change: non-GAAP diluted earnings paid yes were RMB 19 point night, while non-GAAP net income attributable to Baidu core was RMB six 6 billion and non-GAAP net module for Baidu core was <unk>.
Rong Luo: Nongat net income attributable to Baidu Core was RMB 6.6 billion, and Nongat net margin for Baidu Core was RMB 20. As of March 31, 2024, cash, cash equivalents, restricted cash, and shortened investments were RMB191.8 billion, and cash, cash equivalents, restricted cash, and shortened investments excluding ITE were RMB185.8 billion.
Speaker Change: Okay.
Speaker Change: As of March 31st tends to befall cash cash equivalents restricted cash and short term investments well RMB $191 8 billion in cash Kashi Quintus restricted cash and short term investment, excluding I'd see well RMB $185 8 billion free.
Speaker Change: Free cash flow was RMB, four 2 billion and free cash flow. Excluding IC was RMB three 3 billion finally, baidu call had approximate seat so if you're solving problems.
Speaker Change: So to your first 2024.
Operator: Free cash flow was RMB 4.2 billion, and free cash flow excluding IT was RMB 3.3 billion. Finally, Baidu Corp had approximately 34,000 employees as of March 31st, 2024. With that operator, let's now open the call to questions. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2.
Speaker Change: With that operator, let's now open the call up to questions.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: To ask a question. Please press star one on your telephone and might be your name to be announced if you wish to cancel your request. Please press star two.
Alicia Yap: Your first question comes from Alicia Yap with Citigroup. Hi, and thank you. Good evening, Robin, Rong, and also... Sorry, so thank you for taking my questions. I wanted to ask, would you be able to quantify how the AI technology has been helping Baidu to improve its ad monetization rate? Can management share some feedback on those advertisers who have a system? In what areas do they see the largest improvement, and are there any areas that can be further enhanced? Thank you. Hi, this is Robin.
Speaker Change: Our first question comes from Alicia Yap with Citigroup.
Speaker Change: Hi, Thank you good evening robbing them wronged and also.
Speaker Change: Oh, sorry.
Alicia Yap: So thank you for taking my questions.
Alicia Yap: Wanted to ask.
Alicia Yap: Are you able to.
Alicia Yap: Quantified.
Speaker Change: Has the AI technology being helping baidu to improve app monetization rate.
Speaker Change: Can management share some feedback on those advertiser.
Speaker Change: Awesome.
Speaker Change: This is that we are in what kind of areas to do they see the largest improvement and are there any areas that can be further enhanced thank you.
Robin Lee: As you know, our monetization system was the first to benefit from Gen AI, generating several hundred million RMB per quarter in incremental revenue. Since the second half of last year, we have been utilizing early to upgrade our monetization system, enhancing various aspects of ad technology. This includes improving targeting capabilities, refining the auction system, automating creative generation, and adding strategy formation for advertising. Advertisers have a saying, better conversion and more sales leads.
Robin: Hi, This is robin as you know our monetization system was the first to.
Speaker Change: Benefits from Gen P I.
Robin: Generating.
Robin: Several hundred million RMB per quarter in incremental revenue.
Speaker Change: Is the second half of last year, we have been utilizing Ernie to upgrade our monetization system.
Speaker Change: Enhancing whereas aspects of that technology.
Speaker Change: <unk>.
Speaker Change: This includes improving AD targeting capabilities.
Speaker Change: Refining the auction system.
Speaker Change: Although meeting creative from generation and.
Speaker Change: And strategy formation bar advertisers.
Speaker Change: Advertisers have had saying better conversion and more sell fleet.
Speaker Change: This improvement has motivated advertisers.
Robin Lee: This improvement has motivated advertisers to increase their spending with Baidu. So in the first quarter, AI-related incremental advertising revenue grew on a quarter-over-quarter basis, and we expect this trend to continue. The incremental revenue has helped us mitigate the broader macro weakness and also bought us some time to reconstruct our user product with Ernie. I think, as I emphasized in my opening remarks, we believe Burning Agent offers a significant long-term opportunity for our online marketing business. Agents function as the virtual, or Domain.
Speaker Change: To increase their spending with baidu.
Speaker Change: Yeah. So in the first corner AI related incremental advertising revenue grow on a quarter over quarter basis, and when you expect this twinned to continue.
Speaker Change: The incremental revenue has helped us mitigate the broader macro weakness and also brought us some time to.
Speaker Change: Reconstruct our user product it's Ernie.
Speaker Change: I think emphasized in my opening remarks.
Speaker Change: We believe Ernie agent offered a significant long term opportunity for our online marketing business.
Speaker Change: Agents function as a virtual or domains.
Robin Lee: Advertisers can establish their online presence and interact with potential customers using natural language through multi-bonded conversation. With the introduction of AgentBuilder, Advertisers can easily create customized earning agents. When advertisers express their intentions to this agent, they can more effectively achieve their goals, whether it's helping potential customers understand their products or service quality. Agents can also help enrich our content offering and improve user experience on Baidu. While still in the early stage, early agents have helped some advertisers achieve better ROI.
Speaker Change: Advertisers can.
Speaker Change: Fabless their online presence.
Speaker Change: Interact with potential customers using natural language schools.
Speaker Change: School, multi gabon to conversations.
Speaker Change: I mean, it's the introduction of agent builder.
Speaker Change: Advertisers can easily create customized Ernie agents.
Speaker Change: When advertisers.
Speaker Change: Express their intentions to this agent they can more effectively.
Speaker Change: Their goals are.
Whether it's helping potential customers understand their product or.
Speaker Change: Service quality.
Speaker Change: [noise] agent can also help enrich our content offering and improve user experience on baidu.
Speaker Change: While still in the early stage or any agents have helped some advertisers like she better rois.
Robin Lee: For example, we have a customer in online education. They used AgentBuilder to create their AI agent, injecting it with key insights like product introductions and subject matter expertise, and continually providing feedback for refinement. ...has significantly enhanced the company's online customer service by offering round-the-clock high-quality consultations. The adoption of early agent has led to a 20% increase in ad conversion rate for this online education company. I think this is just the beginning.
Speaker Change: For example, we have a customer in online education.
Speaker Change: They used to agent view there to create its AI agent injecting it with a key insights like a product introduction and hmm subject matter expertise.
Speaker Change: Well continually.
Speaker Change: Abiding feedback for refinement.
Speaker Change: You can have significantly enhanced the company's online customer service.
Speaker Change: By offering round the clock high quality consultations.
Speaker Change: The adoption of any agent.
Lead to a 20% increase in conversion rate for this online education company.
Speaker Change: I think this is just the beginning.
Robin Lee: We believe agents will be a major form of content and services in the new AI era, and we will continue to improve the capabilities of early stage. Agents will not only elevate user experience, both conversion and ROI for advertisers, but also, over time, foster... inquiries in transactions directly generated on our platform. This shift should help us to transform our traditional CPC model into a more efficient CPS model. Thank you.
Speaker Change: We believe agents.
Speaker Change: <unk> agent will be a major form of content and services in the new AI era.
Speaker Change: We will continue to improve the capability is off or in Egypt.
Speaker Change: Agents will not only elevate user experience.
Speaker Change: Boost conversion and our eye for advertisers.
Speaker Change: But also overtime foster.
Speaker Change: Increase in transactions directly generated arm, California.
This.
Speaker Change: Help us to transform our traditional CPC model into a more efficient Cps model.
Speaker Change: Thank you.
Speaker Change: Yeah.
Gary Yu: Your next question comes from Gary Yu with Morgan Stanley. Hi, management, for the opportunity to ask questions. I have a question regarding AI cloud. How has the price cut initiative by some of your peer companies affected it?
Your next question comes from Gary Yu with Morgan Stanley.
Speaker Change: Yeah.
Speaker Change: Hi, Thank you management for the opportunity to ask question I have a question regarding the cloud business.
Speaker Change: How has the price cut initiated by some of your peer companies effective Baidu AI call business and how should we think about.
Dou Shen: AI Cloud business, and how should we think about it... profitable, as competition heats up, and also how should we, what should be the sustainable level of cloud growth outlook? Yeah, Gary, this is Dou.
Speaker Change: The profitability.
Speaker Change: As competition heats up.
Speaker Change: And also how should we.
Speaker Change: Oh, what should be a sustainable level of cloud growth outlook going forward.
Speaker Change: Okay.
Don: Yeah, Gary this is Don.
Dou Shen: As we have already mentioned, GeneAI and its foundation models are transforming the cloud industry from general-purpose computing to AI computing. This shift is reshaping the competitive landscape within the cloud industry, presenting us with a valuable opportunity to establish ourselves and E.I. Clark.
Speaker Change: As we have a race already mentioned, Jimmy I and its foundation models or transforming the cloud industry from a general purpose computing to our edge computing.
Speaker Change: So this shift is a reshaping the competitive landscape, we've seen the cloud industry.
Speaker Change: Presenting her with the valuable opportunity to has published ourselves.
Speaker Change: Yeah cloud.
Dou Shen: So we believe we offer China's most efficient AI infrastructure and the most advanced. [inaudible] training, and in-frame. As a result, more and more enterprises are choosing us for model training, fine-tuning, and AI native app development on our public cloud. This increasing demand has significantly boosted our AI cloud revenue. Actually, since the second quarter and second half of last year, our AI cloud revenue growth has started to accelerate. From a year-over-year decline in the third quarter to an 11% increase in the fourth quarter last year, and then further accelerated to 12% in the first quarter of this year.
Speaker Change: So we believe we are.
Speaker Change: Oh for no China's most efficient E infrastructure into the most advanced.
Speaker Change: Mass transit.
Speaker Change: Our training and inference.
Speaker Change: As a result, more and more enterprises are choosing us for motor cleaning fine tuning and native App development on our public cloud.
Speaker Change: This increasing demand has significantly boosted our AI cloud revenue.
Speaker Change: Actually since the second quarter second half of last year. So our cloud revenue growth has started to accelerate.
Speaker Change: From a year over year decline in the third quarter, two and a 11% increase in the first quarter last year.
Speaker Change: And then further accelerated to 12% in the first quarter of this year.
Speaker Change: So the revenue acceleration was supported by two main factors.
Dou Shen: So the revenue acceleration was supported by two main factors, the incremental revenue directly generated by gene AI and foundation models and also the new opportunities they brought to us for our legacy cloud business. So, as Robin just mentioned, in the first quarter of this year, revenue from Gene AI and foundation models accounted for 6.9% of our AI cloud revenue. And then our traditional CPU cloud businesses, or capitalizing on the opportunities presented by gene AI and foundation models. You know, both factors are important ghost drivers of our AI.
The incremental revenue directly generated by a G. A I N Foundation models.
Speaker Change: And also the new opportunities they brought it to Bruce to our legacy.
Speaker Change: Club business.
Speaker Change: So as Robin just mentioned it.
Speaker Change: The first quarter of this year revenue from Genie AI and foundation modal accounts for a 6.9, if our cloud revenue.
Speaker Change: And then the our traditional CPU cloud businesses or.
Speaker Change: Capitalizing on the.
Speaker Change: The opportunities presented by Jean <unk> and foundation models in.
Speaker Change: Both sectors or are important growth drivers of our clubs.
Dou Shen: On a separate note, while the smart transportation business remained subdued, its impact on overall aircraft business in Q1 was substantially smaller than the previous quarter. So overall, we expect our AI cloud to continue benefiting from Mechtron and maintain strong revenue growth momentum in the upcoming quarters. On the profit side, Baidu AI Cloud continues to generate non-gap operating profit, as we have seen in previous quarters. We are committed to sustainable and healthy... brand new growth. During the quarter, we maintained our focus on achieving high-quality revenue growth by scaling down low-margin business. Regarding the business of the GEI and foundation models, the market is still at a very early stage.
Speaker Change: On a separate note Wilson more transportation business remained subdued this.
Speaker Change: The impact on overall, Yeah club business in the <unk>.
Speaker Change: Q1 was a substantially smaller than the previous quarters.
Speaker Change: So overall, we expect our <unk> cloud to continue benefiting from the metro and maintaining strong revenue growth momentum in the upcoming quarters.
Speaker Change: On the profit side Baidu cloud continue to generate non-GAAP operating profit.
Speaker Change: We have seen in previous quarters.
Speaker Change: We are committed to a sustainable and house revenue grows.
Speaker Change: During the quarter, we maintain our focus on achieving high quality revenue grows by skidding dung low margin business.
Regarding the business of a G I and foundation models the market is.
Speaker Change: Still at very early stage, so our focus remains on educating the market.
Dou Shen: So our focus remains on educating the market and broadening our footprint across more enterprises. Looking into the long term, we expect the normalized margin for GNI and foundation models related to business to improve further and to be higher than our traditional cloud business. Regarding the change in pricing policies of some competitors that you just mentioned, it is actually pretty common for cloud vendors to adjust their pricing for certain products.
Speaker Change: And broadening our footprint across more enterprises.
Speaker Change: Looking to the loan wrong. So we expect the normalized margin for junior High and foundation models religious business to improve further into be hired Dan how exceptional cloud business.
Speaker Change: Yeah.
Speaker Change: Regarding the change of our pricing policies about some competitors do you just mentioned right.
Speaker Change: Is actually pretty common for a cloud vendors to adjust their pricing for certain products.
Dou Shen: This is a trend we have observed many times in the past, given that our cloud offerings have expanded beyond the traditional CPU cloud to high-value AI products and services. So the industry changes on CPU cloud pricing have had a minimum impact on the development of our aircraft. Actually, for cloud platform services, by leveraging our unique, proprietary four-layer AI architecture and our strong ability in end-to-end optimization. We have lowered Ernie's inference cost to only 1% of the variance in March last year.
Speaker Change: So this is a trend we have on preserved most times in the past.
Speaker Change: Given that our cloud offerings has that expanded beyond the traditional CPU close to a high value add products and services.
Speaker Change: So the industry changes on the CPU cloud pricing has a minimum impact on the development of our economics.
Speaker Change: Actually no for a cloud platform services by leveraging our unique proprietary four liter AI architecture in our strong ability in the end to end optimization.
Speaker Change: We have lowered brunious inference costs to only 1% and for the very much last year.
Dou Shen: This May, you know, Ernie handles about 200 million API calls or, you know, approximately 250 billion tokens daily. We are confident that Ernie's expanding adoption will continue to enhance its performance, boost efficiency, and then further reduce cost. It's also important to, you know, evaluate price and performance ratio for different models at different workloads, rather than just focusing on some superficial process.
Speaker Change: This mi unit Rooney.
Speaker Change: <unk> about 200 million API calls or you know approximately 250 billion tokens daily.
Speaker Change: We are confident that the earnings expanding adoption, we will continue to enhance its performance.
Speaker Change: Boosting efficiency and then further reduce costs.
Speaker Change: It's also important to you know evaluating present performance ratio for a different models at different workflows.
Speaker Change: Rather than just focusing on some onion a superficial presses.
Dou Shen: So we believe our state-of-the-art AI infrastructure and advanced mass platform delivers the best value to our customers. Looking forward, leveraging our strong AI capabilities, we aim to continuously attract new customers and encourage existing ones to increase their spending on Baidu AI Cloud. At the same time, we aim to consistently generate positive non-gap operating profit. Thank you, Gary.
Speaker Change: So we believe our CTO for the art AI infrastructure in advanced mass platform delivers the best value to our customers.
Speaker Change: Looking forward and leveraging our strong AI capabilities, we into continuously attracting new customers.
Speaker Change: Encouraging existing ones to increase their spending on Baidu AI Claude.
Speaker Change: And at the same time, we aim to consistently generate positive non-GAAP operating profit.
Speaker Change: Thank you Gary.
Alex Yao: Your next question comes from Alex Yao with J.P. Morgan. Hi, good evening management, and thank you for taking my question. Given the cheap shortage in China, how does Baidu maintain its commitment to delivery differential aid? value while enhancing its leading advantage in LLM technology in China. Thank you. Hi Alex, we do think very differently in this aspect.
Speaker Change: Your next question comes from Alex Yao with JP Morgan.
Speaker Change: Oh.
Speaker Change: Hi, Good evening management.
Alex Yao: Thank you for taking my question.
Alex Yao: Given the chip shortage.
Speaker Change: In China, a homeless baidu maintained its commitment to delivering differentiated inc.
Speaker Change: Well in housing a leading advantage O&M technology in China. Thank you.
Speaker Change: Oh, Hi, Alex we.
Speaker Change: We do think very differently in this aspect.
Robin Lee: We're taking an application-driven approach for our AI push. For example, solving all the high school math problems using the most advanced LLM may not be the highest priority at this time. While generating convincing reasons for users to buy the right products is more important in a lot of applications, so with that in mind, we are taking advantage of our unique four-layer AI tech stack to optimize the cost and performance of early models.
Speaker Change: We're taking an application driven approach for our AI push.
Speaker Change: For example, solving all the high school math problems using the most advanced O L. M may not be the highest priority.
Speaker Change: At this time.
Speaker Change: While generating convincing reasons for users to buy the right product, it's more important in a lot of applications.
Speaker Change: So with that in mind, we are taking advantage of our unique Florida Your AI Tech stack to.
Speaker Change: Ultimately optimize the cost and performance.
Speaker Change: Off early models and.
Robin Lee: And we make sure customers and developers can easily build applications using tools like agent builder, app builder, and model builder. For the AI infrastructure layer, a key factor contributing to our high efficiency in model training and inference is our superior capability in GPU cluster management. We have recently made a breakthrough by integrating GPUs from different vendors into one large-scale unified computing cluster, allowing us to use less advanced chips for highly effective model training and inference. Our deep learning framework, Paddle Paddle, has, through continuous innovation and enhancement, helped reduce the cost of model training and inference on a constant basis. Petal Petal is compatible with over 50 different chips.
Speaker Change: And we make sure our customers and developers can easily viewed applications using tools like H M Buder, Abu Dhabi and model will be with her.
Speaker Change: For the AI infrastructure layer, a key factor contributing to our high efficiency in malmo training and in France, with our superior capability.
Speaker Change: In GPU cluster management, we have recently made a breakthrough by integrating gpus from different vendors into one large scale unified computing cluster, allowing us to.
Speaker Change: Use less advanced chips for highly effective Margo training and inference.
Speaker Change: Our deep learning framework pedal pedal.
Speaker Change: Yes.
Speaker Change: Through continuous innovation and enhancement.
Speaker Change: Helped to reduce the cost of our motto training and inferencing on a constant basis.
Speaker Change: Kind of handle it compatible with over 50 different chips.
Robin Lee: Many domestically designed, and its developer community has grown to 13 million. Early 3.5 and early 4.0 remain to be the flagship models for, [inaudible] We're making earning more accessible and affordable by Launching Lightweight LLM, introducing toolkits for model development and app development, applying the MOE approach for model inference for better performance and lower cost. With our application-driven mindset... We have used Ernie extensively to renovate our own project
Speaker Change: Meaning domestically designed and developed.
Speaker Change: Developer community has grown to $13 million.
Speaker Change: But it's the earning three five and 410 remain to be the flagship models.
Speaker Change: Four.
Speaker Change: Sophisticated tasks.
Speaker Change: When making earning more accessible and affordable by law.
Speaker Change: Lunching lightweight L. L M <unk>.
Speaker Change: Introducing toolkit for mono development and App development.
Speaker Change: Applying ammonia approach for motto in France for a better performance and lower cost.
Speaker Change: With our application driven mindset.
Speaker Change: We have used to ernie extensively to renovate our own products.
Robin Lee: And we have gained experience and insight in training and using learning, as well as developing AI-native applications. We're making all these capabilities available to our customers and developers. With all these efforts, we are fostering a vibrant and healthy ecosystem around Ernie.
Speaker Change: And we have gained experience and insights.
Speaker Change: Training and using learning.
Speaker Change: As well as developing AI native applications on it.
Speaker Change: We're making all the capabilities available.
Speaker Change: To our customers and our developers.
Speaker Change: With all of this effort, we are fostering a vibrant and healthy ecosystem around earnings.
Robin Lee: You can see that we are actually taking a holistic approach to developing Gen AI and LLN, which is very different from some of our competitors. Our resources and access to the chips on the market should be sufficient for us to support millions of AI applications in the future. And in the long run, I think China will form an ecosystem of its own. Probably with less powerful chips but the most efficient homegrown software stack.
Speaker Change: You can see that we are actually taking a holistic approach.
Speaker Change: Two developing Jenny I and Oh Allen.
Speaker Change: <unk>, which is very different from some of our competitors.
Speaker Change: Our reserve and access to the chips on the market.
Speaker Change: Should be sufficient for us to support millions of applications in the future.
Speaker Change: And in the long run I think China will form an ecosystem off at all.
Speaker Change: Probably with less powerful chips, but most efficient homegrown software stack.
Robin Lee: There's Apple room for innovation, in the application layer, the model layer, and the framework layer. With our self-developed four-layer AI infrastructure, as well as our strong R&D team, our dedication to AI, and our application-driven approach to building an ecosystem around earning, I'm quite confident that Baidu will stand as a leader in China's AI ecosystem in the long term. Thank you.
Speaker Change: There is ample room for innovation in.
Speaker Change: In the application layer mono layer and a framework layer.
Speaker Change: With our self give ads before layer AI infrastructure.
Speaker Change: That's why I asked our strong R&D team.
Speaker Change: Our dedication to AI and.
Speaker Change: Our application driven approach in.
Speaker Change: In building an ecosystem around Arnie I'm quite confident that Baidu will stand as a leader in China's AI ecosystem.
Speaker Change: Long term.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Lincoln Kang with Goldman Sachs.
Lincoln Kong: Your next question comes from Lincoln Kong with Goldman Sachs. Thank you, management, for taking my question. So, my question is about the advertising business.
Lincoln Kong: Thank you management for taking my question. So my question is about the advertising business.
Robin Lee: So, what's the major track for advertising growth if we compare with our peers? So, what are the trends we have seen for advertising budgets and advertiser sentiment, especially in the second quarter, April, and May? So, what should we think about normalized advertising growth for 2024? Thank you.
Lincoln Kong: So what's the major track for the advertising growth, if we compare with our peers.
Speaker Change: What are the trends, we have seen for the African budgets and advisor sentiment, especially into second quarter April may.
Speaker Change: How should we think about a normalized AD pricing growth for 2024. Thank you.
Speaker Change: Yeah, you know our online marketing revenue grow by 3% year over year in the first quarter well traditional search it's a maturing we are working hard to renovate the user experience with genuine.
Robin Lee: Yeah, you know, our online marketing revenue grew by 3% year over year in the first quarter. While traditional search is maturing, we are working hard to renovate the user experience with Genium. Right now, about 11% of our search result pages are filled with generated results. They provide more accurate, better organized, direct answers to users' questions. And, in some cases, enable users to do things they could not do before.
Speaker Change: But I know about a 11% of our search result pages.
Speaker Change: With generated results.
Speaker Change: This results provides a more accurate and better organized and direct answers to users' questions and in some cases enable users to do things they could not do before.
Robin Lee: We have not started the monetization of those Gen AI results, so it will take some time for revenue to catch up. And the weak macro also contributed to the softness of our ad business. Our advertisers come from a wide range of industries, with the majority being SMEs. This makes our advertising revenue highly sensitive to the macro environment, particularly the offline economy. In the first quarter, advertiser sentiment in some verticals, such as real estate and franchises, remains weak. Specifically in the real estate industry, not only was ad spending from developers and agencies muted, but the impact also extended to both upstream and downstream sectors. But, for example, energy and chemicals.
Speaker Change: We have not started the monetization of those generally I resolved. So it will take some time for revenue to catch up.
Speaker Change: And.
Speaker Change: The weak macro also contributed to the softness off our AD business.
Speaker Change: Our advertisers come from a wide range of industries.
Speaker Change: The majority being Smes.
Speaker Change: This takes our advertising revenue highly sensitive to the macro environment, particularly to the offline economy.
Speaker Change: In the first quarter of advertiser sentiment in some verticals such as our real estate and franchising.
Speaker Change: Remained weak.
Speaker Change: No specific.
Speaker Change: Typically in the real estate industry not only with.
Speaker Change: AD spending from developers and agencies muted.
Speaker Change: But.
Speaker Change: <unk> also extended to both.
Speaker Change: Stream and downstream sectors.
Speaker Change: For example energy.
Speaker Change: Chemicals.
Speaker Change: The chenier.
Robin Lee: [inaudible] Building materials for the upstream and home renovation, furniture, this kind of downstream, are also constrained from spending on our platform. Also, many SMEs in offline sectors need more time to recover as they have been working hard in the past few years. As we enter the second quarter, we have not seen improvements in advertiser sentiment.
Building material for the upstream and homes renovation furniture, there's kind of a downstream are all saw a constrained at spending on our platform.
Speaker Change: Also many is that easing offline sectors need more time.
Speaker Change: To recover as the urban were hit hard in the past few years.
Speaker Change: Absolutely enter the second quarter, we have not seen improvements in advertiser sentiment.
Robin Lee: Given the limited visibility for sentiment improvement and paired with Tough Comp in Q2, our online marketing revenue should remain fundamentally solid but, from a growth perspective, soft over the next few quarters. Beyond the near-term challenges, we expect online marketing to remain a bread and butter business for Baidu for the foreseeable future. Search is one of the most popular apps in the internet age, and Baidu remains the largest search engine in China with close to 700 million monthly active users.
Speaker Change: Given the limited visibility for sentiment improvement.
Speaker Change: And paired with a tough comp in Q2.
Speaker Change: Our online marketing revenue should remain fundamentally solid.
Speaker Change: But from a growth perspective stopped them over the next few quarters.
Speaker Change: Beyond the near term challenges, we expect online marketing to remain a bread butter airplanes for baidu for the foreseeable future.
Searches went off the most popular apps in the Internet age and Baidu remains the largest of search engine in China with close to 700 million I may use.
Robin Lee: Search will likely be one of the killer apps in the age of change. Technology innovation will enable us to better engage users with developers and merchants, and directly connect users' intentions with the most relevant product and service offerings in more natural ways. Yeah, thank you. Your next question comes from Thomas Chong with Jefferies. Hi, good evening.
Speaker Change: Search will likely be one of the killer apps in the age of journey.
Speaker Change: Technology innovation.
Speaker Change: <unk> enable us to better engage users with developers and merchant.
Speaker Change: Directly connect users intentions.
Speaker Change: The most relevant product and service offering.
Speaker Change: In a more natural ways.
Speaker Change: Yeah. Thank you.
Speaker Change: Your next question comes from Thomas Chong with Jefferies.
Speaker Change: Yeah.
Thomas Chong: Hi, Good evening, Thanks management for taking my question. My question is about how much more do we see some cost cutting P. With Steve you mentioned that will be a lag between shifting investments in AI revenue contribution how should we look at margin trend into trying to turn the floor. If you intend to expand the offerings. Thank you.
Thomas Chong: Thanks, management, for taking my question. My question is about how much more room we see in cost cutting. Previously, we mentioned there would be a lag between chip investment and AI revenue contribution. How should we look at the margin trend into 2024 if you intend to expand your AI offerings? Thank you. Hi Thomas, thank you so much for your question. And I think microchallenges are still raining on our vaccine business.
Speaker Change: Hi, Thomas.
Speaker Change: Thank you so much for question.
Speaker Change: I think.
Speaker Change: Macro challenge all of Us do.
Speaker Change: Winning an hour.
Speaker Change: Boxing businesses.
Rong Luo: So we are confident that there will still be some ways for us to continue optimizing operational efficiency. We will strenuously manage our costs for each business, and we will take further steps as necessary, including trying to streamline the organization structures to enhance agility and support strategy flexibility. And we also will relocate resources to prioritize the key strategic areas.
Speaker Change: I'm confident that no still will be some ways for us to do to continue optimizing the operational efficiencies of.
Speaker Change: He was truly manage our costs.
Speaker Change: For each business and we will take some further steps as necessary, including we've tried to streamline the organization structure and you have the agility and support our strategy of flexibility and it also will relocate.
Speaker Change: Resources to prioritize the key strategic areas.
Rong Luo: If we take a look at our businesses, for the mobile ecosystem, I think we can still manage the cost and expenses, so the mobile ecosystem will continue to remain strongly profitable and cash flow positive. For AI Cloud, as I just mentioned, we will continue to face out low-margin businesses and products so we can continue generating operating profits and margins and will not get busy. If we're looking to the longer term, the normalized margin for the joint AI-related cloud business should be higher than the Legacy Club.
Speaker Change: If you take a look into our businesses for mobile ecosystem.
We can still manage the costs and expenses so so low.
Speaker Change: Mobile ecosystem group.
Speaker Change: To remind us as joni profitable and cash flow positive for AI claw as Bill just mentioned that will continue.
Speaker Change: Sure I'll stay solid low margin businesses and the progress silver.
Speaker Change: So we can continue generating the operating profits and margins on non-GAAP basis.
Speaker Change: If we're looking to our longer term the normalized margin for the China related club businesses should be higher than the legacy clubs.
Rong Luo: For other businesses, we aim to reduce our losses; I think that's what we talked about in the past week or two, particularly our intelligent driving businesses with more operational efficiency gains and the UI improvements for robot taxi. And many investors ask me how our investments in earnings will impact my margins. In fact, our investments are mainly related to CapEx for modern trading and inference. In 2023, we made a large purchase, which arrived at different times and had a different depreciation start date.
Speaker Change: For other businesses and to reduce our loss, saying us when we talk about in the past few quarters.
Speaker Change: Particularly our intelligent driving databases, where it's more operationally efficiency gains and as you improve.
Improvements for robot taxis.
Speaker Change: Many investors ask me how already invested investments in early voting and payment models.
Speaker Change: In fact, I'll reinvestments are mainly related to capex for modern training in Paris.
Speaker Change: In 2023, how may the large purchase which has arrived in batches tie at different times.
Speaker Change: The different depreciation status.
Rong Luo: While the annualized depreciation expenses will be available for the whole year 2024, the impact on our overall cost expenses and quarterly earnings is quite predictable and manageable. The depreciation expense book and the IND expenses for computing power use training, and the cost of revenue for completing part of the use of modern inference and Bing's expansion. In the first quarter, we can see that Baidu's cost of non-GET IND and the cost of revenue both increased very slightly.
Speaker Change: Oh Wow, the annualized depreciation expenses it will be available in the whole year 2024, the impact on our overall cost expenses and quarterly earnings.
Speaker Change: It's quite predictable and manageable.
Speaker Change: The depreciation expenses, our book and the R&D expenses for computing par youth training.
Speaker Change: And of course off a rubbing your company in par with Joseph modeling forests, and <unk> expenses in the first quarter, we can see that Baidu core non-GAAP R&D and the cost of revenue both increased slightly while non-GAAP operating margin actually expanded to 23, 5% due to our disciplined.
Rong Luo: Well, now on the operating margin, actually, we have expanded to 23.5% due to our disciplined spending on other items such as SG&A. We believe that the chips we have in hand are sufficient to support the training of earnings for the next one or two years. And because of the limited availability of high-performance chips in China this year, 2024, we expect that our capex to be smaller versus last year.
Speaker Change: Spending on other items such as SG&A.
Speaker Change: Our belief that the chips, we have Manhattan.
Speaker Change: Sufficient to support of Trinity's, earning full and that's why two years and because of the limited.
Speaker Change: Availability of high performance chips in China.
Speaker Change: This year 'twenty 'twenty four we would expect that our capex to be smaller versus last year.
Rong Luo: In conclusion, the investments in general AI and large-language models will have a manageable impact on the near-term market. And with our monetization of earnings already taking off, we expect that more and more revenue and profit will be generated from that kind of business, from both the mobile ecosystem and the AI cloud. Overall, we believe that high-quality growth and investment should be well-balanced. For many years now, we have delivered a solid track record of top-line growth with very resolute cost disciplines, and we intend to continue building our futures on this kind of basis. Thank you so much. Your next question comes from Zoe Wang with UBS. Good evening.
Speaker Change: In conclusion, you must messenger.
Speaker Change: Image models will have a manageable impact on our near term margins.
Speaker Change: And with our monetization of earnings already taking off we expect that more and more revenue and profit will be in January T for all kinds of businesses from both for both mobile ecosystem and AI cloth.
Speaker Change: Overall, we believe that high quality growth and investment I should be aware of balance.
Speaker Change: For many years now we have to deliver a Saudi recall off the top line growth with Laurie rest of low cost disciplines, and we intend to continue building our future on AUM based kind of basis. Thank you so much.
Speaker Change: Your next question comes from Sally Wan with UBS.
Speaker Change: Yeah.
Zoe Wang: Thanks, management, for taking my question. My question is about shareholder return. So how should we think about the execution pace of the current $5 billion buyback program? In addition to the current buyback program, should we expect other diversified approaches to improve shareholder return? Thank you. Yeah, thanks so much for asking my question.
Sally Wan: Good evening, Thanks management for taking my question. My question is about shareholder return. So how about we think about the execution pace of current 5 billion buyback program. In addition to your current buyback program should we expect either a diversified approach to improve shareholder return. Thank you.
Speaker Change: Yeah. Thanks, so much for our questions and I think we highly value our shareholders have been making efforts to increase the.
Rong Luo: And I think we highly value our shareholders, and we have been making efforts to increase shareholder returns. We have consistently repurchased our shares from the market over the past four years, averaging around $1 billion annually. In total, we have allocated around 37% of our free cash flow towards the ShareBank programs.
Speaker Change: Shareholder returns.
Speaker Change: We have consistently repurchase our shares from the market over the past four years, averaging around one.
Speaker Change: $1 billion annually in total we have allocated 37% of our free cash flow towards the shop at the progress I think the Rovs peers.
Rong Luo: I think during these periods and going forward, we will continue to buy back more shares from the market, as we believe in our long-term growth opportunities and we are very committed to shareholder returns. In addition, we have utilized our current share repurchase program to prevent any significant increase in the total outstanding shares cost, aiming to reduce the potential dilution of our shareholders' economic stake in Baidu. In the year 2023, you can see that our total number of shares outstanding was flat year over year, compared to a 1.2% increase in the year 2022 and a 3.2% increase in the year 2021. However, in this quarter, the total shares outstanding began to decrease.
Speaker Change: Going forward, we will continue to buy back shares from the market as we believe in our long term growth opportunities and we are very committed to shareholder returns.
Speaker Change: In addition, we have utilized our eicher and the sharp repurchase program to prevent any significant increase in the total often insurers call aiming to reduce the potential dilution of our shareholders economies staked in baidu.
Speaker Change: The year 2023, you can see that I read total number of shares all spending was flat year over year compared to one 2% increase in the year 2022, and three 2% increase in the year 2021.
Speaker Change: This quarter, although total share of the total shares outstanding AR began to decrease we can see that he has been declining by 0.5% as compared to the prior quarters.
Rong Luo: We can see that it has been declining by 0.5% as compared to the prior quarters. We are adopting a strategy of sustainable and recurrent share-based programs from the open market. And at the same time, we take into consideration the opportunities ahead of us. Now we are facing a huge opportunity in AI foundation models, and we have structured a concrete plan to capitalize on it. So we want to have the flexibility to invest as we consider necessary and in the best interest of long-term value for the shareholders.
Speaker Change: Adopting strategy of sustainable.
Speaker Change: Recurrent.
Speaker Change: Sharp either progress from an open market and Edison Hi, we're taking into consideration the opportunities ahead of us.
Speaker Change: We're facing.
Speaker Change: Huge opportunity in.
Speaker Change: Foundation models, and we have structured a concrete plan to capitalize it.
Speaker Change: So once you have little its ability to invest as we consider it necessary.
Speaker Change: And in the best interest of long term value to the shareholders.
Rong Luo: Furthermore, we believe that the most effective way to create value for shareholders is by building strong base fundamentals. Our core marketing business remains steady, and we believe that AI will help us to build another growth engine. Thank you so much for your questions.
Speaker Change: The more that we believe that the.
Speaker Change: Most effective way to create values for shareholders is by building the strong business fundamentals.
Speaker Change: Our core marketing business remains steady and we believe that the AI, whereas to another growth engine.
Speaker Change: Thank you so much for question.
Speaker Change: Your next question comes from Miranda Zhang with Bofa Securities.
Miranda Zong: Your next question comes from Miranda Zong with BofA Securities. Thank you. Good evening, management. Thanks for taking my question.
Speaker Change: Thank you good evening management. Thanks for taking my question. My question is about mobile taxi. So.
Miranda Zong: My question is about RoboTaxi. Can management share more updates on the RoboTaxi initiatives and the geographical coverage for this year? And I think previously you mentioned that Apollo Go will achieve operating UE breakeven in Wuhan in the near future. I want to understand what's the logic behind the efforts to continue to improve the UE? What's the projected size of the vehicle fleet for this year? And how will it potentially impact costs?
Miranda Zhang: So can management share more updates on the robo taxi initiatives and the geographical coverage for this year.
And I think previously you mentioned that Oh go Oh, well achieve operating breakeven in hand in your future I want to understand what's the logic behind the efforts to continue to improve our U E.
Speaker Change: What's the call Jackie sides of the vehicle fleet, well this year and how will we potentially impact the costs. Thanks.
Speaker Change:
Robin Lee: Thank you. Sure, Miranda, let me give you some more color on the robotech business. In 2023, Apollo Go made significant progress in improving the regional unit economics in key cities. Let me use Wuhan, Apollo's largest operation, to explain how we achieved that.
Speaker Change: Sure Miranda, let me give you some more color on the robo taxi business.
In 2023, Apollo go made a significant progress in improving the regional.
Speaker Change: Unit economics in key cities.
Speaker Change: Let me use one Apollo gulf's largest operation to explain how we achieved that.
Robin Lee: We kicked off Apollo Go's commercial operations in Wuhan back in 2022, and since then, we've witnessed a consistent enhancement in operational UE, which can be attributed to the expanding scale of driverless operations and decreasing costs per vehicle. Regarding scale expansion, our vehicle fleet has been steadily growing. Compared to one year ago, our fully driverless fleet in Wuhan has grown threefold, reaching about 300 vehicles today. Meanwhile, both the operational area and service hours for fully driverless operations have been consistently expanding.
Speaker Change: Dov Apollo goes commercial operation and we will have in banking in 2022.
Speaker Change: Since then we've witnessed a consistent enhancement in operational U E <unk>.
Speaker Change: Which can be attributed to the expanding scale of Fibernet operation.
And decreasing cost per vehicle.
Speaker Change: Regarding <unk>.
Speaker Change: Scale expansion our vehicle fleet.
Speaker Change: It's been steadily growing compared to one year ago are fully gravity speed in Wuhan has grown threefold, reaching about 300 vehicles. Today. Meanwhile, both the operational area in service hours or what are your family's operation have been consistently expanding.
Speaker Change: Thanks to the increasing recognition of our autonomous driving technology by the local government.
Robin Lee: Thanks to the increasing recognition of our autonomous driving technology by the local government, Apollo Go's operational coverage area for its fully driverless ride-hailing service increased by 8-fold from a year ago, now covering over 7 million people in Wuhan. Apollo Go's operational hours also gradually expanded from only the off-peak hours in the beginning to adding peak hours to its operation and eventually extending to 24 by 7 in March of this year.
Speaker Change: The operational coverage area for.
Speaker Change: 440 families ride hailing service increased by eight fold from a year ago now covering over 7 million people.
Speaker Change: Got it.
Speaker Change: Our portal goes operational hours also gradually expanded.
Speaker Change: From only be off peak hours in the beginning to adding peak hours.
Speaker Change: Two its operation and eventually extending to 24 by seven in March of this year.
Robin Lee: The scale expansion resulted in a consistent improvement of UE in terms of revenue. Both daily rides per vehicle and distance per ride have been growing. When it comes to cost, the majority is labor cost and hardware expenditures. We have been demonstrating a consistent track record of safe operation, which helps us to increase the deployment of fully driverless ride-hailing operations. In April...
Speaker Change: The scale expansion without it in a consistent improvement of U E in terms of revenue.
Both daily rides per vehicle and distance per ride have.
Speaker Change: <unk> been growing.
Speaker Change: When it comes to costs the majority if labor cost and hardware expenditures.
Speaker Change: We have been demonstrating consistent track record of safe operations.
Speaker Change: Which help us to increase the deployment of 40 properties ride hailing operation.
Speaker Change: And in April.
Robin Lee: The proportion of fully driverless orders rose to 70%. That's up from only 10% in August 2022 and 45% in Q4 of last year. We expect this figure to reach 100% in the coming quarters, thereby enabling us to minimize the cost related to safety officers. In addition to lowering the labor cost, we are steadfast in driving down hard work. The mass production timeline of RT6, our 6th generation robo-taxi, remains on track. Adopting a battery swapping solution, the mass production price for RT6, excluding the battery, is below 30,000 US dollars.
Speaker Change: The propulsion of four fully tragedies borders are close to 70%.
Speaker Change: That's up from only 10% in August 2022, and 45% Q4 of last year.
Speaker Change: We expect this figure to reach 100% in the coming quarters nearby.
Speaker Change: Enabling us to minimize the cost related to safety officers.
Speaker Change: In addition to lowering the labor cost we are steadfast in driving down hardware Cogs.
The mass production timeline RT six our sixth generation Robo taxi.
Speaker Change: It remains on track.
Speaker Change: Adopting a battery swapping solution the mass production price for <unk> six.
Speaker Change: Excluding battery if below 30000 U S dollars.
Speaker Change: We will use RT six as the primary vehicle in the future of fleet expansion.
Robin Lee: We will use RT-6 as the primary vehicle in our future fleet expansion, and it should help to significantly reduce the hardware depreciation cost for each vehicle, further improving our UE and bring us closer to profitability. Looking into this quarter, we plan to expand the fully driverless fleet of our Wuhan operation to 1,000 vehicles by the end of the year, more than tripling from the end of last year. Our focus remains on improving regional UEE and narrowing the losses for Apollo Gold Benzene. With continued improvement in operational efficiency and cost reduction, we believe Apollo Go will achieve operational UE breakeven in Wuhan first. And once that's achieved, we can scale up the operation quickly.
Speaker Change: And it should help to significantly reduce the hardware depreciation cost for each vehicle and.
Speaker Change: Further improving our U a E.
Speaker Change: And bring us closer to profitability.
Speaker Change: Looking to this quarter, we plan to expand the fully drawn.
Robert: Robert its fleet of our operation to 1000 vehicles by the end of the year.
Robert: More than tripling from the end of last year.
Robert: Our focus remains.
Robert: Improving regional U E and narrow the losses for our polo golf bins.
Robert: With continued improvement in operational efficiency and cost reduction, we believe our portal goal well achieve operational UE break evens Mohan first and once that's achieved we can scale up their operations quickly.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen that does conclude our conference for today. Thank you for participating you may now disconnect.
Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.
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Operator: [inaudible] Transcribed by https://otter.ai ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? and many more. Thank you for watching. I'll see you in the next video. ?? ?? ?? ?? ?? ?? ?? ?? Thank you for watching! ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? and many more. I'll see you in the next video. [inaudible] ? ? ? ? ? ? ? ? ? ? ? ? ? ?
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