Baidu's AI Revenue Exceeds 600 Million Yuan, Its Large Model Has Started Generating Profit
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On February 29, Baidu announced its financial results for the fourth quarter and the full year of 2023. The report shows that the company's Q4 revenue in 2023 reached 35 billion yuan (4.92 billion USD), a year-on-year increase of approximately 6%; the net profit attributable to Baidu was 2.6 billion yuan (366 million USD), a year-on-year decrease of 48%; under non-GAAP, the net profit attributable to Baidu was 7.8 billion yuan (1.09 billion USD), a year-on-year increase of 44%.
Baidu's total revenue for 2023 was 134.6 billion yuan, compared to 123.7 billion yuan in the same period last year, a year-on-year increase of approximately 9%. Among this, Baidu Core revenue was 103.5 billion yuan, an 8% year-on-year increase, while iQiyi revenue was 31.9 billion yuan, a 10% year-on-year increase.
During Baidu's Q4 and full-year 2023 earnings call, Robin Li, Baidu's founder, chairman, and CEO, CFO Rong Luo, and Shen Dou, president of the Intelligent Cloud Group, revealed more details in response to analysts' questions.
Baidu Intelligent Cloud's Q4 Revenue Reaches 8.4 Billion Yuan, Large Model Contributes Incremental Income
During the earnings call, Robin Li disclosed that the daily calls to the ERNIE large model have exceeded 50 million, a quarter-on-quarter increase of 190%; in December, approximately 26,000 companies called the ERNIE large model, a quarter-on-quarter increase of 150%. Currently, well-known companies such as Samsung, Honor, and Autohome have partnered with Baidu. Robin Li emphasized that the company's generative artificial intelligence and foundational model business has begun to generate incremental revenue for us. In the fourth quarter, Baidu Intelligent Cloud's total revenue reached 8.4 billion yuan, with the large model contributing approximately 660 million yuan in incremental revenue to the cloud business.
In 2024, the generative artificial intelligence and foundational model business is expected to bring us billions of yuan in incremental revenue, which will also have a positive impact on our total revenue. In the long term, Baidu's growth rate will outpace China's GDP growth.
Recently, Baidu launched two MaaS products: Qianfan AppBuilder and Qianfan ModelBuilder. As of now, Qianfan ModelBuilder has fine-tuned a cumulative total of 10,000 models.
Robin Li revealed that since its release, Baidu has continuously reduced the inference costs of the ERNIE large model, which have now been lowered to 1% of the March 2023 version. With the reduction in inference costs, more users and enterprises have begun adopting the ERNIE large model.
Baidu CFO Luo Rong stated that in 2024, the generative artificial intelligence and foundational model business is expected to bring billions of yuan in incremental revenue. Similarly, generative artificial intelligence and AI cloud services have contributed incremental revenue, accounting for 4.8% of total revenue.
AI Chip Reserves Are Sufficient At the same time, Robin Li also revealed that Baidu currently has enough chips on hand to support the upgrade of "Wenxin Yiyan" version 4.0 to a higher level.
"Our stockpile of AI chips is sufficient to support the iterative upgrades of 'Wenxin Yiyan' over the next one to two years. As for model inference, the chip capabilities required are not overly demanding, and the chips we have, along with those available on the market, are more than adequate to meet our needs," said Robin Li.
Baidu's Key Financial Results for Q4 2023
Total revenue reached RMB 35 billion (USD 4.92 billion), a 6% year-on-year increase.
Baidu Core revenue was RMB 27.5 billion (USD 3.87 billion), up 7% year-on-year. Online marketing revenue amounted to RMB 19.2 billion (USD 2.70 billion), a 6% increase, while non-online marketing revenue rose 9% to RMB 8.3 billion (USD 1.17 billion), primarily driven by the intelligent cloud business. The cost of sales was RMB 17.4 billion (US$2.45 billion), an increase of 3% year-over-year, primarily due to higher costs associated with the intelligent cloud business, partially offset by reduced content expenses.
Sales and administrative expenses were RMB 5.9 billion (US$825 million), remaining largely unchanged compared to the same period last year.
Research and development expenses were RMB 6.3 billion (US$886 million), an 11% increase year-over-year, mainly due to higher depreciation expenses for servers supporting generative AI R&D and increased server rack fees.
Operating profit was RMB 5.4 billion (US$759 million). Baidu Core operating profit was RMB 4.7 billion (US$657 million), with a Baidu Core operating margin of 17%. Non-GAAP operating profit was RMB 7.1 billion (US$996 million). Non-GAAP Baidu Core operating profit was RMB 6.2 billion (US$873 million), with a Non-GAAP Baidu Core operating margin of 23%.
Other losses totaled a net amount of RMB 2.5 billion (US$356 million), compared to net other income of RMB 1.8 billion in the same period last year, primarily due to losses from an equity method investment that modified certain terms of its preferred shares. The income tax benefit was RMB 96 million (USD 14 million), compared to an income tax expense of RMB 1.3 billion in the same period last year, primarily due to changes in the impairment provision amount for deferred tax assets of certain subsidiaries.
Net income attributable to Baidu was RMB 2.6 billion (USD 366 million), with diluted earnings per ADS of RMB 6.77 (USD 0.95).
Net income attributable to Baidu Core was RMB 2.4 billion (USD 344 million), representing a 9% net profit margin for Baidu Core.
Non-GAAP net income attributable to Baidu was RMB 7.8 billion (USD 1.09 billion). Non-GAAP diluted earnings per ADS were RMB 21.86 (USD 3.08).
Non-GAAP net income attributable to Baidu Core was RMB 7.5 billion (USD 1.06 billion), with a 27% non-GAAP net profit margin for Baidu Core. The adjusted EBITDA was RMB 9.1 billion (USD 1.28 billion) with an adjusted EBITDA margin of 26%. Baidu Core's adjusted EBITDA reached RMB 8.1 billion (USD 1.14 billion) with an adjusted EBITDA margin of 30%.
As of December 31, 2023, cash, cash equivalents, restricted cash, and short-term investments totaled RMB 205.4 billion (USD 28.93 billion), while excluding iQiyi, these amounted to RMB 200 billion (USD 28.17 billion). Free cash flow was RMB 7 billion (USD 980 million), and free cash flow excluding iQiyi was RMB 6.3 billion (USD 894 million).