Overview: Total revenue is roughly the same as last year. The adjusted net profit to mother reached 7.4 billion yuan, surpassing Bloomberg's estimate of 6.7 billion yuan. The adjusted net profit margin to mother was stable. With 2024Q2, Baidu Group achieved total revenue of 33.9 billion yuan, a year-on-year decrease of 0.5%. Baidu's core revenue was 26.7 billion yuan, up 1% year on year, and iQiyi's revenue was 7.4 billion yuan, -5% year over year. With 2024Q2, Baidu Group achieved adjusted net profit of 7.4 billion yuan, a year-on-year decrease of 7.5%.
The adjusted net profit margin to mother was 22%. Among them, Baidu Core achieved adjusted net profit of 7 billion yuan, a year-on-year increase of 7.5%, and an adjusted net profit margin of 26% to mother.
Baidu's core advertising revenue fell 2%, and 18% of search results were achieved by generative AI. Baidu's core online marketing revenue was 19.2 billion yuan, up -2% year over year. Apart from macroeconomic pressure and declining demand in real estate and investment promotion industries, there are also competitive reasons. Currently, the company is accelerating generative search improvements.
Intelligent clouds maintained double-digit growth, and AI contributed 9% of total smart cloud business revenue. 2024Q2, Baidu's core non-marketing revenue was 7.5 billion yuan, an increase of 10% over the previous year. Among them, smart cloud revenue was 5.1 billion yuan, +14% year over year. AI revenue accounted for 9% in the second quarter, which continued to increase compared to 6.9% in 24Q1. The main model training and inference grew rapidly.
AI model inference costs are continuously optimized to promote the growth of users of the original product. ERNIE processes an API cost of about 0.6 billion per day, a significant increase from 0.2 billion in the previous quarter. Currently, the average number of tokens per day exceeds trillion, reflecting the rapid growth in the use of large models by enterprise customers.
The smart driving business has achieved almost 100% fully driverless operation in Wuhan, and future UE balance is expected.
Apollo Go provided approximately 899,000 rides to the public in the second quarter, an increase of 26% year over year. In July, the cumulative number of rides offered to the public exceeded 7 million. Robotaxi began operating in Wuhan on June 19. Currently, it has 400 vehicles and is undergoing large-scale trial operation of the latest RT6 vehicles.
Bike costs in Wuhan have dropped by more than 50% year on year, and it is expected that UE can be balanced in the future.
Investment advice: We are optimistic about the potential driving effect of AI technology on search advertising and smart cloud businesses, and maintain profit forecasts. We expect to achieve adjusted net profit of 28.6/31/33.2 billion yuan in 2024-2026, which is superior to the market rating.
Risk warning: the risk that the growth rate of the advertising market will fall short of expectations due to the macroeconomic downturn; the risk that the actual application of AI models will not be as effective as expected; the risk that the autonomous driving business will develop more slowly than expected; policy risks, etc.