Baidu's Q2 revenue remained flat year-on-year, with adjusted EBITDA increasing by 11% quarter-on-quarter, exceeding expectations, as its intelligent cloud business continues to accelerate | Financial Report Insights

With the continued growth of its smart cloud business, Baidu's core business achieved a slight positive growth in the second quarter, while the overall group revenue remained relatively stable.

Due to Baidu's accelerated investment in Baidu Search, the company's profitability was temporarily affected, with a year-on-year decrease of 8% in net profit in the second quarter. Adjusted EBITDA remained basically flat compared to the same period last year, but still exceeded market expectations, and the profit margin also remained relatively stable.

Regarding the highly anticipated autonomous driving business, Baidu reported that Apollo's autonomous driving orders grew by 26% year-on-year in the second quarter, providing 100% autonomous ride-hailing services in almost the entire city of Wuhan; at the same time, Baidu has begun large-scale road testing of the latest RT6 vehicles. Baidu's video platform iQIYI saw a 5% year-on-year decrease in revenue in the second quarter.

On Thursday, August 22, Baidu Group released its second-quarter financial report for 2024.

1) Key Financial Data:

Revenue: Baidu's revenue in the second quarter was 33.93 billion RMB, basically flat compared to the same period last year, slightly below the market's expected 34.11 billion RMB, with a quarter-on-quarter growth of 8%;

Profit: Adjusted operating profit increased by 2% year-on-year to 7.5 billion RMB, exceeding the market's expectation of 6.79 billion RMB, with a quarter-on-quarter growth of 12%; adjusted net profit attributable to Baidu was 7.4 billion RMB, down 8% year-on-year, with a quarter-on-quarter growth of 5%.

Adjusted earnings per ADS were 21.02 RMB, a 7% year-on-year decrease but surpassing the market's expected 18.54 RMB, with a 6% quarter-on-quarter increase;

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was 9.15 billion RMB, flat compared to the same period last year, exceeding the market's expected 8.93 billion RMB, with an 11% quarter-on-quarter increase. The adjusted EBITDA profit margin was 27%, the same as the same period last year.

2) Key Business Highlights:

Baidu Core Business: Driven by the smart cloud business, non-online marketing revenue increased by 10% year-on-year, bringing a slight positive growth to Baidu's core revenue.

Baidu APP: Monthly active users exceeded 700 million.

iQIYI: Revenue in the second quarter decreased by 5% year-on-year, underperforming market expectations, with total costs decreasing by 2% year-on-year.

Autonomous Driving: Apollo's autonomous driving orders grew by 26% year-on-year in the second quarter, providing 100% autonomous ride-hailing services in almost the entire city of Wuhan; at the same time, Baidu has begun large-scale road testing of the latest RT6 vehicles.

3) Repurchase Situation:

Since the second quarter of this year, Baidu has repurchased shares worth 301 million USD, with the cumulative repurchase amount under the 2023 share repurchase plan reaching 1.2 billion USD.

After the financial report was released, Baidu's US stocks rose in pre-market trading, with an increase of 1.4%.

Baidu co-founder and CEO Robin Li said in the financial statement:

In the second quarter, the smart cloud continued to accelerate, offsetting the macro resistance faced by online marketing revenue, and bringing slight positive growth to Baidu's core revenue.

Operationally, we have accelerated the innovation pace of Baidu Search. We believe this will have a short-term impact on monetization, but will be successful in the long run.

Baidu CFO Herman Yu stated:

As we accelerated the transformation of our products to be AI-native in the second quarter, we maintained a healthy profit margin through continuous operational optimization. Especially for the smart cloud, we expect the growth momentum to remain strong.

Smart cloud business continues to accelerate, Baidu's core revenue achieves positive growth, non-online marketing revenue grows by 10% year-on-year

Baidu's core revenue grew by 1% year-on-year to RMB 26.69 billion, exceeding the expected RMB 26.47 billion. Among them, online marketing revenue was RMB 19.2 billion (approximately USD 2.64 billion), a year-on-year decrease of 2%, while non-online marketing revenue was RMB 7.5 billion (approximately USD 1.03 billion), a year-on-year increase of 10%, mainly driven by the smart cloud business.

In the second quarter, Baidu's core operating profit was RMB 5.6 billion, a year-on-year increase of 23%, with a core operating profit margin of 21%; net profit was RMB 5.5 billion, a year-on-year increase of 9%, with a net profit margin of 20%; adjusted EBITDA was RMB 8.6 billion, a year-on-year increase of 5%; adjusted EBITDA profit margin was 32%.

Baidu's R&D expenses were RMB 5.9 billion, slightly down as a percentage of total revenue.

During the reporting period, Baidu's monthly active users on the app grew by 4% year-on-year to 703 million, exceeding the market's expected 680 million.

iQIYI's second-quarter revenue decreased by 5% year-on-year, total costs decreased by 2% year-on-year

On the same day, iQIYI, a subsidiary of Baidu, announced its financial report, showing a 5% year-on-year decrease in second-quarter revenue to RMB 7.4 billion, below the expected RMB 7.72 billion. Among them, membership service revenue was RMB 4.5 billion; online advertising service revenue was RMB 1.5 billion; content distribution revenue was RMB 700 million; other revenue was RMB 780 million.

In the quarter, iQIYI's Non-GAAP operating profit was RMB 500 million, with an operating profit margin of 7%.

The company stated that iQIYI made adjustments in content strategy and cost control to adapt to market changes and user demands.

In the second quarter, iQIYI's total costs were RMB 5.7 billion, a 2% year-on-year decrease. Among them, content costs were RMB 4.1 billion, while sales and management expenses and R&D expenses were RMB 970 million and RMB 450 million, respectively.

Apollo's autonomous driving orders grew by 26% year-on-year, and the latest RT6 vehicle has begun large-scale unmanned road testing

Baidu announced that in the second quarter, Apollo's autonomous driving service provided approximately 899,000 autonomous driving orders, a 26% year-on-year increase As of July 28, 2024, Luobo Kuai Pao has provided over 7 million orders of autonomous driving services to the public. Luobo Kuai Pao offers 100% fully autonomous ride-hailing services in almost all of Wuhan.

According to media reports, Luobo Kuai Pao has provided services 7 million times nationwide over the past 5 years. Currently, Luobo Kuai Pao is conducting demonstration applications in cities such as Beijing, Wuhan, and Guangzhou. It is reported that the ADFM large model applied in the sixth generation autonomous driving solution is the world's first large model supporting L4 level autonomous driving. It can balance the safety and generalization of technology, with safety exceeding that of drivers by more than 10 times, achieving city-wide coverage of complex scenarios. There are reports that Luobo Kuai Pao's "sixth generation vehicles" have begun large-scale testing.

Meanwhile, Baidu has begun large-scale road testing of the latest RT6 vehicles.