Recently, Baidu Group SW (09888. HK) will announce its Q2 2024 performance on August 22, 2024. China International Capital Corporation and Fangzheng Securities pointed out that during this period, advertising revenue was under pressure, while AI cloud and intelligent driving businesses performed positively.
Advertising business faces challenges, but AI advertising transformation shows initial results
According to a report from China International Capital Corporation, Baidu is facing pressure on its advertising revenue in the second quarter of 2024. Although the company expects that the AI advertising transformation has achieved certain results, with an increase in user retention and engagement, due to the base effect, offline advertiser recovery pressure, and the negative impact of AI search transformation on commercialization, CICC has lowered its expectations for Baidu's core advertising growth rate in the second quarter and expects that the weak advertising situation may continue into the third quarter.
The performance of AI cloud business is stable, and the revenue growth meets expectations
The performance of Baidu's AI cloud business in the second quarter was basically in line with expectations. Considering the reduced negative impact of ACE's revenue base and the continued growth of AI's contribution to revenue, CICC maintains its judgment that Baidu Cloud's revenue in the second quarter will increase by 14% year-on-year.
In addition, the trend of price reduction in large industry models continues, and CICC expects price adjustments to mainly target lightweight models, while the revenue growth of the main models is also considerable.
Institutions continue to be optimistic about autonomous taxis
In addition to advertising and cloud services, institutions point out that although intelligent driving services have long-term potential, they still face cost and policy challenges in the short term.
According to the first quarter financial report teleconference in 2024, Baidu's automatic driving travel service "Apollo Go" has reached 830000 orders in a single quarter nationwide, with Wuhan accounting for the largest proportion. Compared to the same period last year, the service scale has increased by 8 times. The company expects that the UE (unit economy) in a single region is expected to continue to improve, mainly due to the following two aspects:
Firstly, in terms of vehicles, Baidu has deployed about 300 autonomous vehicles in Wuhan and plans to increase this number to 1000 by the end of the year. In addition, the company also plans to introduce the RT6 model to replace existing vehicles.
Secondly, in terms of manpower, as of April, the "Apollo Go" service in Wuhan has achieved a total unmanned rate of nearly 70%. Baidu expects that with the further optimization and application of 5G cloud driving technology, there is still room for further reduction in driver costs.
Fangzheng Securities pointed out that the intelligent driving business has long-term market potential, but its contribution to profits in the short term is relatively limited. At present, the operating costs of Robotaxi are higher than those of ride hailing and taxi services, but with the advancement of technology and the improvement of economies of scale, it is expected that the costs will gradually decrease.
In addition, Fangzheng also pointed out that the safety and riding experience advantages of intelligent driving are expected to attract more users. Considering the research and operation costs, as well as the impact of policies and other factors, it is difficult for the intelligent driving business to contribute significant profits at the reporting level in the short term.