Zhike | Baidu AI Starts to Take the Lead as Intelligent Cloud Revenue Soars and the Volume of Large Model Invocations Surges

Author | Huang Yida

Editor | Zheng Huaizhou

On February 18, Baidu Group (Stock Codes: 9888.HK, BIDU.O, hereinafter referred to as: Baidu) announced its fourth quarter and full-year results for 2024. The financial report shows that Baidu's total revenue in 2024 reached 133.1 billion yuan, and the net profit attributable to Baidu Core reached 23.4 billion yuan, with a year-on-year growth of 21%; In Q4, the operating income was 34.1 billion yuan, which was higher than the 33.4 billion yuan unanimously expected by Bloomberg, but the growth rate dropped by 2% year-on-year.

From the perspective of the income structure, Baidu Core recorded an operating income of 27.7 billion yuan in 2024Q4, with a year-on-year growth of 1%. The online marketing revenue of Baidu Core in 2024Q4 was 17.9 billion yuan, a year-on-year decrease of 7%; The revenue of non-online marketing in the same period was 9.8 billion yuan, with a year-on-year growth of 18%, mainly driven by the growth of Intelligent Cloud; In the fourth quarter, the operating income of Intelligent Cloud increased by 26% year-on-year.

In terms of profits, Baidu's net profit attributable to shareholders in 2024Q4 was 5.2 billion yuan, with a year-on-year growth of 100%; The net profit of Baidu Core in the same period was 5.3 billion yuan, with a year-on-year growth of 117%, and the corresponding net profit margin was 19%. Baidu achieved an operating profit of 3.9 billion yuan in the same period, with a year-on-year decline of 27%; The operating profit of Baidu Core in the same period was 3.6 billion yuan, with a year-on-year decrease of 22%.

Overall, the traditional advertising business is under short-term pressure, but the income growth of AI-related businesses and the operational data at the application end are both outstanding. From the perspective of growth, AI has become the core factor in valuing Baidu.

Chart: The recent trend of Baidu Hong Kong stocks; Source: Wind, 36Kr

01 AI Has Become the Core Growth Driving Force of Baidu

From the perspective of the growth potential shown by the segmented businesses, in terms of business volume, the advertising business is still Baidu's traditional basic business. The negative growth of advertising revenue in Baidu Core has continued from Q2 of last year to Q4, mainly due to the drag of the advertising industry as a whole. The transformation of Baidu Search in the AI field also has an impact on advertising revenue, thereby affecting the growth of Baidu's advertising revenue.

Although the scale of non-advertising business income is not as large as that of the advertising business, it has maintained a relatively high growth rate in recent years. The year-on-year growth rate of this business in 2024Q4 was 18%, and it is showing an accelerating growth trend. Due to the difference in growth potential, the proportion of non-advertising business income in Baidu Core has increased to 35%, therefore, the non-advertising business has become the core driving force for the company's performance growth.

The non-advertising business mainly includes high-tech businesses such as Intelligent Cloud and Intelligent Driving, and the income structure is supported by Intelligent Cloud. In terms of growth driving force, this quarter's financial report shows that the growth of the non-advertising business is mainly driven by the Intelligent Cloud business, and the income growth of Intelligent Cloud mainly relies on the release of AI-related demands. From the quantitative indicators, according to Baidu's financial report, the year-on-year growth rate of AI Cloud business income in 2024Q4 is as high as 26%, significantly exceeding market expectations.

On the application side, according to the financial report data, the call volume of the Wenxin series models in December 2024 has reached 1.65 billion times, and the external API call volume has increased by 178% month-on-month; The monthly active users of Baidu Wenku's AI function in December 2024 reached 94 million, with year-on-year and month-on-month growth of 216% and 83% respectively. Baidu's AI platform not only includes Baidu's own Wenxin large model, but also the Qianfan large model platform provides nearly a hundred mainstream models at home and abroad. Especially after the recent access to DeepSeek, it provides the lowest price in the industry, and attracted 15,000 player customers to call on the first day.

From the perspective of industrial implementation, reviewing the situation of large model winning projects in 2024, Baidu ranked first in the three dimensions of the number of winning projects, the number of industry coverage, and the number of winning projects of central and state-owned enterprises; In the review in January of this year, Baidu achieved the first place in both the number of winning projects and the winning amount. Baidu Intelligent Cloud has the largest industrial implementation scale of large models in China. More than half of the central and state-owned enterprises and a large number of private enterprises are jointly conducting AI innovation with Baidu Intelligent Cloud.

In the context of the increasingly fierce competition in the large model, the strong growth of Baidu AI is mainly driven by the following three aspects:

First, the strong growth of domestic AI-related demands. The high prosperity of the industry beta is the underlying logic supporting the strong growth of Baidu AI;

Second, while Baidu has the advantage of a traffic entrance, Baidu's AI strategy pays more attention to the fit between products and technologies, and has good openness, so that products can be better implemented;

Third, Baidu AI has a certain leading edge in technology. Coupled with the advantage of the traffic entrance and the strategy of emphasizing product implementation, Baidu AI can realize performance earlier.

02 Investment Strategy

From a long-term strategic perspective, compared with other major companies, Baidu chose to embrace technology earlier. The non-advertising business in Baidu Core is mainly composed of AI as the core of Intelligent Cloud business and Intelligent Driving. Although the advertising business is still the basic position, but from the two dimensions of strategic direction and performance growth, high-tech business is the key to valuing Baidu.

AI, as the core development direction in the field of consumer technology, is not just a concept for enterprises and investors at this stage, but has reached the stage of beginning to realize performance. At the same time, the market is also more concerned about the technological progress at the application end of AI. In the investment logic of AI, the proportion of fundamentals will continue to increase.

For Baidu AI, the matrix of the Wenxin large model itself is rich, and the iterative product of Wenxin will be released in 2025, significantly improving the multi-modal ability and having a stronger tool invocation and thinking planning ability. The Qianfan large model platform accesses hundreds of mainstream large models at home and abroad. The highlight of the recent access to DeepSeek is to reduce the reasoning price to 30% of the official pricing of DeepSeek. The price advantage is conducive to improving customer stickiness, and the topicality of DeepSeek is also conducive to enhancing the influence of Baidu AI.

It is worth noting that the Wenxin large model recently announced its open source, so that more developers and enterprise users can invoke the model with zero threshold and low cost, aiming to achieve the next step of service monetization through open source drainage. Low cost is one of the core advantages of the large model competition at this stage. The essential reflection of the performance growth of Intelligent Cloud is the result of the combination of Baidu's technical advantages and the business model advantages of cloud services.

Looking at Baidu's traditional advertising business, the short-term performance pressure is mainly affected by macroeconomic factors. In the long term, the economic recovery expectation is the key force supporting the repair of Baidu's advertising performance. At the same time, based on Baidu's advantages in the AI field, the new business model combining AI and advertising is also being explored. According to the information disclosed in Baidu's earnings call, currently 22% of Baidu's search result pages contain AI-generated content, which is a further improvement compared to before, and AI-generated content further penetrates into multiple modalities such as short videos, notes, and live broadcasts in 2024Q4.

In terms of valuation, the current PE-TTM of Baidu Hong Kong stocks is less than 10 times, only at the level of traditional manufacturing. As an enterprise with a strong technological attribute, it is obviously undervalued at present; From a long-term perspective, the current valuation level of Baidu is only slightly higher than the historical low. In the future, with the gradual repair of advertising revenue growth, Baidu's basic business is stable, and the high performance elasticity brought by high-tech businesses opens up an upward space for Baidu's valuation. The leading position of Baidu in the technical level of the AI application end is the core logic of Baidu's long-term investment value.

*Disclaimer: 

The content of this article only represents the author's opinion. 

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