Baidu releases Q3 earnings report, Apollo and other new AI businesses see inflection point in development

Author? |? Norton

Editor?

Editor? Xiao Han

On Nov. 17, Beijing time, domestic Internet and AI giant Baidu officially released the company's third-quarter financial report (unaudited) as of Sept. 30th.

In the third quarter, Baidu's operations improved further. Revenue of 28.2 billion yuan, net profit of about 13.7 billion yuan, both exceeded Wall Street expectations. Baidu's core business became the main driver of Baidu's revenue growth, rebounded significantly, Baidu's core business revenue of 21.4 billion yuan in the quarter.

Meanwhile, Baidu ushered in an inflection point in the development of AI business. Among them, the strategic business Xiaodu Technology completed independent financing, and the commercialization of hardware and software business accelerated. In terms of intelligent cloud, in the third quarter, Baidu's AI cloud revenue grew 41% year-on-year to 2.2 billion yuan.

Apollo focuses on three major areas of intelligent transportation, Telematics, and autonomous driving, another focus of Baidu's AI strategy.2020 So far, Baidu's Apollo has made breakthroughs in technology and commercial exploration.

In terms of intelligent transportation, the "ACE Traffic Engine" released only in April has now landed in more than 10 cities. In terms of intelligent car link, Baidu Apolllo's cooperation with more than 60 car companies, plans to cooperate with more than 400 models on the market. Intelligent transportation and intelligent car business have the ability to realize. In addition, in terms of automatic driving, Baidu Apollo is also an industry leader in both technology and commercial exploration.

Baidu Q3 earnings analyst call, Baidu Chairman and CEO Robin Li also made a special introduction to the positioning of Apollo, business model.

In Robin Li's positioning, Apollo is a comprehensive solution for intelligent transportation, a dynamic ecosystem with deep participation from all parties, including equipment manufacturers, government agencies, technology providers and large vendors.

In terms of business model, Apollo a **** has three directions. One is to provide technology for OEMs to provide the DuerOS system. The second is the intelligent transportation infrastructure project, the new intelligent transportation infrastructure project in Guangzhou Development Zone with a project amount of $460 million belongs to this category. Third, Baidu's self-driving cabs (robotaxi) can use Apollo's L4 and L5 autonomous driving systems.

"This business (i.e., the self-driving cab business) has already been carried out in a number of cities in China, and I believe that we can see the commercialization of this business on the ground soon in the future." Robin Li said during the earnings call.

Overall, Baidu's core business such as advertising has rebounded with the gradual rebound of the economy, and some of its AI business has some profitability, which provides good financial support for Baidu to continue to adhere to the value of its technology and promote its new AI business. On the other hand, in the new infrastructure, intelligent networked cars, vehicle and road synergy and other wind mouth has arrived at the moment, AI new business represented by Apollo is also expected to usher in the best time to release the value of Baidu's development of a new engine at the same time, to promote the development of industry and society forward.

One, revenue and profit exceeded Wall Street's expectations?AI business ushered in the development of the inflection point

In the third quarter of 2020, Baidu's revenue and net profit performance was good overall. The company's revenue of 28.232 billion yuan, up 8% from the previous year. Net profit of 13.678 billion yuan, compared with 3.579 billion yuan in the previous quarter, an increase of 282% sequentially.

According to public reports, Baidu's revenue and profit for the quarter exceeded Wall Street's expectations, with net profit exceeding Wall Street's average estimate by 56 percent. In addition to showing that Baidu's overall profitability has been improved, this also proves to some extent that Baidu's business and operations have a strong anti-risk ability.

Baidu Q3 2020 key financials

On specific business segments, Baidu's core business rebounded significantly, becoming the main driver of the company's revenue growth. In the third quarter, Baidu's core business generated total revenue of 21.379 billion yuan, up 13% sequentially and 2% year-on-year. Among them, online advertising revenue was 18.4 billion yuan, basically unchanged from last year; non-online advertising revenue rose 14 percent year-on-year to 2.9 billion yuan, which was partly driven by the growth of the smart cloud business.

The continued improvement of Baidu's mobile eco-infrastructure, anchored by Baike, smart applets and hosted pages, has contributed to the rebound of the advertising business, which is Baidu's main source of revenue. Following this trend, Baidu's advertising business is likely to achieve better performance in the fourth quarter of this year.

Baidu's Q3 core business key financial data

Besides the rebound of traditional business, Baidu's AI business, a new grip on its development, has also seen an inflection point in its development. Earnings reports and recent data show that 2020 may become the year of commercialization breakthrough for Baidu's AI business.

On the whole, we can divide Baidu's AI business into three parts: Xiaodu Technology (covering software such as Xiaodu Voice Assistant and hardware devices such as Xiaodu Smart Speaker and Xiaodu Smart Display), Intelligent Cloud, and Baidu Apollo.

In the third quarter, the most weighty event for Xiaodu Technology was the independent financing. After the financing was completed, Xiaodu Technology's valuation rose to about 20 billion yuan.

Behind the bright performance is an important reason for Xiaodu Technology to get the favor of capital. Baidu's third-quarter earnings report shows that in September, Xiaodu Assistant first-party hardware devices reached 2.7 billion monthly voice interactions, compared with the same period last year, an increase of 65%; Xiaodu Assistant total monthly voice interactions amounted to 5.3 billion times. The number of developers in Xiaodu Assistant Skill Store reached a scale of 45,000 developers.

In terms of Intelligent Cloud, Baidu's AI Cloud saw steady growth in revenue, up 41 percent year-on-year to 2.2 billion yuan in the third quarter, driven by businesses related to the Internet, transportation, financial services and healthcare industries.

Meanwhile, Baidu Apollo also had a breakthrough. In its earnings release, Baidu specifically said, "The commercialization of Baidu Apollo unfolded in a gradual manner, with particularly strong momentum in areas such as intelligent transportation and autonomous driving."

Specifically, in September this year, Baidu Apollo in Changsha to obtain the first domestic full driverless test license. Getting this license represents that Baidu Apollo has been allowed to take out the safety officer on the open road and carry out fully driverless road tests. In addition, Baidu Apollo in August successfully won the bidding for the Guangzhou Development Zone Intelligent Transportation New Infrastructure Project, with a project amount of nearly 460 million yuan, which is likely to become the largest bidding project order in 2020 in the field of domestic intelligent transportation.

Overall, in the third quarter of 2020, Baidu delivered a good answer sheet. While the advertising business performed solidly, the AI business also accelerated its landing in the industry and under favorable policies. Along with the various industries in the intelligent upgrade and digital transformation further in-depth, Baidu next will also usher in more development opportunities.

Two, Apollo three major business step by step development?

Through the latest quarterly earnings report, it can be seen that Baidu has achieved good results in the company's operations and specific business. Among them, the recent progress of Baidu's Apollo is particularly noteworthy.

Apollo is a key part of Baidu's AI strategy and one of the two axes of Baidu's new AI business. At the moment, Baidu Apollo's business layout focuses on three aspects of intelligent transportation, Telematics, and autonomous driving. And as of the third quarter of this year, Apollo has achieved important breakthroughs above the three core businesses.

1, April released "ACE traffic engine"? Now in more than 10 cities landing

April 9, Apollo officially released the "ACE traffic engine", and disclosed the Apollo intelligent transportation solutions.

"ACE Traffic Engine" is a complete set of intelligent transportation solutions covering AI, maps and other underlying technologies, intelligent engines such as automatic driving and vehicle-road coordination, as well as specific applications such as intelligent information control and intelligent public transport, which Baidu Apollo has created for governments around the world.

With the help of ACE Traffic Engine, local governments only need to put forward their demands when deploying intelligent transportation projects and building an intelligent transportation system. Similar to seeking equipment, underlying technology providers and coordinate the cooperation of all parties to complete the technical integration of work, can be packaged to Baidu to solve. Simply put, this is a set of programs will be executed with high efficiency.

In about half a year since its release, "ACE Traffic Engine" has been put into practice in more than 10 cities, including Beijing, Changsha, Chongqing, Baoding, Nanjing, Cangzhou, Guangzhou and Dalian. In other words, from the first-tier and new first-tier cities to the second-tier and third-tier cities in China, all of them have expressed their recognition of "ACE Traffic Engine".

2, cooperation car enterprises more than 60 intelligent car link commercialization progress "speed"

Baidu began in 2016, began to layout "vehicle road cooperation" full-stack R & D. At the end of 2019, Apollo in the first ecological At the end of 2019, Apollo released the intelligent car link open platform at the first ecological conference, formally integrating the automatic driving open platform, vehicle and road synergy open platform, intelligent car link open platform "three Dragonballs".

In terms of Telematics, Apollo's cooperation with car brands and the number of listed models are at the forefront of the industry. Up to now, Apollo in the car networking aspects of the cooperation of car companies, including Mercedes-Benz BMW, Ford, General Motors, Cadillac, Lexus, Geely, Great Wall, Chery, Hyundai, Kia, etc., *** totaling more than 60. The number of listed models in cooperation is more than 400.

Meanwhile, Xiaodu Car will also provide navigation services for more than 10 million users every day, and the number of voice interactions per month can reach 15 million.

3. Self-driving cab service open to the public has landed in three cities

As mentioned in the report, Baidu Apollo made some important progress in self-driving technology and commercial exploration this quarter.

Taking out the safety officers is an important part of landing and monetizing self-driving cabs (robotaxi) on a large scale. From a technical perspective, Apollo has already received the country's first fully driverless test license in September this year.

During the 2020 World Congress, Apollo successfully demonstrated driverless and 5G parallel driving. The strength of autonomous driving technology is located in the leading position in the industry.

Baidu Unmanned Taxi

In terms of commercial exploration, Baidu Apollo's self-driving cabs are now fully open for test ride service in Changsha, Cangzhou and Beijing.

According to official data from Baidu, in Beijing, the peak call volume of self-driving cabs on the third day of operation was 600 units, and the call volume for the whole day was more than 2,600 units, which is not an exaggeration to say that it is Beijing's newest "net red".

It is understood that in Baidu Apollo's three major businesses, intelligent transportation, intelligent car business has the commercialization of landing capacity, to achieve "self-blood". In contrast, self-driving cabs to achieve commercialization will take some time, but from the perspective of the future market size, the prospects are quite promising.

According to JP Morgan's research, from 2019 to 2025, China's L1 to L5 assisted driving and autonomous driving market will realize an average annual growth rate of 33%, and the market size will reach about $7.1 billion in 2025 (about RMB 46.4 billion). When the time is ripe, Baidu Apollo, which has been fully accumulated in automated driving technology and commercial exploration, will naturally enter the commercialization "fast lane".

Three, the domestic intelligent network trend has arrived? Apollo future promising

Now, Baidu AI new business core pillar of Apollo is ushering in the development of unprecedented opportunities.

Baidu's performance has rebounded, and its core business has started to rebound, while some of its AI businesses have shown rapid growth. All of this provides a basic guarantee for Apollo to plow into intelligent transportation, the Internet of cars, and autonomous driving, which requires a lot of research and development investment.

On the other hand, and more importantly, the general trend of the development of automobile intelligence in China has arrived.

Today, globally and especially domestically, intelligent networked vehicles and related industries are developing in full swing.

The capital market tends to be most responsive to changes in trends. Recently, Tesla, Azure, Xiaopeng Auto and other automotive companies that have a layout in terms of intelligentization have collectively shown a rising trend in stock prices. At the same time, capital has long since begun to raise its stakes in the autopilot track. Some data show that so far in 2020, the amount of financing for global autonomous driving companies has exceeded 7 billion U.S. dollars (about 45.8 billion yuan), which has exceeded the scale of financing in 2019.

Focusing on the domestic, on the intelligent networked vehicles where to go, how to go, after the early mapping, the development goals and development route has been relatively clear.

Recently released "Intelligent Networked Vehicle Technology Roadmap 2.0" planning, by 2025, China's intelligent networked vehicles with L2 level, L3 level of autonomous driving ability in the total sales of automobiles accounted for 50%, the C-V2X terminal new car assembly rate of 50%, a high degree of self-driving cars to achieve a limited number of regional and specific scenes of commercialization applications.

By 2030, the proportion of L2 and L3 level self-driving models in China will reach 70%, the proportion of L4 level self-driving models will reach 20%, and the equipment of new cars with C-V2X terminals will be basically popularized.After 2035, L5 level self-driving passenger cars will start to be applied.

Contents of Intelligent Networked Vehicle Technology Roadmap 2.0

The Intelligent Networked Vehicle Technology Roadmap 2.0 will provide an important reference for the formulation of related policies. As for the development route, the Ministry of Transportation has issued the Outline of Digital Transportation Development Plan, which proposes to vigorously promote the research and development of automated driving and vehicle-road coordination technology, thus laying the tone for the domestic automated driving to take the route of single-vehicle intelligence + vehicle-road coordination.

In addition, in the post epidemic period, in order to promote the recovery of the domestic economy, the Central Economic Work Conference has repeatedly proposed to increase investment in new infrastructure. The intelligent transportation system centered on technologies and applications such as autonomous driving, vehicle-road coordination, 5G and AI has thus become an industry hotspot.

In the key nodes of intelligent networked vehicles, autonomous driving, vehicle-road synergy and new infrastructure construction, Baidu Apollo has landed in the three core areas of intelligent transportation, vehicle networking and autonomous driving, which can be said to accurately grasp the pulse of the times.

More importantly, in these three major businesses, Apollo layout earlier, already has a wealth of technology and project experience reserves, in the industry has a first-mover advantage. Next, Apollo is expected to release more value at the wind mouth, and continue to lead and even promote the development of the whole industry.

For Baidu, the rapid release of Apollo's potential and the arrival of a new development phase also mean that Apollo will become its new development engine, driving further growth in revenue and profit.

This article was written by the author of Automotive Home, and does not represent the viewpoint of Automotive Home.