Baidu, Inc.

to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations.

Hello, everyone, and welcome to Baidu's fourth quarter and fiscal year 2024 earnings conference call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website, as well as on newswire services. On the call today, we have Robin Lee, our co-founder, and Julius Rong, head of the Mobile Ecosystem Group, MEG, Dou Shen, our EVP in charge of Baidu AI Cloud, ECG, and Jackson Junjie He, our interim CFO. After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Credit Security Delegation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with SEC and Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward-looking statements except as required under applicable law. Our earnings press release and this call include discussions of certain annotated non-GAAP financial measures. Our press release contains a reconciliation of the annotated non-GAAP measures to be annotated most directly comparable step measures and is available on the IR website at ir.baidu.com. As a reminder, this conference will be recorded. In addition, a broadcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin.

Hello, everyone. Baidu Core total revenue for the fourth quarter saw a slight year-over-year increase, reaching RMB 27.7 billion. Our AI cloud bins demonstrated robust momentum with revenue growth accelerating to 26% year over year, offsetting the softness in our online marketing bins. The growth was primarily driven by broad market recognition of our AI capabilities, in which we will continue to invest to make sure we stay at the forefront of this technology megatrend. 2024 marked a pivotal year as GenAI demonstrated strong market demand. We see this momentum reflected in the genuine value we created for our customers through our AI products and solutions, as well as AI cloud services. This growth shows how enterprises have awakened to AI's transformative potential. catalyzing broader adoption across diverse scenarios while affirming the market's trust in Baidu's technical capabilities and AI expertise. As we continue to cement our leadership position as an AI innovator, our vision is gradually coming to fruition on multiple fronts. Our strategic AI investments are showing meaningful progress across our key bins. Our cloud bins demonstrated strengthening momentum towards the end of the year with both robust revenue growth and margin expansion. As we continued to rebuild the entire product portfolio of our mobile ecosystem with AI, most notably in Baidu Search. Meanwhile, Baidu's autonomous ride-hailing service, ApolloGo, has proven the viability of its BINS model, strengthening our confidence in pursuing global expansion and exploring asset-light BINS models. Ernie has demonstrated industry-leading capabilities in instruction following and state-of-the-art RAG technology that minimizes hallucinations. These best-in-class capabilities have driven widespread adoption across various scenarios, leading to significantly growing API costs. In December, Ernie handled approximately 1.65 billion API costs daily. We witnessed particularly strong external demand, with external API costs growing 178% quarter over quarter. We saw rapid growth across various business sectors, such as education, e-commerce, entertainment, and recruitment. The robust growth in external API calls is driven by two reasons. First, businesses are finding enough value from integrating earnings into their daily operations. Second, price matters. As the inference cost goes down, adoption goes up quite quickly. We recently made a significant strategic decision to open source our upcoming Ernie 4.5 series and make ErnieBot free for end users, which we believe will further expand market awareness of Ernie's capabilities and enable broader adoption across an increasing array of industries. Reflecting this growing market recognition, our AI cloud business delivered a robust performance. In Q4, we have partnered with leading enterprises across diverse sectors, helping them address specific operational challenges using our AI products and solutions. We collaborated with state-grade corporation of China to develop a tailored AI solution based on Ernie and our mass platform, Qianfan. we have developed comprehensive AI solutions that permeate key operational processes, from power dispatching and equipment condition diagnosis to procurement, safety supervision, marketing, and office systems. Our solutions have demonstrated remarkable effectiveness in boosting operational reliability. Impressed by these results, StateGrade has increased its spending on our AI cloud services, further deepening its collaboration with us. We also collaborated with Zhaoping, a leading recruitment company, to adopt Ke Yue's early-powered outbound calling product for campus recruitment. Featuring highly human-like voice with natural conversational abilities, the product enables sophisticated multi-round interactions. Ernie's advanced capabilities ensured accurate gauging of candidates' interest in job opportunities while consistently keeping conversations on track. With this product, Jopin achieved a 50% higher acceptance rate for job fair invitations and 70% lower labor costs. The growing market recognition and adoption reinforce our confidence, and we are optimistic that the growth momentum we witnessed today is just a start. As enterprises continue to discover novel ways to harness earnings and our AI cloud potential, we foresee an ever-expanding horizon of possibilities unfolding before us. On the consumer-facing products, Baidu Wenku is a shining example. In Q4, Wenku's subscription revenue grew 21% year over year. In December, Wenku's monthly active user of AI-enabled features reached 94 million, almost doubling quarter over quarter, making Wenku one of the world's largest AI products by the number of paying users. This quarter, we integrated Baidu Wenku with Baidu Drive, enhancing Wenku as an AI-powered creativity platform. This integration allows Wenku to combine personal cloud storage with AI-powered search and document creation capabilities, while enabling users to streamline their workflow from searching, accessing files, to creating and sharing, all within a unified, seamless platform. Furthermore, Wenku introduced Free Canvas in January, which transforms content creation by enabling users to organize diverse formats, text, slides, audio, videos, and even website links as unified Canvas. Free Canvas also integrates with Wenku's existing AI capabilities, including AI Editor and AI-powered PowerPoint features. allowing users to access our full suite of AI editing tools and save or share their work in any desired format via Baidu Drive. Leveraging Ernie, Wenku is transforming into a next-generation intelligent creativity platform that redefines how users create, collaborate, and bring their ideas to life. Now, turning to Surge, our largest consumer-facing product, which stands as another compelling testament to our AI transformation. Over the past several quarters, we have aggressively leveraged Ernie to transform Surge. This has been a challenging but deeply meaningful journey. Like pioneers crossing unfamiliar waters, we embraced the uncertainties that come with charting new territories. After extensive exploration, we have defined our path forward in leveraging the power of language models to present the multimedia content in search results. Currently, 22% of all search results pages contain AI-generated content. During the quarter, we mainly focus on redefining and enhancing the quality of our AI-generated search results. Through early advanced capabilities in content generation, we can deliver unlimited high-quality content on demand, vastly expanding the depth and breadth of our search results. This quarter, we expanded beyond text generation to generate diverse content formats, including short videos, notes, agents, digital humans, and live streaming. Through this more dynamic and varied content combination, users can now discover a broader range of information that was previously inaccessible, presented in more engaging ways that align with evolving user preferences. As a result, we have achieved substantial improvements across three dimensions of our search results in quality, quantity, and format diversity. Alongside this, we further enhanced the search experience by optimizing the matching between queries and search results. By analyzing the nature and intent of each query, the GenAI-enabled search can determine the optimal content format and presentation style, such as delivering AI-generated short videos for how-to queries, generating comparative charts for analysis-focused searches, and dynamically organizing content sequences. This intelligent matching ensures that users receive not just the most relevant results, but in the most effective and easy to understand format. The effectiveness of this transformation is reflected in our improved user metrics. On Baidu app, Users exposed to AI-generated search results demonstrated higher engagement levels, conducted more search queries, and showed higher rotation rates and longer time spans. We are encouraged to see daily search queries per user increased by 2% year-over-year in December. During our AI transformation of search, we placed strong emphasis on agents as we envision agents will become one of the most important forms of AI-native applications. Our agents have now transcended their initial chatbot origins through convergence with digital human technology, evolving into embodied intelligent entities with vivid visual presence, thanks to our industry-leading digital human technology. This represents a powerful innovation path we've pioneered breaking new ground in how agents interact with users. Taking our newly introduced lawyer agents as an example, this embodied lawyer agent can transform legal expertise and industry know-how into engaging multi-model content, featuring lawyers' actual appearance in live streaming and AI-generated short videos. Through this agent, we can efficiently generate high-quality, authoritative content at scale for by-do search and feed, while pioneering innovative formats of content and user engagement. Moreover, these agents also create significant value for lawyers by helping them build personal brands, enhance engagement with potential clients, and improve lead conversion. Such agents are becoming a compelling new addition to Baidu's content ecosystem, creating new possibilities while further diversifying our content landscape. In the field of intelligent driving, our continued investments in AI are also propelling significant progress in our Robotaxi business. In Q4, ApolloGo delivered remarkable results that reinforced our position as the world's top autonomous ride-hailing service provider. Our domestic operations continue to show robust momentum, and we have successfully validated our pioneering BINS model through years of operations and established a path to profitability in the autonomous driving industry. Importantly, our unrelenting focus on safety remains at the core of our efforts as we expand our services. To date, Apollo Gold fleets have accumulated more than 130 million autonomous kilometers with an outstanding safety record, underscoring our industry-leading standards. These operational and safety track record has paved the way for further scaling and operational enhancement. Building on this achievement, we are confident in expanding beyond mainland China as we enter the next phase of growth. In November 2024, ApolloGo secured permits to conduct testing on open roads in Hong Kong. making us the only company to receive RoboTaxi testing authorization in the region. Notably, Hong Kong represents our first entry into a right-hand drive, left-hand traffic market, showcasing our ability to adopt our autonomous driving technology to different traffic systems while maintaining rigorous safety standards. This achievement recognizes our deep expertise in autonomous driving operations as we are committed to expanding our footprint and bringing safe, reliable, and convenient autonomous driving services to more cities and regions worldwide. Now, let me review the key highlights for each business for the fourth quarter. AI Cloud revenue reached RMB 7.1 billion in Q4, delivering a strong year-over-year increase of 26% with expanding non-gap operating margins. This quarter, we doubled the scale of our unified GPU cluster, yet still achieved a 99% valid training time, a remarkable achievement enabled by our faster and more advanced network architecture. Our network has proven the capability to enable GPUs across different geographical locations to work together seamlessly with minimized performance loss and automatically resolve the frequent network issues inherent in large-scale computing with almost unperceivable impact to our clients. demonstrating our ability to deliver peak performance at a massive scale. We continue to enhance Qianfan, our mass platform, which improves model and app development experience for our customers and partners. Our platform features the early family of models and offers access to a selection of high-quality models across the globe, with DeepSeq being one of our latest additions. We offer post-trained SFT data labeling and preparation for all models hosted on Qianfan, enabling us to deliver the most suitable models and tools to enterprise clients at all scales. The increasing market recognition of our AI expertise continues to drive strong momentum in our enterprise client pipeline. We have established deep partnerships with leading enterprises, including Xiaomi and Jike, further highlighting the growing trust in Baidu AI Cloud. Besides, we are increasingly becoming the preferred choice for mid-tier businesses. This reflects the strengthening competitiveness of our AI infrastructure and marks a healthy evolution and diversification of our customer portfolio. For our mobile ecosystem, our current priority is to further enhance the user experience and refine our product features. We will explore monetization opportunities after our GenAI-enabled search product features and framework become sufficiently refined. Additionally, we continue to see agents emerging as a promising avenue for monetization. which represents meaningful growth potential for our advertising business. In December, over 27,000 advertisers have been generating ad spending through early agents on a daily basis. With rapid growth in healthcare, legal, education, and B2B sectors, this rapid adoption stems from agents' unique ability to address their specific pain points. agents can quickly master complex, non-standardized service portfolios, a task that traditionally requires lengthy training for human customer service people, while efficiently qualifying leads from standard customer inquiries through intelligent multi-round interactions. For intelligent driving, in Q4, ApolloGo provided approximately 1.1 million rides to the public nationwide, representing a year-over-year growth of 36%. In January, the cumulative rides provided to the public exceeded 9 million. Also, we reached another milestone recently with the successful transition to 100% fully covered operations nationwide. Building on this strong momentum and with an unwavering commitment to safety as our top priority, we expect to see even faster growth in our ride volumes, with a significant acceleration anticipated in 2025 as we further scale our operations. We continue to improve the technology as we scale up. Combined with our validated business model and initial steps in expanding global footprint, we believe we are well positioned to create substantial value and reshape the future of mobility. Driven by our deep-rooted belief in technology and conviction in AI's long-term value creation potential, we will continue to invest to make sure we stand at the forefront of cutting-edge AI technology and deploy that to all our products across the board. With that, let me turn the call over to Jackson to go through the financial results.