Baidu, Inc. Price & Performance (BIDU)

Hello, everyone, and welcome to Baidu's fourth quarter and fiscal year twenty twenty four Baidu's earnings release was distributed earlier today you can find a copy on our website as well as on newswire services. The call today, we have Rodney Me our Co Founder and Julius Chartered of Baidu Mobile Ecosystem Group, AmiJi, Douxun, our EVP in charge of Baidu AI Cloud, ECG and Jackson, Jin Jihe, our Interim CFO. After our prepared remarks, we will hold a Q and A session. Please note that it is discussion today will contain forward looking statements made under the Safe Harbor provisions of The U. S. Credit Security Validation Reform Act of 1995. Forward looking statements subject to risks and uncertainties that could cause actual results 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 unaudited non GAAP financial measures, Our press release contains a reconciliation of the unaudited non GAAP measures to the unaudited most and is available on our IR website at ir.baidu.com. As a reminder, In addition, webcast 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 Corp total revenue for the fourth quarter saw a slight year over year increase, reaching RMB27.7 billion. Our AI cloud demonstrated robust momentum with revenue growth accelerating to 26% year over year. Offsetting the softness in our online marketing business. 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 mega trend. 2024 marked a pivotal year as Gen AI 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 Baidu 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 businesses. Our cloud business demonstrated strengthening momentum towards 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 [indiscernible] Meanwhile, Baidu's autonomous ride hailing service ApolloGo has proven the viability of its spins model strengthening our confidence in pursuing global expansion and exploring asset light.

VINCE models. Ernie has demonstrated industry leading capabilities in instruction following and state of the art RAG technology that minimizes [indiscernible] This best in class capabilities have driven wide spread adoption across various scenarios, leading to significantly growing API calls. In December, Ernie handled approximately 1,650,000,000 API calls, 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 costs is driven by two reasons. First, businesses are finding enough value from integrating earning 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 Earning 4.5 series and make Earning Bot free for end users. Which we believe will further expand market awareness of earnings 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 Grid Corporation of China to develop a tailored AI solution based on Ernie and our mass platform, Tianfeng.

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, State Grid has increased its spending on our AI cloud services further deepening its collaboration with us. We also collaborated with Xiaoping, a leading recruitment company adopt earning powered outbound calling product for campus recruitment. Featuring highly human like voice with natural conversational [indiscernible] the product enables sophisticated multi round interactions Earning's advanced capabilities ensured accurate gauging of candidates' interest in job opportunities while consistently keeping conversations on track. With this product, Xiaoping 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 It's just As enterprises continue to discover novel ways to harness earning and our AI cloud potential, we foresee an ever expanding horizon of possibilities unfolding before us. On the consumer facing products, Baidu Wengkoo is a shining example In Q4, Wengkoo's subscription revenue grew 21% year over year. In December, Vancur's monthly active user of AI enabled features reached 94,000,000, almost doubling quarter over quarter.

Making Wengkoo one of the world's largest AI products by the number of paying users. This quarter, we integrated Baidu Wengkou and with Baidu Drive, enhancing Wanku as an AI powered creativity platform. This integration allows Wengkoo to combine personal cloud storage with AI powered search and document creation capabilities. While enabling users to streamline their workflow accessing files to creating and sharing, all within a unified seamless platform. Furthermore, when Ku introduced free Canvas in January, which transforms content creation by enabling users to organize diverse formats. Text, slides, audio, videos and even website links. [indiscernible] Free Canvas also integrates with Wengkoo's existing AI capabilities, including AI editor, and AI powered PowerPoint features. Allowing users to access our full suite of AI editing tools can save or share their work in any desired format [indiscernible] Leveraging Ernie, Wengkoo is transforming into a next generation intelligent creativity platform that redefines how users create, collaborate and bring their ideas Now turning to Search, our largest consumer facing product. Which stands as another compelling testament to our AI formation Over the past several quarters, we have aggressively leveraged earning to transform Search. This has been a challenging but deeply meaningful journey. Like pioneers crossing on familiar 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 our search results pages contain AI generated content. During the quarter, we mainly focused 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 than was previously inaccessible, presented in more engaging ways that aligned 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 Gen AI 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 third queries and showed higher orientation rates and longer time spent. We are encouraged to see daily search queries produced by During our AI transformation of search, we placed strong emphasis [indiscernible] Athlete invasion agents will become one of the most important form 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 [indiscernible] Thanks to our industry leading digital human technology. This represents a powerful innovation path we've pioneered breaking new ground in how agents [indiscernible] Taking our newly introduced lawyer agents as an example, This embodied lawyer page can transform legal expertise and industry knowledge into engaging multimodal 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 Baidu Search.

And Feed. While pioneering innovative formats of content and user engagement Moreover, these agents also create significant value for lawyers, helping them build personal brands [indiscernible] 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, Apollo Go 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 valid 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 feeds have a accumulated more than 130,000,000 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 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 [indiscernible] 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 expertise in autonomous driving operations as we are committed to expanding our footprint bringing safe, reliable and convenient autonomous Baidu hailing 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 RMB7.1 billion in Q4, delivering a strong year over year increase of 26% with expanding non GAAP 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 Chiantfang, our mass platform, which improves model an 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 train SFP data labeling and preparation for all models hosted on Tianban. Enabling us to deliver the most suitable models and tools to enterprise clients at all scales. The increasing market recognition of our AIX 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 business. This reflects the strengthening competitiveness of our AI infrastructure marks a healthy evolution and diversification of our customer portfolio. [indiscernible] mobile ecosystem, Our current priority is to further enhance the user experience and refine our product features. We will explore monetization opportunities after our Gen AI 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 earning 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 a approximately 1,100,000 rides to the public nationwide, representing a year over year growth of 36 In January, the cumulative rights provided to the public exceeded 9,000,000 Also, we reached another milestone recently with the successful transition to 100% fully covering 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 right [indiscernible] 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 Driven by our deep rooted belief in technology and conviction in AI long term value creation potential, We will continue to invest to make sure we stand at the forefront of cutting edge AI tech to all our products across the board.

With that, let me turn the call over to Jackson to go through the financial results. Quarter and full year 2024 financial results. Total revenues in the fourth quarter were RMB34.1 billion, decreasing 2% year over year. Total revenues for the full year 2019 were RMB133.1 billion, decreasing 1% year over year. Baidu Co's Q4 revenues were RMB27.7 billion, increasing 1% year over year. In 2024, Baidu Co generated RMB 104,700,000,000.0 in revenue, increasing 1% over year. By two quarters, online marketing revenue decreased 7% year over year to RMB17.9 billion in Q4, accounting for 65% of Baidu's total revenues. Baidu Co online marketing revenue decreased by 3% year over year in '24. Baidu Co's non online marketing revenue was RMB9.8 billion, up 18% year over For the full year 2024, non online marketing business increased 12% year over year. The increase in non online marketing business was mainly driven by AI cloud business, Revenue from iQIYI was RMB6.6 billion in Q4, decreasing 14% year over year. Revenue from iQIYI was RMB 29,200,000,000.0 in 2024, decreasing 8% year over year. Cost of revenues was RMB18 billion in Q4 increasing 3% year over year primarily due to an increase in traffic acquisition costs costs related to AI car business and a one time write down of inventories.

Partially offset by a decrease in personnel related expenses and the content costs. Cost of revenues was RMB66.1 billion in 2024, increasing 2% year over year.

Primarily due to increase in traffic acquisition costs bandwidth costs and the server cost savings fees. Partially offset by a decrease in personnel related expenses and content costs. Operating expenses were RMB12.2 billion in Q4 which remained flat compared to the same period last year. Primarily due to increase in expected credit losses [indiscernible] and the server cutting fees for Gen AI's research and development inputs. The channel spending and promotional marketing expenses. Partially offset by a decrease in personnel related RMB561 million of the increase in expected credit losses was pertaining to a one time extra rule. Operating expenses were RMB 45,800,000,000.0 in 2024, decreasing 4% year over year. Primarily due to a decrease in personnel related Operating income was RMB3.9 billion in Q4 compared to RMB5.4 billion for the same period last year. Baidu Co operating income was RMB3.6 billion and Baidu Core operating margin was 13% in Q4, compared to RMB4.7 billion and 780,000,000.00 for the same period last year. The decrease due to one time loss of RMB101 billion including accrual of credit losses write down of inventories and other. Operating income was RMB21.3 billion in 2024, Baidu Co operating income was RMB19.5 billion and Baidu Co operating margin was 19% in 2024.

Non GAAP operating income was RMB5 billion in Q3. Non GAAP Baidu Co operating income was RMB4.6 billion and non GAAP Baidu core operating margin was 17 Non GAAP operating income was RMB 26,000,000,000 in 2024. Non GAAP Baidu core operating income was RMB23.9 billion, and non GAAP diluted operating margin was 23% in 2024. In Q4, total other income net was RMB2.7 billion, compared to total other loss net of RMB2.5 billion for the same period last year, mainly due to an increase in net gain arising from exchange rate fluctuation, which between RMB and the U. S. Dollar and a decrease in pickup losses from equity method investment, which modified certain terms of its preferred shares and resulted in significant in 2023. Income tax expense was RMB1.6 In 2024, total housing income net was RMB7.4 billion, decreasing 20% year over year, primarily due to a decrease in pickup loss Income tax expense was RMB4.4 billion, In Q4, net income attributable to Baidu was RMB5.2 billion, and diluted earnings per ADS was RMB14.26. Net income attributable to Baidu Co was RMB5.3 billion and net margin for Baidu Co was 19 Non GAAP net income attributable to Baidu was RMB6.7 billion.

Non GAAP diluted earnings per ADS was RMB19.19. Non GAAP net income attributable to Baidu Core was RMB67 billion, non GAAP net margin for Baidu Core was 24%. In 2024, net income attributable to Baidu and RMB23.8 billion, and diluted earnings per ADS was RMB35.91. Net income attributable to Baidu Co was RMB23.4 billion and net margin for Baidu Core was 22%.

Net non GAAP net income attributable to Baidu was RMB 27,000,000,000, Non GAAP diluted earnings per ADS was RMB 76.85. Non GAAP net income attributable to Baidu Core was RMB26.3 billion Baidu non GAAP net margin for Baidu Core was 25%. As of 12/31/2024, cash, cash equivalents, restricted cash and short term investments were RMB139.1. And cash, cash equivalents, restricted cash and short term investments, excluding Free cash flow was RMB13.1 billion, and free cash flow excluding I We define net cash position as cash cash equivalents plus total restricted cash deposits and other. Less total loans, convertible senior notes As of 12/31/2024, net cash position for Baidu was RMB170.5 billion, Baidu Co had approximately 31,000 employees of December 3139. With that operator, let's now open the call to questions.

Ladies and gentlemen, we will now begin the question and answer session.

Announced My questions is on the latest hot topic. So we have seen DeepSeq gaining a lot of attention lately. And Baidu recent announcement for the open sourcing, the upcoming Ernie 4.5 series and also making Ernie bot for free. So could management share with us the strategic thinking behind this move? And also, how do we view [indiscernible] current competitive landscape of the foundation's models. How does Spiedu plan to stay ahead of this evolving market? Thank you.

Hi, Alicia. Let me answer your questions. The general AI and foundation model market is still nascent, but moving at a very faster pace. The DeepSeq success story will certainly accelerate the adoption foundation models As foundation models become more accessible and a affordable, I believe we are entering a truly transformative phase. We will see an explosion of new AI applications and use cases that will open up incredible opportunities and push the boundaries of What's possible with AI? One thing we learned from DeepSeq is that open sourcing the best models can greatly help adoption. When a model is open sourced, people naturally want to try it. Out of curiosity. Which helps drive broader adoption Early 4.5 will be our best models ever and we would like to have our users and customers try them out more easily than before. So our decision to open source 4.5 series is also backed by our deep confidence in our technology leadership. This conviction stems from our decade long commitment to R and D investment. Our continuous technological innovation and our unique position as one of the few companies worldwide with full stack AI capabilities. Ernie has already demonstrated strong market traction with daily API calls surging from $50,000,000 to $1,650,000,000 in just one year.

So through open sourcing, we believe more developers and users [indiscernible] Driving even broader adoption and expanding its impact across more scenarios. Similarly making earning bot free, will enable more users to compare our foundation models with other models on an apple to apple Baidu. Because they don't charge Last time we had a major upgrade of earning was in October 2023. So it's a long time ago. So stay tuned for earning 4.5 next couple of months. Having said that, I want to emphasize one crucial point. No matter open source or closed source, foundation models become truly valuable on the only once they can effectively address real world problems at scale. [indiscernible] We have been committed to an application driven approach and continuously iterating earning. With this mindset, since launching, we have been using Ernie to renovate our products while serving enterprise customers. Internally, we've leveraged Oerne to successfully consumer facing products like Baidu Search and Baidu Weng Ku. Externally, through our mass we are enhancing the model and application development [indiscernible] for enterprise clients. Earnings' industry leading capabilities in instruction following, and state of the art retrieval augmented generation technology minimize this hallucination have enabled the wide adoption across various scenarios.

And Tianfeng's comprehensive tool chain [indiscernible] Customers to customize any model for their own application scenarios. Going forward, we plan to accelerate earnings iteration based on performance improvement and cost cutting potential. We will continue evolving it in areas with greatest potential for real world impact We are excited about the new chapter of AI development and we look forward to seeing AI technology bring more groundbreaking applications that have lasting value for the society. Thank you. Thank you. Your next question comes from Lincoln Kong from Goldman Sachs.

Thank you management for taking my questions. So my question is about the search business. So following recent quarters of search revamp so how should we think about the future adjustment or changes? So what's the current mix of the G and A result and what's our target mix And also as AI integration continue to deepen, could you share more color around the user metrics? Given that AI chatbot such as DeepSeq and Dobao are also offering search capability? Do do you view the competitiveness or the competition dynamics between Baidu Search and those AI chat bots? Thank you. Hi, Lin Zhang. Let me answer your question. And currently, around 22% of all search result pages, which have contained the AI generated contents. However, there is much more getting on piloting We have fundamentally transforming such and making more powerful and efficient than ever before.

And same as Robin said in the prepared remarks, with earnings, we have expanded the search beyond tax and links to offer diverse content formats including short videos, live streaming, agents, notes and short plays. And these different formats can be dynamically combined to create a personalized search As we continue to transform our search, we also are developing capabilities, which allow for the deeper personalizations adapting to each user's habits and preference. And our efforts have led to a better user results. And in general, can see that among monthly active users who can dollar search on Bilibili, 83% engage with the generated AI content. What's even more encouraging is that in December, the search queries per user on the Baidu app grew by 2% year over year. We focus on continuously improvement in user experiences expanding the AI's role as we see increasing positive those engagements Building on this, let me share a small case of how earning agents can create values for our advertisers.

During this past Chinese New Year holiday, while many small and medium enterprises are closed for one week and customer demand in certain industry actually peaked. Our earning agents effectively bridge this gap. Company saw increased inquiries as a family reunite and chair on elderly parents house needs. Other customers [indiscernible] actually were away because they're on holiday. Through the earning agents, we have the company effectively identify and qualify the highly relevant sales leads enabling them to efficiently flow our and serve their customers seamlessly, even with a reduced in geographical holiday. And regarding your question about AI chatbots and such, we believe that we are still in the very early stage of the AI revolution driven by the financial models. Whether it's AI native chatbots like Deepsea or our AI driven products, these kind of efforts. And these all represent different ways to explore AI potential. As the leader in Chinese search market with hundreds of millions of users, maintain agility and Holistic market view by increasing the best innovations and incorporating the truly innovative AI features. We continue to pioneer AI transformations enhancing the search experiences for our massive user base.

Also, search by its nature is deeply rooted in language, [indiscernible] Which aligns perfectly with the large language model capabilities This position us where to lead in the AI empower such transformation. We believe such is evolving into integrated platform that's go beyond the AI chatbots and one that not only provides the smart answers, but also guides users through their entire journey from finding answers to providing in-depth analysis to completing tasks and ultimately to delivering the comprehensive services and solutions Our AI travel represent an important but early phase in AI application development the QA app today has not yet And for us, the key is to maintain this rapid and determined pace of the air transformation [indiscernible] what users truly need and want from the next generation of search. Thank you, Lin Tian.

Thank you. Your next question comes from Alex Yao from JPMorgan. Please go ahead.

Question. So could you comment on core apps growth outlook for first quarter twenty twenty five and full year 2025? What are the macro assumptions you made [indiscernible] as the advertising business truly bottomed out in 4Q twenty twenty four and started to recover, Lastly, what are the potential opportunities for monetizing Gen AI search and what is the expected timing? Thanks, Alex.

Is Julius. Let me answer your question. Yes, we are seeing different kinds of similar policies rolling out in the past few months [indiscernible] and trading policies. And while we believe that these measures will even will benefit the economy, and they need some time to flow through. Given that our advertising business is highly correlated with the small and medium enterprises, who are particularly sensitive to macro conditions.

Plus, with persistently challenging competitive landscape, and we haven't really seen any improvements in Q4 yet. Despite near term pressures, our efforts to transform search financial models are progressing aesthetically and we believe that with AI transformations, we will continue to enhance the user experiences and create new This quarter, we further deepen the AI transformation of such and we are seeing encouraging improvements in user metrics as we talked about in the prepared remarks. And we believe this will help drive revenue growth in Opin the new monetization opportunities in the Logan Tenn. Also, we haven't started monetizing our results at scale year, which is around 22% of the total queries. Once our AI AI powered such features are sufficiently refined we will move forward with monetization. With higher quality user products, we are seeing opportunities for future growth. Based on these factors, we think that we are reaching the low point of our advertisement businesses we expect our app businesses to gradually improve with the first half of the year performing better than Q4 and the second half of the year showing further improvement over the first half. Thank you, Alex. Your next question comes from Gary Yu from Morgan Stanley.

Please go ahead. Thank you.

For the opportunity. So my question is regarding AI Cloud. Given the strong growth of your AI Cloud business this quarter, Can we expect a continued positive traction going into 2025? And both in terms of revenue and also profitability. What are the main driver behind this momentum? And additionally, could management share your outlook on the AI cloud market? In 2025? How should we approach enterprise cloud demand and what incremental opportunities does AI bring to this segment? Thank you.

You, Gary, for your question.

So as Robin mentioned, our AI cloud revenue growth accelerated to 26% year over year in Q4.

Contributing to a full year revenue growth of 17% in 2024. Notably, our Genie AI related revenue nearly tripled year over year in 2024.

So this growth was fueled by rising demand for early and our AI infrastructure, underscoring the market's strong recognition of our technology leadership So as a result, we have successfully attracted a diverse customer base and build a robust pipeline of opportunities. So for the AI infrastructure, we have established partnerships across diverse sectors including Internet, automotive, smart devices manufacturing, energy finance, utilities, and loss of AI GC startups Our customer base continues to grow healthily With strong gains among both top tier and mid tier customers. Demonstrating our expanding market share in China's cloud market.

On the MOS platform, [indiscernible] It provides comprehensive foundation models with industry leading press and performance.

So we offer the Ernie family of models from flagship to lightweight variants. Designed to meet And besides we also provide access to a wide range of high quality third party foundation models. Including TIPS6 V3 and R1 models. Thanks to our full stack AI capabilities, and end to end optimization, we can ensure Optimal performance and stability for Animodels hosted on our platform. While maintaining highly competitive pricing.

So in addition to that, Xianfang provides a full site of tools for fine tuning models and building AI native apps.

So that our customers can easily work out solutions catering for their own specific needs.

So in terms of the AI cloud market, we believe it will grow rapidly in 2024. 2025.

On one hand, during the recent Chinese New Year holiday, large younger models became a widely discussed topic This not only further increased public awareness of foundation models, but also encouraged more people to think deeply about how to leverage them to improve their own businesses.

On the other hand, we are confident that the performance of foundation models will continue to improve. While the costs will steadily decline. Surely, this will further lower the barrier to utilize these models. So as a result, we believe more enterprises will integrate foundation models into every aspect of their business operations. From R and D to production and to which drive explosive growth in API costs.

Thereafter, we anticipate increased spending on Baidu AI Cloud.

As we have observed a clear trend in the farm site [indiscernible] who adopted foundation models through API calls on our Tianfeng mass platform also tended to increase are spending on our AI cloud services.

On the profit side, our non GAAP operating margin continued to expand year over year in Q4 as we focused on high value opportunities that align with our [indiscernible] priorities which drives sustainable robust robust growth So looking into our 2025, we are confident that our AI cloud revenue growth will maintain strong momentum While continuing to generate positive operating profit. Thank you, Gary. Thank you. Your next question comes from Zhong Wei from UBS. Please go ahead. Hi, management. Good evening. Thank you for taking my question. I want to ask about our margin trend. So given the near term headwinds in core ads and the increasing mix of cloud revenue, how should we think about the core margin levels in the first quarter and also full year 2025? Is there any room to further optimize our operating efficiency And also are there any investment plans for the full year that we should be aware of? Thank you.

Thank you, Wei, for your question.

This is Jackson.

So So despite the near term pressure, so we remain optimistic that our AI investment to deliver more sustainable impact So we stay focused on improving resilience across all aspects of our business operations and see encouraging progress across our businesses. First, for our online marketing business, we expect our advertising revenue to gradually improve by our plan to monetize our AI generated search results at SKU and also our readiness to capture growth opportunities. [indiscernible] Secondly, so for our AI cloud business, it has already demonstrated robust growth with continued margin improvement. Driven by our growing market presence and the competitive advantage in our unique self developed four layer AI architecture and the four step AI capabilities So we remain confident in maintaining this strong momentum going forward. Third, for our entire driving business, after go. We remain focused on narrowing losses with better operation efficiency and improved We are also exploring innovative operational models including asset led models. As you asked for the investment and optimization in 2025, we will maintain optimal resource allocation to high growth opportunities while staying aligned with our long term strategy. Our investments will continue to focus on initiatives that offer both tremendous future opportunities and strong ROI potential, including further advancing earnings deepening the AI transformation of search enhancing our AI cloud offerings and expanding our autonomous driving initiatives.

As we move forward with these initiatives, we remain committed to enhancing operational efficiency [indiscernible] to maximize the impact of these strategic investments. Thank you. [indiscernible] next question comes from Miranda Zhang from Bank of America Securities. Please go ahead. Good evening. Thanks management for taking my questions. Question. My question is about the RoboTaxi business. Can management provide updates to progress of the RoboTaxi business heading into 2025? What other targets for fleet size unit economies and value proposition for our robotaxi business.

What do you think the industry is approaching Are we reaching an inflection point? And what's your view about the competition dynamics As we are seeing that China's robotaxi competitors are leveraging ecosystem strategies with automakers and also right yielding platforms So wondering what is Baidu's approach to compete and scale Again, this is Robin.

We've invested in autonomous driving technology for over a decade. [indiscernible] We have turned our big vision into reality. Through Apollo Go, we established ourselves as a leading global player in autonomous driving technology. We operate in one of the most challenging environments globally. China's traffic conditions are among the worst most complex due to its massive population diverse road conditions, dynamic traffic scenarios, And complicated urban layouts. The price for ride hailing in China is about like one seventh of that in The U. S. So our successful operation here demonstrates our exceptional technological and operational capabilities. We designed the RT6 our sixth generation short tons vehicle from the ground up It is the most cost effective global taxi vehicle the world has ever seen. [indiscernible] and Baidu strong foundation for further scaling and global expansion. [indiscernible] approximately R1.1 million dollars nationwide that's 36% increase year over year. And in January, the cumulative rights provided to the public exceeded 9,000,000 Furthermore, as I mentioned, we've achieved 100% fully driverless operations in China which means that we don't have any safety [indiscernible] on the vehicles anymore. So this is a new industry benchmark and it reinforces our leadership in this area.

As I mentioned earlier, in November of last year, a political got To start, open road testing in Hong Kong, important step because Hong Kong is the first is our first right hand drive and left hand traffic market. It shows our ability to adapt our autonomous driving technology to different traffic systems. Opening doors for expansion into other markets with similar driving setups. This year will be a paramount year for our expansion. We expect to grow our feed size and write volumes faster than ever. As we push forward, we We're also actively seeking cooperation opportunities. We have identified a variety of potential partners including mobility service providers, local taxi companies, third party fleet operators Baidu other potential partners. This asset light approach will allow us to scale up efficiently while maintaining flatbed By working with diverse brand job partners, we aim to strengthen our position in the market and bring autonomous driving to even more people. Looking at the broader market, as I mentioned in our last earnings call, since the market is still in its infancy, competition actually helps accelerate the market development and foster a more friendly pro innovation regulatory environment. And in this growing market, our mission remains clear.

Delivering safer more convenient and more comfortable mobility experience for more users.

Thank you.

Thank you. Your next question comes from Thomas Chong from Jefferies. Please go ahead.

Hi, good evening. Thanks management for taking my questions. Looking into 2025, what will be Baidu's strategic focus for business investments? Specifically, how will resources be allocated across search, autonomous driving, cloud services and foundation models Additionally, what is management's outlook on full year 2025 capital expenditures, as well as shareholders' returns Thank you. Thank you, Thomas. This is Jackson.

So as we evaluate our capital allocation options in 2025, so our approach are guided by the following strategic [indiscernible] So we will continue to invest in advancing our Baidu capabilities as a long term strategic priority. So with that, we will further deepen the transformation across our product portfolio [indiscernible] [indiscernible] we aim to drive the adoption of our AI infrastructure. Our mass platform Tianfeng, and the earning among enterprise customers meeting their growing demand for our AI products and solutions. As well as AI car services. In intent driving, so we are focusing on scaling domestic operations exploring innovative operational model and expanding our international presence. So while ensuring disciplined ROI management and effective loss control. For CapEx, two key priorities to drive our decisions. So strengthening our technology leadership and accelerating the [indiscernible] across different sectors.

So as you asked for shareholder returns, we repurchased over US1 billion dollars since the beginning of 2024, which is significantly higher than our total buybacks in 2023. So in total, we have repurchased US1.7 billion dollars under our $5,000,000,000 purchases program. Which runs through December 2025.

So going forward, we plan to accelerate our buyback program as part of our ongoing efforts to return value to our shareholders for their enduring trust and support.

Thank you.

Ladies and gentlemen, that is all the time we have for questions. That does conclude our conference for today. You for participating participating. You may all disconnect. [indiscernible] [indiscernible] [indiscernible] Thank you.