The priority of Baidu's development in 2022 is that the AI cloud business is higher than the industry's revenue growth level, and the "Apollo Go" operation scale. But for Baidu, which is committed to becoming a "leading AI company", the profitability of the AI cloud business will still be an unavoidable problem
Investment Times researcher Prince West
It is not easy to keep the basics, and it is also difficult to transform. The same is true for Baidu (BIDU.O, 9888.H), the head of the Internet.
Recently, Baidu disclosed the fourth quarter and annual results of 2021. According to the announcement, in the fourth quarter of 2021, Baidu achieved total revenue of 33.088 billion yuan, an increase of 9.3% year-on-year; of which the core revenue was 25.978 billion yuan, an increase of 12.4% year-on-year. In 2021, the core revenue of Baidu and Baidu was 124.493 billion yuan and 95.163 billion yuan respectively, an increase of 16.3% and 20.9% year-on-year.
Looking at the company's core revenue, we can see that the year-on-year growth rate of online marketing (advertising) revenue is significantly weaker than that of non-online marketing (non-advertising), while the better growth of the latter is mainly due to the drive of cloud and other AI-driven businesses. In particular, the AI cloud business contributed 15.1 billion yuan in revenue in 2021, accounting for more than 70% of the core non-online revenue.
However, it is worth noting that compared with the overall growth of the revenue side, Baidu's profitability has declined. In fiscal 2021, the net profit attributable to Baidu and the net profit attributable to Baidu's core were 10.226 billion yuan and 13.557 billion yuan, respectively, a year-on-year decline of about 50%. The net profit margin attributable to Baidu and Baidu's core net profit margin also declined from the previous year, with the latter falling by nearly 20 percentage points.
In fact, in the company's performance conference call, Chairman and CEO Robin Li said that the priority of the company's development in 2022 is that the AI cloud business is higher than the industry's revenue growth level, and the "Apollo Go" operation scale. But for Baidu, which is committed to becoming a "leading AI company", the profitability of the AI cloud business will still be an unavoidable problem.
As of the close of trading on March 11, Baidu U.S. stocks closed at $118.92 per share, down 66.48% from the high of $354.82 per share on February 22, 2021, and Baidu Hong Kong stocks closed at HK$131.5 per share, down 48.75% from HK$256.6 per share at the beginning of the listing.
Advertising revenue growth slowed
The announcement shows that in the fourth quarter of 2021, Baidu achieved a total revenue of 33.088 billion yuan, an increase of 9.3% year-on-year. Baidu's core revenue and iQiyi's revenue were 25.978 billion yuan and 7.4 billion yuan respectively, with a year-on-year growth rate of 12.4% and -1%. Among core revenues, online marketing revenue slowed down, up only slightly by 1% from the previous year to 19.1 billion yuan; non-online marketing, driven by cloud and other AI-driven businesses, recorded 6.9 billion yuan, a year-on-year increase of 63%.
For the whole year, in 2021, the company achieved revenue of 124.493 billion yuan, an increase of 16.3% year-on-year. Core revenue and iQIYI revenue were 95.163 billion yuan and 30.6 billion yuan respectively, an increase of 20.9% and 3% year-on-year. Among the core revenues, online marketing revenue was 74 billion yuan, an increase of 12% year-on-year; non-online marketing revenue was 21.2 billion yuan, a sharp increase of 71% year-on-year.
In fact, the slowdown in the growth rate of Baidu's advertising revenue can be seen from the quarterly data. In 2021 Q1, Q2, Q3, Baidu's online revenue increased by 27%, 18%, 6% year-on-year, if combined with Q4 data, advertising revenue growth fell significantly.
In addition, as The current largest traffic entrance of Baidu, in December 2021, the MAU (monthly active users) of Baidu APP was 622 million, an increase of 14% year-on-year, and the proportion of daily login users reached 82%. However, from the revenue side, the revenue of hosted pages may have declined. In the third quarter of 2021, Baidu Online's revenue was 19.5 billion yuan, and the revenue of managed pages accounted for 43%, that is, about 8.4 billion yuan. In the fourth quarter, managed page revenue still accounted for more than 40% of online revenue, calculated at the 40% limit, about 7.6 billion yuan, a decrease of about 800 million yuan from the previous quarter.
In terms of revenue ratio, in 2021, Baidu's advertising revenue accounted for 77.7% of core revenue, although it declined from the previous year, it still accounted for nearly 80% of core revenue; including AI cloud, intelligent driving and other growth plans, "new business" revenue accounted for 22.3%, about 6.5 percentage points higher than the previous year. It is not difficult to see from this that Baidu's transformation from "China's first search engine" to "leading AI company" is slightly difficult.
Baidu's fourth quarter 2021 and fiscal year 2021 results (million yuan)
Source: Excerpt from the announcement
AI cloud business growth is better
In fact, whether it is quarterly data or fiscal year data, Baidu's AI cloud business in the "new business" has performed more brightly.
Baidu AI Cloud has not only made breakthroughs in multiple industries such as transportation, manufacturing, energy and utilities. By the end of 2021, PaddlePaddle's cumulative developer base has increased to 4.06 million, serving 157,000 visitors. Meanwhile, developers have produced 476,000 models at PaddlePaddle. In the field of ACE intelligent transportation, by the end of 2021, according to the contract amount of more than 10 million yuan, 35 cities have landed baidu ACE intelligent transportation, an increase of 21 over the previous year.
In the performance conference call, Luo Rong, the company's chief financial officer, said that the intelligent cloud business has a significant pull on Baidu's non-advertising revenue growth. In the fourth quarter of 2021, the AI cloud business contributed 5.2 billion yuan in revenue, an increase of 60% year-on-year; in 2021, it contributed 15.1 billion yuan in revenue, accounting for more than 70% of the core non-advertising revenue, a year-on-year increase of 64%. Obviously, the AI cloud business has become the "new engine" of the company's revenue growth.
In contrast, intelligent driving is slower. In the fourth quarter of 2021, the self-driving travel service platform "Radish Run" provided 213,000 rides, nearly doubling from the previous quarter. At present, "Radish Run" has covered eight cities in Beijing, Shanghai, Guangzhou, Shenzhen, Chongqing, Changsha, Cangzhou and Yangquan. At the same time, Baidu has charged for the automatic ride-hailing service in Beijing, Chongqing and Yangquan on November 25, 2021, February 18, 2022 and February 27, 2022 respectively.
However, if calculated according to 100 yuan per single, the revenue of the "radish run" order in the fourth quarter is only more than 20 million yuan, which is still small in comparison. Jidu Automobile completed the A round of financing, and there is still a period of time before mass production. Cooperate with BYD to provide autonomous driving solutions for a number of popular models, especially ANP and AVP, two major intelligent driving products, in the future, but it will take time for the cooperation to cash in revenue. As the "third growth engine", the company's intelligent driving is still in the start-up stage.
Core net profit margins fell sharply
In addition, it should be noted that Baidu's profitability has declined.
In the fourth quarter of 2021, Baidu's cost of sales increased by 19% year-on-year to 17.3 billion yuan due to increased traffic acquisition costs, bandwidth costs, merchandise sales costs and other costs related to the new AI business. Sales and management expenses and R&D expenses increased by 27% and 30% year-on-year to RMB6.5 billion and RMB7.4 billion. The increase in costs and these two expenses far exceeded revenue by 10 to 20 percentage points.
As a result, in the quarter, the net profit attributable to Baidu and the net profit attributable to Baidu (Non-GAAP) were 1.715 billion yuan and 4.084 billion yuan, respectively, a year-on-year decline of 66.9% and 40.5%. The net profit attributable to Baidu's core and core net profit (Non-GAAP) were 2.656 billion yuan and 4.625 billion yuan, down 56.0% and 38.6% year-on-year, which was obviously different from the revenue growth.
For the whole year, in 2021, the net profit attributable to Baidu and the net profit attributable to Baidu (Non-GAAP) were 10.226 billion yuan and 18.830 billion yuan, a year-on-year decline of 54.5% and 14.5%. The net profit attributable to Baidu's core was 13.557 billion yuan, a decrease of 48.9%, and the core net profit (Non-GAAP) was 21.292 billion yuan, a year-on-year decline of more than 15 percentage points.
Roughly calculated, in 2021, Baidu Core's net profit margin was 14.25%, down nearly 20 percentage points from 33.71% in the previous year, while Baidu Core's net profit margin (Non-GAAP) was 22.37%, also down nearly ten percentage points from the previous year. The net profit margin attributable to Baidu and the non-GAAP net profit margin (Non-GAAP) were 8.21% and 15.13%, both of which also declined from the previous year.
In the performance conference call, Robin Li said that the company's development priorities in 2022 are: AI cloud business, maintaining a higher level of revenue growth than the industry; further expanding the operation scale of "Apollo Go" to provide ride services for more passengers; continuing to expand cooperation with automobile manufacturers, especially in ANP and AVP intelligent driving products; Jidu Automobile plans to launch the first concept mass production car at the Beijing Auto Show in April, accept orders in the second half of the year, and plan to achieve mass production in 2023. In other words, business growth remains a priority, and profitability metrics are not considered.
Baidu Core's Fourth Quarter 2021 and Fiscal Year 2021 Results (MILLION)
Source: Company announcement