“These changes have brought phased pains and will have a positive and far-reaching impact.” Li Yanhong said in an internal letter after the release of the earnings report.

After experiencing the “gray” financial performance of the previous quarter, Baidu ushered in the Q2 earnings report this year on August 20th, Beijing time (August 19th, US Eastern Time).

First look at the market. In Baidu’s unannounced financial report of Q19 in 2019, Baidu achieved revenue of 26.3 billion yuan, up 1% year-on-year and 9% quarter-on-quarter. This figure is higher than market expectation 257.68. 100 million yuan.

As of 18:00 on August 19th, Baidu’s US stocks rose 7.52%, or $104.22 per share, with a market capitalization of $36.479 billion.

Compared with Q1’s operating income and net profit, Baidu experienced a certain degree of recovery in Q2.

Operating indicators, Baidu Q1 has experienced its first quarterly loss since 2005. At Q2, Baidu’s operating profit returned to 233 million yuan, but it still fell 96% year-on-year. According to non-GAAP calculations, Baidu Q2’s operating profit reached 1.96 billion yuan, down 70% year-on-year.

In terms of profitability indicators, Baidu Q2’s net profit reached 2.4 billion yuan, although it still fell 62% year-on-year, but it has a 62% increase. According to non-US GAAP, Baidu Q2 net profit reached 3.63 billion yuan, down 53% year-on-year.

Earnings per share, Baidu Q2 adjusted earnings per ADS of 6.57 yuan, the market expects 6.27 yuan; compared with the same period last year, the income per ADS 18.14 yuan fell 64%; according to non-GAAP calculation, Baidu Q2 per ADS revenue was RMB 10.11, down 54% from RMB 21.83 per ADS in the same period last year.

And Baidu’s most important business, Baidu Core (a combination of search services and transaction services), is still difficult to hide the growth rate in Q2.

Baidu Core Q2 revenue was RMB 19.5 billion (US$2.85 billion), down 2% year-on-year; net profit attributable to Baidu’s core was RMB3.73 billion (US$543 million), down 54% year-on-year.

Since Baidu Q1 announced its earnings report, it announced that the former search company president resigned from Hailong and the search company transformed into a mobile eco-business group (MEG). Baidu content ecology became the focus of the financial report. The Baidu Q2 financial report also disclosed the core business data such as Baidu APP and small programs.

TruncationIn June, Baidu App’s daily users reached 188 million, a year-on-year increase of 27%; smart small programs reached 270 million monthly users, a quarter-on-quarter increase of 49%; Baijia number content creators reached 2.2 million.

“With the strong growth of traffic and the continued expansion of the mobile ecosystem, we will focus on improving profitability, increasing the return on investment of our customers and bringing more value to our shareholders,” said Bai Zheng Chief Financial Officer Yu Zhengyu.

In the Baidu Q2 financial report, the traffic cost still has a small increase, the number is 3.4 billion yuan (about 499 million US dollars), an increase of 27%, the earnings report, Baidu said this is due to The increase in TAC (traffic acquisition) costs and the expansion of offline digital screens and other areas.

Since May of this year, Baidu has successively exposed a series of investments in praise, knowledge, and shell, all of which are related to the small program and knowledge system of Baidu’s content ecology. This is also a defense measure for Baidu to strengthen the content integration under the attack of competitors on search and short video.

As an important member of Baidu’s content ecosystem, iQiyi’s user scale has continued to grow. As of June, the number of members reached 100.5 million, a year-on-year increase of 50%. In Baidu Q2’s earnings report, its content cost was RMB 5.8 billion (US$ 847 million), a year-on-year increase of 12%, mainly due to the increase in content investment of iQiyi.

In the AI ​​business that Baidu bets on, Baidu’s smart speaker business has become a rare bright color. According to data released by Canalys and Strategy Analytics, the small smart speaker has become the first in the Chinese market for two consecutive quarters, and ranks among the top three in the global market with Amazon and Google.

In the first half of 2019, the Baidu AI open platform was widely used, and the number of developers increased to 1.3 million. The download volume of developers of Baidu’s deep learning platform, the paddle, increased by 45% in the second quarter of 2019.

As for the autopilot business, Baidu said in its earnings report that China FAW has mass-produced a self-driving taxi equipped with Apollo in June. Baidu’s first autopilot taxi program in Changsha, Hunan is still steadily advancing. As of June, the Baidu Apollo test team had a mileage of over 2 million kilometers, covering 13 cities. As of July, Baidu had a total of 204 autopilot road test licenses in China, which is five times that of the second company.

However, Baidu’s autopilot business still faces the possibility of spin-off. According to “Late Post”, Baidu’s unmanned driving department will be split next month.

After Baidu’s second earnings report, Baidu’s CEO Li Yanhong issued an internal letter saying that during this time, faced with severe external challenges and a weak macro environment, the company promoted a series of subversive changes from top to bottom, involving Organizational structure, personnel changes, business consolidation, and so on. These changes will bring phased pains, and will bring positive and far-reaching effects, making Baidu more stable and farther.

Attached to the full text of Li Yanhong’s internal report:

You Baidu classmates:

Beijing time today morning, the company released the second quarter of this year’s financial report: the total revenue of 26.3 billion yuan, net profit of 2.4 billion yuan. From today’s earnings report, some good signs are being presented, and the company’s performance has stabilized and rebounded. This also proves that Baidu is still firmly and motivated in the core business field.

This time, faced with severe external challenges and a weak macro environment, the company pushed a series of disruptive changes from top to bottom, involving organizational structure, personnel changes, business consolidation and so on. These changes will bring phased pains, and will bring positive and far-reaching effects, making Baidu more stable and farther.

Search is the foundation of Baidu and is the core value of Baidu. In the past 20 years, Baidu search has been focused on meeting the needs of users to obtain information on an equal and convenient basis. It is the attention of users and the continuous investment in core technologies, which builds up our competitive barriers and maintains the leading position of Baidu search. Today, we are redefining the search with AI. Because of the evolutionary history of search engines, it is the evolutionary history of artificial intelligence technology.

The direction of smart search is evolving is a more accurate answer, or even the only answer. At present, the first satisfaction rate of Baidu’s search results has reached 51%. Smart search has broken through the “box” limit, extending from mobile phones to smart speakers, smart cars and other scenes, and will become a ubiquitous super-intelligent interactive portal. We must always be committed and do the best search.

Based on a solid search base, Baidu is building an unprecedentedly prosperous mobile ecosystem. In June, the average number of daily users of Baidu App reached 188 million, a year-on-year increase of 27%. The dual-engine consisting of “search + information flow” and the “double-family + small program” double-environment further consolidate the status of Baidu App’s super-entry, and promote the strong growth of Baidu App’s user duration and search traffic. .

Smart applets help us build a new content and service ecosystem. On the one hand, Baidu search’s unique centralized distribution, long tail distribution and other features can help developers get traffic and let the smart applet grow rapidly. On the other hand, rich smart applet products are also an important starting point for improving the search experience. The ability to search for information and services is greatly enhanced. Thanks to the benign interaction between search and smart applets, the smart small program has 270 million monthly active users, and the number of small programs has reached 150,000, covering 271 sub-categories.

In the AI ​​field, we lay out in advance and continue to invest for many years. At the dawn of the industrial intelligence wave, Baidu is in an unprecedented position. Baidu Smart Cloud has developed rapidly with its “Cloud+AI” strategy. In Canalys and SynergyIn the China Public Cloud Report released by Research in the first quarter of 2019, Baidu Smart Cloud ranked among the top four public service providers in China for PAAS (Platform as a Service) and IAAS (Infrastructure as a Service). This is due to Baidu’s long-term first-mover advantage in AI’s basic capabilities and the industry restructuring opportunities that AI brings to cloud services. As the world’s largest open platform for autonomous driving, Apollo continues to strengthen and strengthen its industry leadership.

In early August, Baidu and FAW Hongqi jointly built the first domestically produced L4-class self-driving taxi Robotaxi, which has been scaled up in Changsha. The small assistants continued to maintain strong momentum during the quarter. The cumulative number of activated devices exceeded 400 million units, a year-on-year increase of 4.5 times; monthly voice queries exceeded 3.6 billion times, a year-on-year increase of 7.5 times. Provide users with ubiquitous intelligent interactive services in different scenarios such as mobile, home and car. The small smart speaker has become the first in the Chinese market for two consecutive quarters, and ranks among the top three in the global market with Amazon and Google.

“Climbing the mobile foundation and winning the AI ​​era” is our core strategy. We have a big opportunity in front of the distance to let Baidu re-enter the industry. With plenty of grain, we have built some important bridgeheads in key locations. We need more generals who dare to make military orders, more A soldier who dares to fight hard. Before Baidu is about to celebrate its 20th birthday, before “using technology to make the complex world simpler,” I believe we can also make Baidu a simple, dream-driven company, as it was when it was born 20 years ago.

Robin