Baidu Inc - ADR

AI is now the core growth engine (and majority of revenue mix) - Total revenue: RMB 32.1B (-2% QoQ, -? YoY not stated for total), but Baidu General Business returned to growth: RMB 26.0B (+2% YoY, ~flat QoQ). - Core AI-powered business: >50% of General Business revenue for the first time, at RMB 13.6B (+49% YoY). This is the clearest “inflection” investors should take away. - AI Cloud Infra and AI applications combined: RMB 11.3B in Q1, reinforcing that AI is shifting from “investment” to “material revenue.”

AI Cloud Infra momentum is accelerating—especially inference + GPU Cloud - AI Cloud Infra revenue: +79% YoY (accelerated growth vs broader market). - Within AI Cloud Infra: - GPU Cloud: +184% YoY (accelerating from already strong prior quarter +143%). - Management attributed demand strength to both training and faster-growing inference workloads, with inference taking a growing share. - MoS (model serving) traction: - External token consumption rose to ~7x YoY daily average by March. - Tianfan MoS expanded model library quickly beyond ERNIE to models like DeepSeek, GLM, MiniMax, Kimi, etc. - Compute capacity / supply constraints: management said demand remains strong but supply is relatively tight; they are expanding capacity and improving resource efficiency to support growth.

Margin outlook: structural improvement expected via mix shift (GPU Cloud + apps) - CFO highlighted that as AI businesses scale up, they are expected to contribute both revenue growth and margin expansion over time. - Key margin drivers investors heard: - GPU Cloud structurally higher margins than CPU Cloud (complexity, barriers, stability/availability valued by customers, and cost optimization room via full-stack + Kunlunxin). - AI applications expected to be “naturally higher-margin” with operating leverage. - Corporate levers: cost optimization, improved server utilization, and internal productivity gains from using AI. - Near-term financial tone: operating efficiency improved—non-GAAP operating income for Baidu General Business RMB 4.0B (+39% QoQ); operating cash flow positive at RMB 2.7B (3rd consecutive quarter).