BIDU - Baidu, Inc.

Operator: Hello, and thank you for standing by for Baidu's Second Quarter 2025 Earnings Conference Call. [Operator Instructions]. Today's conference is being recorded. [Operator Instructions] I now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's Second Quarter 2025 Earnings Conference Call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website as well as our Newswire services. On the call today, we have Robin Li, our Co- Founder and CEO, Julius Rong Luo, our EVP in charge of Baidu Mobile Ecosystem Group MEG , Dou Shen, our EVP in charge of Baidu AI Cloud Group ACG; and Henry Haijian He our 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 Securities Litigation 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 filings 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 directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Yanhong Li: Hello, everyone. In Q2, Baidu Core's total revenue was RMB 26.3 billion. Our AI cloud continued to gain momentum, growing 27% year-over-year to RMB 6.5 billion. Notably, Baidu Core's non-online marketing revenue exceeded RMB 10 billion for the first time. That's up 34% year-over-year. This performance helped offset the near-term headwinds in our online marketing business. This year marks Baidu's 20th anniversary as a public company. Over the past 2 decades, we remain grounded in our belief in technology and innovation. Today, technological advancement is unfolding at an unprecedented pace. We've embraced the mega trend with open mind, experimenting boldly adapting quickly and engaging deeply with AI frontiers. Amid rapid evolution, we've identified and doubled down on a few directions, we believe holds the greatest long-term value and are deepening our efforts with increasing clarity and confidence. Foundation model development remains a key focus area where we are actively exploring the frontier of foundation model research and pushing the boundaries of AI capabilities. With an application-driven approach, we see earnings intuition towards areas with real world application value. such as the fundamental AI transformation of Baidu Search and our industry-leading digital human technology. Take digital human as a prime example, which represents 1 of the best applications of our ERNIE models. This quarter, powered by ERNIE, our digital human technology reached new levels of realism and capabilities, matching or even exceeding human performance in certain scenarios. A standout case was a live stream featuring the digital human of volume call, a top influencer in China. The 7-hour live stream generated tens of millions in GMV fully powered by ERNIE series models. ERNIE 4.5 Turbo generated the complete script, including dialogue, tone and action queues. closely mirroring the real person's communication style. Our multi-model capabilities delivered industry-leading visual realism with nuanced facial expressions, gestures and body movements that responded naturally to conversation flow in real time, achieving next level of performance that sets new standards in digital human technology. Beyond this flagship case, digital humans are empowering our broader merchant base with performance that already surpasses human live streaming hosts in many scenarios. Going forward, we will continue accelerating foundation model integration, strategically focusing our efforts on areas with application value where we can maintain our most competitive capabilities. Beyond the model capabilities, our unique 4-layer end-to-end AI architecture has become a core competitive advantage and represents a key focus in our AI cloud business where our full stack AI capabilities are driving healthy growth. As the infrastructure layer, we achieved a critical system engineering breakthrough this quarter by completing the large-scale stable deployment of prefiled detailed separation architecture. This breakthrough significantly improves inference on currency and resource utilization, while substantially reducing inference costs. The achievement was made possible at the end to end optimization enabled by our unique 4-layer AI architecture. spending infrastructure framework models and applications, which allows us to comminate improvements across all layers. At the same time, each layer remains open giving customers flexible choices between Baidu's proprietary and third-party options. As a result, we continuously improving the cost effectiveness of our AI cloud products and solutions reinforcing our position as China's top-tier cloud provider in the AI era. Meanwhile, our industry-leading MaaS platform, Qianfan continue to evolve to better support enterprise clients in building models and facilitating AI application development. Qianfan features a comprehensive model library covering nearly all mainstream foundation models on the market. This quarter, we further expanded the library with a range of new models, including our newly often sourced ERNIE 4.5 series, additional third-party multi-model models and other leading options enabling greater flexibility across enterprise use cases. Leveraging our breakthrough in cloud infrastructure, Qianfan delivers enhanced stability, higher concurrency and lower inference costs when running models, meeting our superior price performance. On the tool chain front, Qianfan's tool chains are among the most comprehensive with industry-leading reinforcement learning and post training tools for our model development. In Q2, Qianfan was further enhanced to support a wider range of AI tools and functions that can be caught via MCP or API including Baidu's proprietary capabilities such as Baidu AI Search, Baidu Wiki, Baidu Maps as well as selected third-party capabilities like payment services. These enhancements helped simplify AI application development and continue to solidify Qianfan's leadership as 1 of China's top MaaS platforms. Autonomous driving remains 1 of the most promising areas with long invested, which represents a critical frontier in physical world AI. Following the successful validation of our urban model at the end of last year, Apollo Go is now scaling rapidly. In Q2, Apollo Go provided over 2.2 million fully driverless rides to the public. That's up 148% year-over-year, marking our strongest quarterly growth in 2 years. Also, Apollo Go's global expansion has gained solid momentum, highlighted by two strategic partnerships with leading global life saving platform. In July, we announced a multiyear strategic partnership with Uber. Under this partnership, thousands of Apollo Go's fully autonomous vehicles will be deployed on the Uber platform across multiple international markets with initial rollouts planned for Asia and the Middle East. This milestone was followed by our partnership with Lyft in August, which will also bring thousands of our fully autonomous vehicles to key European markets through the Lyft platform. Starting with Germany and United Kingdom and sailing across Europe over time. Our expansion into international markets is built on a strong foundation. In China, we have already achieved positive unit economics in markets where ride fares are much lower than those in major overseas markets. That's why this global partnerships are both logical and strategic, positioning us to capture greater value in higher fare markets while scaling efficiently. Our partners' global market presence -- leveraging our partners' local market presence, we can accelerate market entry across different continents and achieve faster deployment while maintaining a cost-efficient asset-light business model. In markets we've already entered, we continue to make encouraging progress in Hong Kong, one of the world's most complex right- hand drive city. We recently expanded our testing coverage to include Tongcheng and Southern District advancing our open road testing into more complex urban scenarios across both commercial and residential areas. Also, we further strengthened our presence in the Middle East in Dubai and Abu Dhabi, we started open road testing in designated areas in August. Notably, Apollo Go leads the world in right-hand drive robotaxi market. This is a space where hardly any companies of our kind have entered, and we've made by far the most progress. The rapid progress we are making in Hong Kong really shows our global leadership. It's proof of how adept our technology is and how mature our operations have become across all kinds of environment. Our experience there provides us valuable insights for entering other right-hand drive markets, strengthening our confidence in scaling Apollo Go globally. With solid progress quarter by quarter, we are more confident than ever in Apollo Go's international potential. As China's largest autonomous ride hailing service provider and a global leader in this space, Apollo Go continues industry-leading technology -- Apollo Go combines industry-leading technology, extensive operational experience and extraordinary safety records to bring safe, comfortable and affordable autonomous ride-hailing services to more markets worldwide than anyone else. In our mobile ecosystem, transforming our products with AI remains a strategic priority, especially our legacy consumer-facing product Baidu Search. Baidu is at the forefront of applying AI to transform search globally rather than simply inserting AI summaries into search results. We are fundamentally revolutionizing the third experience by completely replacing static structural hyperlinks with intelligent, structured and multi-model first AI-generated responses. These responses start with relevant multi-model content right at the top. Making complex information more accessible to a broader user base and therefore, creating a more intuitive experience. In Q2, our AI transformation continued to accelerate, with AI-generated content reaching over 50% of mobile search result pages by the end of June up from 35% in April. By July, 64% of mobile search result pages contained AI-generated content presented in a structured and multi-model first format, marking the broader rollout of our innovative AI search experience. This AI transformation reached over 90% of Baidu App's monthly active users in July, with over 60% of such search result pages, starting with rich media elements such as images or videos. As we advance our AI transformation, the expanding content ecosystem across Baidu provides meaningful support leveraging ongoing progress in Gen AI and multi-model capabilities, Baidu's AI-generated content has grown significantly in both scale and quality providing more high-quality content for search results. AI-generated multi-model content, in particular, has been a seen rapid expansion. For example, daily AIGC video generation reached millions of units starting from May and daily AIGC video distribution within Baidu App has grown rapidly. We're delighted to see sustained improvements in user metrics. In June, Baidu App's MAU reached 735 million representing a 5% year-over-year growth. The daily average time spent per user in Q2 increased by 4% year-over-year. Building on Search, ability to satisfy user intent, we are expanding its boundaries from providing smart answers to completing tasks and connecting real-world services. For instance, our agents engaged users in multiround conversations, connect them with relevant service providers when needed and facilitate end-to-end task completion across multiple verticals. We believe this represents a meaningful expansion of what Search can achieve enabling users to seamlessly move from information to action. Now let me review the key highlights of each business sector this quarter. AI cloud revenue reached RMB 6.5 billion in Q2, up 27% year-over-year with non-GAAP operating profit achieving year-over-year growth. The growth was primarily driven by the growing demand for our highly cost-effective end-to-end AI products and solutions. Within the enterprise cloud, which contributes the vast majority of AI cloud revenue, subscription-based revenue grew at a solid pace, signaling a healthier and more sustainable revenue structure. On the infrastructure layer, we continuously enhanced our resource management capabilities, achieving higher and higher infrastructure utilization. Through ongoing end-to-end optimization across our 4-layer AI architecture, combined with increasingly refined and efficient GPU resource management capabilities. Our large-scale key clusters have achieved over 90% utilization rates recently for key tasks. Our enhanced capabilities allow us to deliver better performance at lower cost and provide more competitive pricing for enterprise customers, establishing a virtuous circle, where our growing customer base and diversified workloads further improve resource utilization, reinforcing our sustainable revenue model. In Q2, our customer portfolio continued to improve. existing clients deepen the collaboration and increased spending, while mid- tier enterprise clients demonstrated strong growth momentum. Additionally, this quarter marked several strategic partnerships with prominent companies across key verticals, including a leading lifestyle platform and top-tier gaming company in China. In the embodied AI industry, we have partnered with 20 companies cumulatively, including Shenzhen Institute of Artificial Intelligence And Robotics for Society. In autonomous driving, we established a partnership with Black Sesame Technologies on AI cloud infrastructure. This partnership reflects the strong recognition of Baidu AI cloud and affirm our competitive positioning in China's AI cloud market. Building on our full stack AI capabilities, we are not only serving enterprise clients but also driving internal productivity and mass- market AI adoption at the application layer. Internally, we widely adopted Comate, our AI coding assistant for developers. Comate capabilities continue to improve, enabling more agentic and efficient development workflow. In July, AI contributed to generating over 45% of our new code with our developers providing oversight and approval. This has significantly boosted our engineering productivity and meaningfully enhanced our internal R&D efficiency. Externally, Miaoda extends this AI development capabilities to the broader community. Following Miaoda's official launch last quarter, we are now delivering 2 no-code capabilities that enable users to create applications from mini games to utility tools and websites through simple natural language conversations with AI, no programming expertise required. As of July, users have created around 200,000 applications on Miaoda all built completely without writing a single line of code. We are continuously enhancing no code capabilities as we work toward our mission to democratize AI and empower anyone to innovate. Moving to intelligent driving. In Q2, Apollo Go provided over 2.2 million fully driverless rides to the public, up 148% year-over- year. As of August, cumulative rides provided to the public have surpassed 14 million, underscoring the scale and maturity of our fully driverless operations. As of June, Apollo Go's global footprint spans 16 cities. To date, our fleets have accumulated over 200 million autonomous kilometers with an outstanding safety record, which is a testament to the ability and safety of our autonomous driving technology. Beyond global partnerships like Uber and Lyft, we are accelerating the rollout of asset-light business models domestically. This quarter, we established new partnerships with HelloRide and T3 Mobility, expanding our collaborative network with leading mobility service providers. Additionally, building on the partnership announced last quarter, Apollo Go's fully autonomous vehicle rental service officially went live on the Car Inc. app. offering users a new access point to our Apollo Go fleet. These partnerships enable us to rapidly scale our services while leveraging partners' operational expertise and existing customer bases, creating an efficient path to broader market penetration. Going forward, we are confident to further accelerate our global expansion and capture significant value across multiple markets worldwide. For mobile ecosystem, we continue accelerating AI transformation of search in Q2. In today's highly competitive mobile Internet market, where new products and technologies are emerging and evolving faster than ever, user needs and behaviors are constantly shifting, making it essential for us to keep iterating at a rapid pace. While our AI transformation is progressing rapidly, it is still in the early stages with considerable room for optimization before reaching its full potential. And we are not yet at the stage for large-scale monetization. Against this backdrop, we began prudent small- scale monetization testing in Q2 with user experience remaining our top priority. Early results have been satisfying. For example, some queries that we previously difficult to monetize are now showing potential. Agents maintained strong performance in driving better conversion efficiency, further validating our effectiveness. In Q2, revenue generated by our agents for advertisers grew 50% quarter-over-quarter, contributing 13% of Baidu Core's online marketing revenue. That's up from 9% in Q2 -- in Q1. In parallel, digital human gained traction as an innovative monetization avenue for our advertising business, particularly through AI-powered live streaming. We've seen steady growth in digital human adoption over recent quarters. Beyond serving live streaming hosts for merchants, they were being adopted at growing scale in health care, legal services, education and automotive sectors. More advertisers recognize their value in boosting conversion performance through real-time user interaction and round-the-clock availability, leading to increased ad budget allocation towards digital humans. In Q2, revenue generated by digital human increased by 55% quarter-over-quarter, contributing 3% of Baidu Core's online marketing revenue. To sum up, as we look ahead, Baidu will stay anchored in our long-term mission and move forward with greater focus and resolve as we continue to translate AI innovation into real-world value. Before we move to Q&A, I'd like to take a moment to welcome Henry, Mr. Haijian He, who recently joined us as Chief Financial Officer. With that, let me turn the call over to Henry to go through the financial results. Haijian He: Thank you, Robin, and hello, everyone. I'm delighted to join the Baidu team and looking forward to working with all of you. Now let me walk through the details of our second quarter financial results. Total revenues were RMB 22.7 billion, decreasing 4% year-over- year. Revenue from Baidu Core was RMB 26.3 billion, decreasing 2% year-over-year. Baidu Core's online marketing revenue was RMB 16.2 billion, decreasing 15% year-over-year. Baidu Core's non-online marketing revenue was RMB 10 billion, up 34% year-over-year, primarily driven by the boost of AI cloud business. Within Baidu Core's non-online marketing revenue, AI cloud revenue was RMB 6.5 billion, increased by 27% year-over- year. Revenue from iQIYI was RMB 6.6 billion, decreasing 11% year-over-year. Cost of revenue was RMB 18.4 billion, increasing 12% year-over-year, primarily due to an increase in costs related to AI cloud business and content costs. Operating expenses were RMB 11.1 billion, decreasing 4% year-over-year, primarily due to a decrease in personnel-related expenses, partially offset by the increase in channel spending expenses. Baidu Core's operating expenses was RMB 9.7 billion, decreasing 5% year-over-year. Baidu Core's, SG&A expenses were RMB 5 billion, increasing 6% year-over-year. SG&A accounted for 19% of Baidu Core's revenue in the quarter compared to 18% in the same period of last year. Baidu Core R&D expenses were RMB 4.7 billion, decreasing 14% year-over-year. R&D accounted for 18% of Baidu Core's revenue in this quarter compared to 20% in the same period of last year. Operating income was RMB 3.3 billion. Baidu Core's operating income was RMB 3.3 billion, and Baidu Core's operating margin was 13%. Non-GAAP operating income was RMB 4.4 billion. Non- GAAP Baidu Core operating income was RMB 4.4 billion, and the non-GAAP Baidu Core operating margin was 17%. Total other income net was RMB 4.9 billion, increasing 531% year-over-year, primarily due to an increase in the fair value gain and a pickup of earnings from long-term investments. partially offset by increase in the net foreign exchange loss arising from exchange rate fluctuation between RMB and the U.S. dollar. Income tax expenses was RMB 881 million compared to RMB 1.1 billion in the same period of last year. Net income attributable to Baidu was RMB 7.3 billion, and the diluted earnings per ADS was RMB 20.35. Net income attributed to Baidu Core was RMB 7.4 billion, and the net margin for Baidu Core was 28%. Non-GAAP net income attributed to Baidu was RMB 4.8 billion. Non-GAAP diluted earnings per ADS was RMB 13.58. Non-GAAP net income attributed to Baidu Core was RMB 4.8 billion, and non-GAAP net margin for Baidu Core was 18%. As of June 30, 2025, cash, cash equivalents restricted cash and short-term investments were RMB 124.2 billion. And the cash, cash equivalents, research cash and short-term investments, excluding iQIYI, were RMB 119.9 billion. As of June 30, 2025, cash, cash equivalents, short-term investments and the long-term time deposits and held-to-maturity investments for Baidu Core were RMB 229.7 billion. Free cash flow was negative RMB 4.7 billion, and free cash flow, excluding iQIYI was negative RMB 4.6 billion, primarily due to the increase of investment in AI business. We define net cash position, as total cash, cash equivalents, restricted cash, short-term investments, net long-term time deposits held-to-maturity investments and others, less total loans, convertible senior notes and notes payable. As of June 30, 2025, net cash position for Baidu was RMB 155.1 billion. Baidu Core had approximately 31,000 employees as of June 30, 2025. With that, operator, let's now open up the call for the questions. Thank you. Operator: [Operator Instructions] Your first question comes from Alicia Yap, Citigroup. Alicia Yap: And also welcome Henry as the new CFO. I have a question on your AI model. with the rapid model iteration, how do you view the current landscape? How do you position ERNIE strategically in the market and its alignment with Baidu broader business strategy? And we also have heard that you are planning to launch ERNIE 5.0, could management share plans for ERNIE in the second half this year and also the key focus area for this next version. Yanhong Li: Alicia, this is Robin. Let me first give you our take on the current landscape. The pace of model iteration is faster than ever. We see multiple new models launched almost every week and each new generation is stronger than the last. In recent months, we've seen models grow more capable, reaching the stage where their deeper logic and greater creativity now enable them to proposed entirely new solutions we've never saying before. And I believe this is -- this kind of innovative ability is getting stronger. Meanwhile, the foundation model landscape is becoming more diverse and clearly not a one-size-fit-all situation, especially in China, similar to EVs you always have a lot of choices, different models excel at different tasks. Some are stronger in reasoning, some in coding and some in multimodality. So we will continue to see a market where multiple models coexist at very reasonable prices. And the value creation will happen at the application level more than at the model level. Against this backdrop, ERNIE's positioning is clear. We take an application-driven approach to innovation. In fact, we've taken this approach since the launch of ERNIE -- first launch of ERNIE more than 2 years ago. Rather than spreading efforts across every possible direction, we stay focused on the strategically important areas that's valuable to us. We think we can deliver meaningful impact and sustain our leadership. For example, as we advance AI search transformation, we direct our model capabilities towards generating and selecting multi-model search results. And our users love it. Our cloud customers also love it. They're paying for our Search API for the purpose of RAG in their Gen AI applications. Another example is our hyper realistic digital human technology, which now matches and even exceeds real human performance in the live streaming e-commerce scenario. Our model is just better at convincing people to buy. Cloud customers are paying for these capabilities, too. As we move into the second half and beyond, we will continue this acceleration. We're currently working on the next flagship version of ERNIE with significant improvements across key capabilities and expect to launch it as we are ready. In the meantime, we will continue to roll out iterations and updates on an ongoing basis for our existing models. We also keep monitoring industry developments to ensure our technology road map captures the most promising market opportunities. Thank you. Operator: Your next question comes from Alex Yao from JPMorgan. . Alex C. Yao: And Henry all the best to your new role. So here is my question, how is the AI-powered search upgrade progressing in Q2 and Q3? Could the management share updates -- updated metrics on how user behavior is shifting with the new experience, how should we think about the end game of AI search in terms of product format, user reach and lastly, commercial potential. Rong Luo: Alex, thank you so much for your question. This is Julius. I think Q2, we continue to accelerate transformation. And as Robin has just mentioned, Baidu leads globally in using AI to transfer search and we are maybe were the most aggressive in revolutionized search. And we're probably the only company that has completely replaced the traditional links with intelligent AI answers that start with the multi-model content. This creates a more efficient, intuitive user experiences and unlike the current AI answers -- travel that remains mostly still as a text base. Our focus remains delivering the better user experiences beyond the MAUs and the time spent improvements and the user exposed to AI Search now shows higher UV and retention indicating our next generation, such experience is driving the stronger user satisfaction. As for the end game of AI Search, I think still an open question, but our path is quite clear. We are fundamentally restructuring Search. First, instead of just indexing or linking to information, we are delivering the intelligent AI generating answers that begin with the relevant multi-model content. Multi modern content now appears more at the very top of AI answers with increasing portion being AI generating as high-quality AIGC content expensed on our platform it directly enrich the search results and broadens what we can offer to the users. And meanwhile, the AI is also empowering the people across our ecosystem from users, content creators, advertisers and service providers to produce the more backed content. This includes enabling those who were not traditional content creators to participate in making our whole ecosystems more vibrant. And for example, in July, we have launched our MuseSteamer, our proprietary video generation model to facilitate AIGC video creation at scale. And the latest version of MuseSteamer with significant update will be launched tomorrow afternoon. And just stay tuned, we're moving fast. And second, we are also evolving from fighting information to completing tasks and connecting users with the real-world services. For example, through the MCPs, we have connected search to external capabilities like our British Museum metropolitan museum MCPs that can provide ambitious explanations right in search. For more complicated needs, our agents help understand the user's intent and connect them with the services providers when the offline services are required. What we have done today is only the beginning and Search will continue advancing in capabilities and reach over time. In the third place, we're also working towards the shift from the general results to personalized pages. While AI Search understands the individual context, memories and preference to generate the tailor-made responses, delivering more intelligent and relevant and personalized answers while better matching the users with the tools and services they need. And looking ahead, we will continue to accelerate AI transformation, which in the short term will weigh on our revenue. But over time, we believe the AI search will unlock exciting commercial possibilities and upside is substantial. Thank you for your question, Alex. Operator: Next question comes from Gary Yu, Morgan Stanley. . Gary Yu: I have a question regarding the AI cloud revenue. Can management provide a breakdown of the current revenue mix and margin profile. What's the split between subscription based and project-based revenue? And how do you see them evolving in the coming quarters? And also what's the margin profile looking like in the near term and over the long term? Dou Shen: Thank you, Gary. This is Dou. In Q2, AI cloud revenue grew 27% year-over-year to RMB 6.5 billion. For the first half of 2025 AI cloud revenue increased 34% year-over-year, accelerating from the low teens growth we saw in the first half of 2024. Enterprise Cloud has consistently outgrown our overall AI cloud business and remains the main growth driver. Then within the Enterprise Cloud, subscription-based revenue accounts for more than half of the total and continued growing steadily in Q2. The growth was driven by strong momentum in subscription-based AI infrastructure, which grew over 50% year-over-year. We are seeing a good traction with both top-tier and mid-tier customers. Our mid-tier customers, in particular, delivered notable revenue growth as they continue expanding with this. reflecting our broadening customer base. The other part of the enterprise cloud is project-based revenue. Project-based revenue is typically linked to customer deployments and will inevitably fluctuate from quarter- to-quarter based on contract timing and project schedules. We are currently conducting a careful review of our project portfolio and aim to gradually reduce the propulsion of project-based revenue for greater revenue stability. Turning to Personal Cloud, which is a smaller part of our overall AI cloud business. Over the recent quarters, we've integrated Baidu Drive with Wenku and launched multiple new AI features. Recently, we opened up select AI features for free to encourage wider adoption. While this may involve some near-term trade-offs, we believe it helps deepen user engagement and positions us to benefit from a broader AI adoption. On profitability, we achieved year-over-year growth in non-GAAP operating profit and maintained a healthy margin driven by a healthier revenue mix duty towards higher value offerings, while margins can move around from quarter-to-quarter due to dynamic market environments, we see clear potential for the future improvement over the long run as we scale and optimize our mix. Thank you Gary. Operator: Our next question comes from Lincoln Kong from Goldman Sachs. Lincoln Kong: So my question is about the Search. So actually, can management share more color on the reason AI search monetization testing because the following your earlier comments on AI search opening up new monetization opportunity. Could you elaborate on that? And how are all pricing format and business model evolving? What will be the margin look like? Rong Luo: Thank you Lincoln, the master question is curious. I mentioned about the monetization opportunities earlier, and let me elaborate over here. And from a product perspective, while our AI transformation already covers a large portion of such results, we are still in the early stage with substantial room for improvement. We aim to further increase the penetration of multimodal content in such results and continue building and enriching our AI native ecosystem through MCP agents and on the foundation, enable the deeper, broader or higher quality connections to the real-world services. As the AI transformation on once and the user experiences improves, monetization opportunities will naturally follow. And also, the AI Search brings the native apps that feels intuitive and integrate, enhancing rather than interrupting the user experiences. So the vast majority of keywords that were previously very difficult to monetize now can be monetized under AI Search, which should be significantly expand our advertisement inventory over time. While initially, we will be very conservative with monetization to ensure we get the user experience right and but the long-term upside is much higher. And during our AI transformation, we are moving from simply generating sales leads to enabling the real-world service delivery. This is a shift made possible by new AI native commercial products such as agents or digital humans. These innovative products allow us to better capture and serve the user needs through interactive conversations while connecting users with service providers in verticals like health care, travel and education, where our agents and digital humans have already proven monetization capabilities. And over the long term, the ability to fulfill the user needs end-to-end position us well to drive a gradual transition from CPC to CPS, which offers a much higher ceiling for monetization. And in Q2, we have already begun the early testing of the AI Search monetization. While it's still in early days, we have seen the very encouraging signals, and we believe this trend will continue over time. That said, we always put user experiences first. So we chose very deliberate approach to AI Search monetization and large-scale monetization has not started yet. And at the same time, we have been aggressively accelerating the AI search transformation, including changing those queries with the highest monetization capabilities. So in the near term, we do expect the revenue and margin will remain under significant pressure. But long term, we believe this positions us well for stronger growth. Operator: Our next question comes from the line of Miranda Zhuang with Bank of America Securities. Xiaomeng Zhuang: My question is about cloud and GPU. So how should we assess the sustainability of the AI-driver cloud demand especially against the backdrop of a soft economy and intensifying market competition and also with the easing of the H20 chip restriction, has management seen any meaningful improvement in supply? How do you think about the chip constraint? Will it remain as a limiting factor for growth going forward? Dou Shen: Miranda, I would do questions. Actually, we were seeing strong and growing demand for AI driven cloud services as the China's cloud market continues its shift towards AI centric computing. The adoption of Gen AI and foundation models is accelerating, and AI has become a strategic focus for more and more companies. From what we've observed, demand is picking up across a wide range of sectors, not only from early adopters like [ Titan ] Internet companies, but also from a broader side of the industries like utilities, financial services and the public sector, where interest in AI- driven cloud solution is rising quickly. Meanwhile, technological advances are filling strong new demand from emerging sectors such as embodied AI. We are effectively capturing new opportunities and working with leading players in this field, including 20 of China's promising embodied AI start-ups and 4 of which are China's top humanoid robot companies. The reason we are able to capture opportunities so quickly is our unique competitive positioning. What differentiates us is our ability to deliver highly cost-effective end-to-end AI cloud products and solutions, thanks to our full stack AI capabilities. Taking our AI infra as an example, we keep improving utilization and efficiency through our industry-leading resource management capabilities. By dynamically allocating computing resources, we can better match workloads with the suitable resources and manage demand fluctuations, delivering better performance at lower cost. As a result, we can provide cost-efficient, reliable and scalable cloud services that makes it really easy for companies to adopt AI with minimal effort and scale it into real business impact. On your question about chips, our focus remains on building a flexible AI architecture that maximize GPU utilization and supports a variety of chips, including domestic chips. This enables us to better serve customers as the supply environment evolves. Looking ahead, we believe that a self-sufficient supply chain, together with increasingly major homegrown software stacks will form a solid foundation for sustainable innovation in China's AI ecosystem. And clearly, Baidu is well positioned to lead the transition. Thank you. Operator: Next question comes from Wei Xiong, UBS. Wei Xiong: Given the near-term headwinds on ad revenue, and continued investment in AI. I wonder what are the plans for cost optimization and efficiency improvement that can help protect margins? How should we think about the margin trend in 2026 and beyond. Haijian He: Thank you. This is Henry. First of all, on the AI investment, we remain committed to investing in AI and have made substantial investments throughout this year particularly in AI transformation of Search. As Julius mentioned earlier, our core legacy product search is ongoing a radical transformation. Over the past several quarters, we have ramped up investments to accelerate this transformation, which we believe is critical to drive long-term value. However, since the AI search monetization is still in very early stages and has yet to scale, our revenue and margins are on the considerable pressure in the near term with Q3 expected to be especially challenging. To help pushing the near-term impact, we will actively drive internal efficiency gains. This includes strengthening resource coordination efforts across different business groups and improving overall resource utilization efficiency. But also on the other hand, while we are remaining committed to long-term AI investment, we'll be very prudent in managing the pace to avoid future deterioration of fluctuation in margins. Looking further ahead, we see potential for margin improvement as our core advertising business recovers and stabilized and our non-advertising business both expand their revenue share and improving their own profitability. We believe our strategic direction and the disciplined execution should support a gradual recovery in profitability over time. Obviously, on the outlook front, I think before or around end of this year, we expect to have a greater visibility into next year. And at that time, we will have -- we will provide a clear outlook beyond the current quarters for the long term. In parallel, we are carefully assessing different approaches to present and to unlock the hidden and unstated value of our assets. By doing so, we aim to strengthen our portfolio, create significant long-term value for shareholders, but also support sustainable growth over the long term of business. Thank you. Operator: The next question comes from Thomas Chong, Jefferies. Thomas Chong: My question is about the global autonomous driving landscape. We see it becomes increasingly competitive -- how does Apollo Go assess its long-term differentiation against peers? And how do the recent Uber and its partnership fits into your global expansion strategy? And what is the road map for achieving sustainable profitability. Yanhong Li: Yes. I think autonomous driving is one of the most exciting frontiers where AI is transforming the physical world. and success in this field requires cutting-edge technology, massive sustained investment and disciplined execution over many years to achieve commercial operations at scale. One of the earliest entrants, we have built an unparalleled foundation across all these areas and become an undisputed global leader in this field. With our business model validated, our current focus is on running real-world operations at scale. And we have established global leadership in both left-hand and the right-hand drive robotaxi market. In the left-hand drive market, we were the first to achieve UE breakeven and all of our current operations in China, in Mainland China are fully driverless. Globally, we are among the very few capable of scaled fully driverless and commercial operations in a single complex, large population area. And in the right-hand drive market, we lead the industry globally. In Hong Kong, we've rapidly expanded our operating of testing and advanced into increasing the complex urban scenarios following regulatory approval. Our technology stack and operational expertise are highly transferable across geographies, allowing us to adapt efficiently to new markets and regulatory environment. We also built a major advantage with RT6, the world's first and only production vehicle designed especially for level 4 autonomous driving from day one. Unlike some retrofitted cars, RT6 is a purpose built from the ground up is a focus on safety system integration and cost efficiency. It has the lowest unit cost globally for Level 4 and is already running on our commercial operations at scale, giving us a big edge for broader rollouts with this strength, we are confident about expanding to more cities worldwide, especially those with higher ride fares. Here's the picture. We have the lowest cost level 4 vehicle and most efficient operation. We first achieved UE breakeven in Wuhan where taxi fares over 30% cheaper than the Tier 1 cities in China and far below many overseas markets. Yet we still managed to prove our business model there. Such operational excellence and cost efficiency is unmatched globally. For us, expanding overseas means going from low fare markets to high fare markets. Often with fares several times higher. Our huge cost advantage can deliver much stronger unit economics in most major cities worldwide. To accelerate our global expansion, we are also taking a proactive approach to global partnerships. As we mentioned in our prepared remarks, we announced a partnership with Uber in July and followed by Lyft in August. Our partnerships with this world's leading mobility platforms will help us enter and scale more quickly into global markets like Middle East, like Asia, like Europe. Looking ahead, we anticipate accelerating growth in ride volumes with our global operational fleet size multiplying. With that momentum, we are confident that Apollo Go will continue to lead the market and stay at the forefront of autonomous driving worldwide. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Hello, and thank you for standing by, for Baidu's First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's first quarter 2025 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 Li, our Co-Founder and CEO; Julius Rong Luo, our EVP in-charge of Baidu Mobile Ecosystem Group, MEG; Dou Shen, our EVP in-charge of Baidu AI Cloud Group, ACG; 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 (ph) Securities Litigation 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 filings 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 directly comparable GAAP measures, and is available on our IR website at ir.baidu.com. As a reminder, this conference will be recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. We kicked-off 2025 with a solid start. In the first quarter, Baidu Core’s total revenue reached RMB25.5 billion, representing a 7% year-over-year increase. The growth was primarily attributable to the robust performance of our AI Cloud business. In Q1, AI Cloud revenue reached RMB6.7 billion, increased by 42% year-over-year, representing a significant acceleration for our cloud business. Such performance reinforces the widespread market recognition of our distinctive AI capabilities, underpinned by our unique four layer AI architecture, while affirming the ongoing demand for our full-stack end-to-end AI products and solutions. Notably, AI Cloud accounted for 26% of Baidu Core revenue, up from 20% a year ago, reflecting the growing significance of our AI Cloud business within our business portfolio. Throughout the first quarter, amid rapid evolution across the AI landscape, advancing our AI capabilities remains our core priority. We have accelerated the iteration of our foundation models, allowing us to maintain our leading position as one of the top players in this dynamic field. In March, we released ERNIE 4.5 and ERNIE X1. ERNIE 4.5 is our first flagship model with multimodal capabilities, and it excels at understanding, analyzing and processing multimodal content precisely. ERNIE X1, our first reasoning model brings advanced reasoning capabilities with best-in-class function calling, tackling complex problems with extended chains (ph) of thought. Notably, both ERNIE 4.5 and ERNIE X1 come with highly competitive pricing. Furthermore, in April, at Baidu Create 2025, we unveiled their upgraded version, ERNIE 4.5 Turbo and ERNIE X1 Turbo, which feature -- enhanced performance and dramatically lower pricing, making them among the most cost effective options on the market. Our rapid and continuous cost reductions stem from our unique four layer AI architecture and full-stack capabilities. This distinctive architecture enables end-to-end optimization at every layer, spanning infrastructure, framework, models and applications, allowing us to holistically enhance both performance and efficiency. As a result, we deliver superior performance and stability at highly competitive pricing, positioning us to offer industry leading foundation models and AI solutions with exceptional price performance ratios. With stronger capabilities and lower pricing, foundation models are becoming increasingly accessible, enabling diverse applications at scale and unlocking significant value across industries. Beyond the model iterations, we are also taking steps to make AI more open and collaborative. As previously announced, we plan to open source our most advanced ERNIE 4.5 series of models on June 30, a move that reflects both our technological confidence and our efforts to make ERNIE more accessible. In parallel, we are proactively embracing open standards such as the model context protocol or MCP, which provides easier access to AI powered tools and further lowers barriers to AI development. As development becomes simpler, we expect to see a growing number of AI applications emerging on our platform. Together, these efforts echo our consistent application driven approach to innovation and our determination to make AI more accessible, applicable and impactful. In our AI Cloud business, we are strengthening Qianfan, our industry leading MaaS platform, to better support developers and enterprise clients in building models and facilitating AI applications. Qianfan boasts a comprehensive model library of foundation models, covering nearly all mainstream options on the market. It offers not only our own ERNIE family of models, but also a wide range of open source and third-party models, including the latest reasoning and multimodal models. This breadth allows individual developers and enterprise clients to choose suitable models with greater flexibility. Importantly, Qianfan provides these models with industry leading cost effectiveness. We're running models like DeepSeek. Qianfan achieved what we believe to be some of the lowest inference costs in the industry today with lightning speed and massive concurrency. Qianfan also delivers an expanding tool chain continuously enrich to provide the most comprehensive and user friendly toolkits for AI development. This quarter, complementing our existing app builder, model builder and agent builder, we introduced data builder to support AI data processing and preparation, while rolling out system wide upgrades across the entire tool chain to further improve efficiency and ease of use. First, we enhanced the model builder to support the customized development of reasoning models by incorporating advanced training techniques, including reinforcement learning methods, like, RFT and GRTO. Second, we extended our fine-tuning capabilities to multimodal models, offering multimodal reinforcement learning techniques and enabling full process support from model building and training to evaluation and development. Third, as foundation models grow in size, model distillation has become essential for enterprise adoption. Hence, we introduced a one-click distillation feature that streamlines the previous multi step process. With our expanded model library now covering reasoning models, enterprise clients can effortlessly build smaller models that maintain reasoning capabilities with reduced costs, making it easier to adopt advanced AI technology. Together, these enhancements significantly strengthened Qianfan’s tool chain, lowering the barriers for AI adoption and enabling faster, more efficient innovation across diverse use cases. On our legacy consumer facing product, Baidu Search, we accelerated its AI transformation with an unrelenting focus on enhancing user experience. Our journey exemplifies how complex AI capabilities can be applied to create meaningful improvements that directly benefit our hundreds of millions of users. After exploring and validating for several quarters and with consistent positive user feedback, we established a relatively mature and scalable product framework for our AI – for our Gen AI enabled search early this year. Building on this, we are determined to further accelerate the AI transformation of Search. In April, about 35% of mobile search result pages contain AI generated content, increasing from 22% in January. We are further enhancing the search experience by prioritizing multimodal content, including images, videos, agents, digital humans and live streaming. We believe this is a more effective way to present search results, as it aligns with evolving user preferences and better addresses the growing complexity of search queries. The distribution of multimodal content has been rapidly increasing. This trend reflects our continued progress in delivering a more intuitive and effective search experience. Also, the volume of content accessible within Baidu has continued to expand, particularly with the empowerment of foundation models. One example is AI generated digital human videos, which have surged over 30-fold from the beginning of 2025 through April in just a few months. The growing volume of content enriches what users can discover and provides access to a more expensive information landscape. Our efforts have led to consistent improvements in user experience. Users exposed to AI generated search results, find their search intent fulfilled more easily and quickly, indicating they get the desired information more efficiently. These users are also increasingly inclined to search for more varied questions or topics, have demonstrated higher retention over time. We are delighted to see more users can enjoy this improvement. In March, the MAU of Baidu App increased by 7% year-over-year, reaching $724 million. We firmly believe that agents and intelligent digital humans represent promising real-world applications of AI technology that will open up vast market opportunities ahead. Last quarter, I introduced the convergence of agents and intelligent digital humans, a powerful combination that brings together foundation models capabilities and digital human technology. Today, they are already widely deployed throughout our mobile ecosystem, effectively supporting different scenarios across industries. At our recent Baidu Create 2025, I further introduced an upgraded version of intelligent digital human with hyper realistic interactions, delivering natural conversation with vivid facial expressions and fluid human like gestures. In the future, we believe they can match or even outperform humans in certain scenarios. We're preparing to launch and scale our next generation hyper realistic digital humans into production soon. Now turning to intelligent driving, which represents another compelling frontier of our AI applications in the physical world. As highlighted last quarter, Apollo Go, our autonomous ride-hailing service has successfully validated its business model in the key operational region with highly complex transport conditions and cost sensitive local passengers. And it has achieved 100% fully driverless operations in Mainland, China. This gives us strong confidence to expand into international markets with higher pricing for ride-hailing service, where we aim to replicate and further optimize our proven approach. In Q1, we reached critical milestones in international expansion with Apollo Go entering both Dubai and Abu Dhabi, aiming to provide safe, comfortable and affordable autonomous ride-hailing services in this booming markets. In May, we began open road validation testing in Dubai and we expect to start testing in Abu Dhabi soon. Meanwhile, we have also expanded our testing area in Hong Kong and obtained permission to conduct open road testing with designated passengers in April. With over 1,000 fully driverless vehicles now deployed globally, we continue to solidify our position as world's leading autonomous ride-hailing service provider. We are scaling up our services globally. Looking ahead, we will deepen our presence in existing markets, while strategically entering new ones, capturing broader growth opportunities worldwide. Now let me review the key highlights for each business for the first quarter. AI Cloud revenue reached RMB6.7 billion in Q1, delivering a strong year-over-year increase of 42% with non-GAAP operating profit remaining positive. Gen AI and foundation model related revenue recorded triple digit year-over-year growth, as accelerating AI adoption across multiple sectors drove a notable increase in customer demand for our highly cost effective AI Cloud services. As mentioned earlier, we also upgraded our MaaS platform, Qianfan, with an expanded model library and more comprehensive toolkits, extending support for the training and fine-tuning of multimodal and reasoning models to further facilitate AI native application development. On applications, we -- you may recall that at Baidu World last October, we previewed MiaoDA, which delivers no code capabilities. In this quarter, we officially launched MiaoDA, making it available to everyone, programmer or not. Now that reflects our mission to democratize AI and empower more people outside the developer community to create innovative applications with natural language inputs. The growing market recognition of our AI expertise continues to drive strong customer growth. In Q1, we deepened our collaboration with existing clients, while also expanding our customer base with new partnerships. We worked with a wide range of leading enterprises such as China Merchants Group and a top e-commerce company in China, further validating our position as the AI partner of Choice. Our client pipeline remains healthy. We saw strong growth in the automotive sector and began expanding into emerging verticals, such as embodied artificial intelligence, where we recently entered into a strategic partnership with Beijing Humanoid Robot Innovation Center, the developer of the Tiangong Ultra Humanoid Robot. For our mobile ecosystem, we accelerated the AI transformation of search in Q1, while continuing to improve the efficiency of our monetization approaches. Agents continue to demonstrate enhanced efficiency as a monetization channel for our advertising business. In March, over 29,000 advertisers had daily ad spending through agents, with many demonstrating increased willingness to allocate more of their ad budget to our agents. Adoption spans sectors like healthcare, education, lifestyle services, B2B, real estate and business services including legal services. In Q1, revenue generated by our agents for advertisers increased 30-fold year-over-year, accounting for 9% of Baidu Core's online marketing revenue. On the other hand, our industry leading intelligent digital human have proven their transformative value across business scenarios. For example, our digital humans serve as live streaming hosts for merchants on our platform. Over the past few quarters, tens of thousands of such digital humans have been live streaming on our platform every month, serving not just the merchants, but also expanding into fields like legal services, health care, education and more. Turning to intelligent driving. As just highlighted, Apollo Go made solid progress with its international expansion. Following our entry into Dubai and Abu Dhabi, our global footprint now spans 15 cities. Backed by our validated business model and proven operational expertise, we aim to further broaden our presence across more cities globally. In terms of ride volume, we are seeing clear acceleration. Apollo Go provided approximately 1.4 million rides to the public in Q1, representing a robust year-over-year growth of 75%. As of May 2025, the cumulative rides provided to the public have exceeded RMB11 million. Meanwhile, we continue to scale up our service capabilities in cities where we have long been operating. Also, we are exploring asset light business models, as a key strategic direction for our future growth. And we have started to see early adoption in certain areas recently. In May, Apollo Go entered into a long-term strategic partnership with CAR Inc, China's leading auto rental service provider to introduce fully autonomous vehicle rental services and explore new models for smart mobility together. As our technology and operations mature at scale, we see significant opportunities and commercial sustainability across more use cases and regions. Combined with our regionally validated business model and global expansion efforts, we believe we are well-positioned to create substantial value and reshape the future of mobility in the coming years. Looking back at the quarter's divestments (ph), we are seeing encouraging progress in AI applications across the board from enterprise services to consumer facing products and intelligent mobility. AI technologies are beginning to generate tangible, meaningful value through applications, which embodies the ultimate goal of our application driven innovation and aligns perfectly with our long standing strategic focus on AI. With that, let me turn the call over to Jackson to go through the financial results. Junjie He: Thank you, Robin. So now let me walk through the details of our first quarter financial results. Total revenues were RMB32.5 billion, increasing 3% year-over-year. Revenue from Baidu Core was RMB25.5 billion, increasing 7% year-over-year. Baidu Core's online marketing revenue was RMB16.0 billion, decreasing 6% year-over-year. Baidu Core's non-online marketing revenue was RMB9.4 billion, up 40% year-over-year, mainly driven by AI Cloud business. Within Baidu Core's non-online marketing revenue, AI Cloud revenue was RMB6.7 billion, increased by 42% year-over-year and accounted for 26% of Baidu Core's revenue. Revenue from iQIYI was RMB7.2 billion, decreasing 9% year-over-year. Cost of revenues was RMB17.5 billion, increasing 14% year-over-year, primarily due to an increase in costs related to AI cloud business and traffic acquisition costs. Operating expenses were RMB10.5 billion, decreasing 3% year-over-year, primarily due to a decrease in personnel related expenses, partially offset by the increase in channel spending and promotional marketing expenses. Baidu Core's operating expenses were RMB9.1 billion, decreasing 4% year-over-year. Baidu Core SG&A expenses were RMB4.9 billion, increasing 10% year-over-year. SG&A accounted for 19% of Baidu Core’s revenue this quarter, which is basically flat from last year. Baidu Core R&D expenses were RMB4.9 billion, decreasing 16% year-over-year. R&D accounted for 16% of Baidu Core's revenue this quarter, compared to 21% in the same period last year. Operating income was RMB4.5 billion. Baidu Core's operating income was RMB4.2 billion and the Baidu Corre’s operating margin was 16%. Non-GAAP operating income was RMB5.3 billion. Non-GAAP Baidu Core operating income was RMB4.9 billion and non-GAAP Baidu Core operating margin was 19%. Total asset income net was RMB4.5 billion, including 260% year-over-year, mainly due to an increase in fair value gain and the pickup of earnings from long-term investments, partially offset by the decrease in net foreign exchange gain arising from exchange rate fluctuation between RMB and the U.S. dollar. Income tax expense was RMB1.2 billion compared to RMB883 million in the same period last year. Net income attributable to Baidu was RMB7.7 billion and diluted earnings per ADS was RMB21.59. Net income attributable to Baidu Core was RMB7.6 billion and net margin for Baidu Core was 30%. Non-GAAP net income attributable to Baidu RMB6.5 billion. Non-GAAP diluted earnings per ADS was RMB18.54. Non-GAAP net income attributable to Baidu Core was RMB6.3 billion and non-GAAP net margin for Baidu Core was 25%. As of March 31, 2025, cash, cash equivalents, restricted cash and short-term investments were RMB142.0 billion and the cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB136.7 billion. Free cash flow was negative RMB8.9 billion and the free cash flow excluding iQIYI was negative RMB9.2 billion, mainly due to an increase of investments in AI business. We define net cash position as total cash, cash equivalents, restricted cash, short-term investments, net long-term, term deposits and held-to-maturity investments and others, less total loans, convertible senior loans and loans payable. As of March 31, 2025, net cash position for Baidu was RMB159.0 billion. Baidu Core had approximately 31,000 employees as of March 31, 2025. Finally, since last year, we have accelerated our share repurchase program. From the beginning of Q1 2025, we repurchased a total of $445 million of our shares, reflecting our long standing commitment to delivering long term value to shareholders. With that, operator, let's now open the call to questions. Operator: Ladies and gentlemen, we will now begin the question-and-answer. [Operator Instructions] Your first question comes from Alicia Yap with Citigroup. Please go ahead. Alicia Yap: Thank you. Good evening, Robin, Jackson, Juan and management. Thanks for taking my questions. I wanted to ask about the AI model. So given the rapid pace of the model iterations and also your upcoming open source strategy. Can management share the latest update on your AI overall strategy? And then, what is the technology roadmap for earning in 2025? Will Baidu continue iterating on the foundation model such as the ERNIE 5.0, for example? Can you further reduce inference costs going forward? Thank you. Robin Li: Hi, Alicia. This is Robin. Over the past few months, we've seen an accelerated iteration of foundation models. But no matter how fast the models advance, I think one thing is always clear. The true value of foundation models ultimately lies in applications built on the models. That's why we stick to an application driven approach for innovation. The foundation model space is very broad. So, we don't necessarily have to make ERNIE lead in every possible direction. Instead, we strategically focus our model iteration efforts on areas with real application value, where we can build the most competitive capabilities. For example, we make sure our model development matches what our products actually need. For over one year, we've been using foundation model to drive AI transformation across our mobile ecosystem, including search. This hands-on experiences have shown us which model capabilities bring real value and are worth prioritizing like, multimodality. We've also spotted some promising application areas. Take our digital humans for instance. By combining different model capabilities, we've created hyper realistic digital humans that can even perform better than real human in certain situations. We'll be rolling them out at scale soon, opening up their value in many new scenarios. Our earnings technology roadmap, we're set to continue the evolution of ERNIE. We're already working on the next generation of [indiscernible] models, and we expect to further accelerate our pace of model iteration. And back to your question on inference costs, yes, we absolutely believe we can keep driving down costs. In fact, each new model we've launched recently has come with significant price cuts. As I mentioned before, we released ERNIE 4.5 and X1 in March. X1 matched DeepSeek R1's performance at only half the price. Then about a month later, we rolled out turbo versions with better performance and even more aggressive pricing. ERNIE 4.5 Turbo at 80% lower price than 4.1 and Ernie X1 Turbo at half the price of Ernie X1. This price cuts are supported by our full-stack AI capabilities to continuously lower inference costs, making our model one of the most cost effective options on the market today. We're also opening up our best capabilities to the broader community. So, we are on track to open source ERNIE 4.5 series on June 30. And we are excited to see markets response and look forward to more people exploring what ERNIE can do. Ultimately, we hope this helps more users experience the true value of our models and explore new real world applications. Thank you. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Please go ahead. Lincoln Kong: Thank you, management for taking my questions. My question is about the cloud business. So, we have seen a very strong growth in the first quarter for the cloud revenue. So what are the key drivers for this strong growth? So, how should we think about sustainability here? And also could management provide us some breakdown in terms of the by category, for example, like infrastructure, industry solutions, project based service and as well as this personal cloud? So, how should we think about the outlook for the growth as well as the profitability within 2025 for cloud business? And lastly, with the recent tightening of our U.S. export restrictions on those advanced AI chips, so what are the potential impact here on Baidu Cloud operation and our growth plan? Thank you. Dou Shen: This is Dou. Thank you for your question. In Q1, our AI Cloud revenue growth further accelerated to from 26% year-over-year growth in Q4 last year to 42% year-over-year, mainly driven by surging demand for Gen AI and foundation models across industries for both training and inference. So as foundation models have undergone faster iteration recently, we have seen a fast increase in the model training needs, not just for large language models, but also for other types of models. Customers are increasingly choosing Baidu AI Cloud for our recognized leadership in AI infrastructure and our enhanced MaaS platform, Qianfan, which consistently lowers inference costs and improves toolchain efficiency. In terms of the revenue breakdown, Baidu AI Cloud primarily consists of two parts: personal cloud and enterprise cloud. And enterprise cloud contributes to the vast majority of AI cloud revenue, which has consistently outgrown overall AI cloud. And then, within the enterprise cloud, we have subscription based and project based revenue. For the subscription based revenue, it currently accounts for the majority of the enterprise cloud revenue, providing a sustainable revenue stream. Among subscription based revenue, Gen AI related revenue has maintained triple digit year-over-year growth for several consecutive quarters. Project based revenue may fluctuate from time-to-time, but in the long run, we believe the proportion for our subscription based revenue will continue to rise, supporting more sustainable and healthier long-term growth for our cloud business. On the profit side, AI Cloud's non-GAAP operating margin continues to expand year-over-year in Q1, maintaining its upward trend. This was driven by an improved revenue mix towards higher value offerings as we focus on opportunities that align with our strategic priorities. As a result, our AI cloud's non-GAAP operating margin is now at the level of teens. Regarding AI chip export restrictions, as Robin just mentioned, we follow an application driven approach because we believe the greatest value of AI eventually lies at the application layer. Even without access to the most advanced chips, our unique full stack AI capabilities enable us to build strong applications and deliver meaningful value. Also, our AI infrastructure is both scalable and highly efficient, enabling strong GPU utilization to support both training and inference with high cost performance. In parallel, we have the flexibility to select from a range of chip solutions based on different business scenarios, especially for inference. So looking forward, we believe that in overtime, domestically developed self-sufficient chips, along with increasingly efficient homegrown software stack will jointly from a strong foundation for long-term innovation in China's AI ecosystem. Thank you. Operator: The next question comes from Alex Yao with JPMorgan. Please go ahead. Alex Yao: Thank you, management for taking my question. So you accelerated the AI search transition this quarter. Was management's rationale behind the move? What are your expectations for AI answers penetration? And then any updates on upcoming testing for AI monetization in 2Q? And how should we think about the ramp up into second half this year in terms of monetization and the consumer behavior? Thank you. Robin Li: Thank you, Alex for your question and let me take your question. In Q1, actually, we have seen significantly accelerated our AI transformation of such aiming to further enhance the user experiences through innovative technology. And our top priority remains the same that is the user experiences as we believe that the high quality of the [indiscernible] continues the user metrics improvements are critical for sustainable long term growth. In April, we have seen that roughly 35%, 35% (ph) of the mobile search results, which is content -- AI generated content, up from 22% in January, which has making our largest expansion so far. We expect this percentage to keep rising rapidly in Q2. And there are a couple of reasons behind them. In the first place, today's AI landscape is evolving very quickly and the users' information seeking behaviors continue to diversify. So it's more necessary than ever to make rapid innovations in such capabilities. Second, ongoing progress in the model's capabilities has also helped us to keep improving the quality, quantity and the presentation format of the search results, while generating the multimodal contents at a massive level. And meanwhile, the average cost per query will keep falling as the inference cost drops. And we can roll this out across more queries more quickly. And in the third place, we have established a solid product framework that was well with our capabilities to incorporate multimedia contents, which play a very important role in this whole process, which can help us to provide much easier to digest answers and aligns better with the users' behavior. And we have seen very clearly signs of improvement in the user experiences. The users who has been exposed to the AI generating search results are finding the information much more efficiently and exploring more types of queries and showing the stronger retentions. And therefore, we are actively investing to accelerate our AI transformations of search. On monetization, we are still very early had just starting to prepare for testing, Since our AI search differs significantly from the traditional search, the corresponding monetization approach needs to be rebuilt and refined and this takes some time. That said, we can see huge potential, perhaps currently, only a small percentage of the traditional search queries can be monetized, while the vast majority cannot. Over time, we anticipate AI search will greatly enhance our ability to monetize the long tail queries and previously untapped areas. And we expect more queries to become monetizable as compared to the traditional search. Plus, AI search can likely create formats that are more flexible and native and feed naturally into the new users' experiences. They can be less intrusive, but potentially even enhance overall expenses. And looking ahead, we believe that the long-term potential of this expanding monetization capabilities is quite promising, opening up the possibilities that go beyond what Chinese law search can achieve. While our clear move towards AI search will inevitably put a notable near term pressures on revenue and margin, I would still believe this is the right path to follow for the long term growth. Thank you, Alex. Operator: Your next question comes from Gary Yu with Morgan Stanley. Please go ahead. Gary Yu: Hi. Thank you, management. I have a question regarding robotaxi. Given the recent development in the robotaxi space, including some of the players announcing their new robotaxi vehicles and partnership with Uber. How do you feel the evolving competitive landscape and what differentiates by Baidu RT6 from other robotaxi vehicles? Also, are you exploring similar types of partnership like your peers? Should we expect faster expansion of Apollo Go this year? And lastly, what scale and unit economics are you targeting and how to think about the long term profitability potential? Thank you. Robin Li: Gary, we've been invested in autonomous driving for over 12 years. Today, Apollo Go is among the first and the very few players globally to operate autonomous ride-hailing services at scale, making us both China's largest and global leader in this space. RT6 is the world's first and as of today, the only purpose built maas produced Level 4 autonomous vehicle. It is designed from the ground up for fully driverless operations, with self-developed hardware design, algorithms and software and featuring top safety redundancy. RT6 is now running at meaningful scale across multiple cities. And its unit cost is below $30,000 far better than anyone else on the planet. With this unique strengths and proven business model, Apollo Go has been making steady progress in global expansion, most recently entering Dubai and Abu Dhabi. Altogether, our global footprint covers 15 cities, as I mentioned during the prepared remarks. And on expansion strategy, we are highly open and adaptive. We are ready to enter into any city worldwide. As long as regulations and conditions allow, we can enter quickly and scale efficiently. Our confidence comes from our long operating history, low cost structure and excellent safety record. With over 1,000 fully driverless vehicles deployed, we are expecting to see faster growth in our global fleet size, geographic range and right volumes this year and beyond. Meanwhile, we are proactively exploring new business models through partnerships, especially those that can scale fast and land quickly. We're in active discussions with various players, including ride-hailing platforms, fleet operators and more. While serious partnerships usually take time to work through all the details, some of them are already taking shape. We are happy to share progress that is really meaningful and concrete. Our strategic partnership with CAR Inc, Shenzhou Zuchu, our top auto rental -- China's top auto rental service provider is one example. And I'm sure there's more to come. Looking into the longer-term, we see a clear path to profitability as hardware and labor costs keep coming down and our growing operational scale brings more efficiencies. Given our leading position in both technology and operations, we are confident Apollo Go will continue to lead the field. We expect Apollo Go to be a key driver of Baidu's long-term growth. Thank you. Operator: Your next question comes from Miranda Zhuang with Bank of America Securities. Please go ahead. Miranda Zhuang: Thank you for taking my questions and congrats on the good results. My question is about the competition. So, we see other AI applications are ramping users with enhanced models and offer more advanced functionalities like deep -- search or agent and some are leveraging existing large traffic super app platforms. So to this, how will Baidu compete with other AI application and platforms? Thank you. Robin Li: Thank you for your question. This is Julius. As I mentioned earlier, with AI evolving very quickly, people now have different ways and choices to find information and enjoy the contents. So we understood early on that if we didn't take both steps to renovate search, we will be challenged sooner or later. That's why we were among the first major tech companies in China or globally to use AI to transform a legacy core business. In recent months, you have seen us accelerate these transformations. And as for AI chatbots specifically, for sure, they are one innovative form of AI applications. And we also have our own chatbot product, like, ERNIE bots, and we have also integrated conversational AI capabilities in the Baidu app. So I would say that AI chatbot represent one important exploration of AI applications, but they are now the ultimate form. Our goal is to find the most powerful applications that can create lasting value in these AI areas. So when we talk about the competition, it's not just about competing with the chatbots. I think it's about rethinking the value of search in AI times. From there, we have identified two directions, we are currently focused on. First, we believe AI search should efficiently meet the user needs while offering highly engaging experiences. Our AI search now looks very different from the traditional search. We prioritize the rich, impressive multimodal content that is easier to understand and nature to interact with. Second, we are reimaging the AI search to go beyond just finding information. And our ambition is to expand the search to help users make decisions, provide solutions and ultimately deliver results. To support this, I think a key strategy initiative for us is to make Baidu more capable through innovative approaches like agents. Our agents today can already handle the users, handle complicated problems, support the decision making and connect them with the right qualities behind things. Looking ahead, we aim to further enhance our services capabilities through agents. This will now only improving the user experiences by meeting more needs, but also help our customers and our partners connect much better with users than before. Besides, we're also making Baidu more open. This quarter, we proactively embrace MCP and the third-party agents. On one hand, by connecting the third-party tools and capabilities, we are enabling the users and customers and the partners to even more -- to do even more things within our platform. And on the other hand, as we're also try to open up our capabilities through MCP. For example, our e-commerce MCP, by doing so, we are helping all parties in the ecosystem to benefit from greater flexibilities and unlock the broader opportunities, both within and beyond our platform. And in the face of today's increasingly dynamic marketing, and we believe our innovative approaches can expand both the depth and breadth of what such can do and ultimately create the values for everyone in the ecosystem. Thank you. Operator: Your next question comes from Wei Xiong with UBS. Please go ahead. Wei Xiong: Hi. Good evening, management. Thank you for taking my question. I want to follow-up on the cloud side. So with accelerating enterprise AI adoption, how should we think about the enlarged TAM for China's cloud market? And how is our cloud business differentiated from competitors in terms of strategy, technology and customer base? Also regarding the Qianfan platform, could you please maybe share more some updates here, which industries are seeing the fastest AI adoption and where do we see the largest long term potential? Thank you. Dou Shen: Thank you for the question. I'll take it. As AI adoption accelerates, the time for China's cloud market is expanding meaningfully, driven by changes across the stack. With foundation models driving up the need for a massive computing power, the abilities to build and manage large scale GPU clusters and to utilize GPUs effectively has become key competitive advantages. Meanwhile, as models evolve with different strengths and AI applications bring increasingly diverse needs. The cloud platforms with broad model portfolios and food stack capabilities are best positioned to offer the flexibility and scalability customers require. This industry shifts align perfectly with Baidu's positioning, making our unique AI capabilities increasingly valuable. Baidu is one of the very few cloud providers globally with end-to-end full-stack AI capabilities. So we offer China's most efficient AI cloud infrastructure, back end by strong GPU cluster management. This allows us to deliver high performance, stable and cost effective AI services, while continually improving training and inference efficiency. Qianfan, our MaaS platform is among the most advanced on the market. It offers a comprehensive model library covering both our ERNIE series and nearly all mainstream supporting and open source models. This quarter, so we further enhanced Qianfan’s to [indiscernible] with extended support for training and tuning and distillation especially for our newly added multimodel and reasoning models. Strategically, we remain firmly committed to an application driven approach. So as the AI landscape evolves, this approach positions us well to deliver differentiated value. We offer full-stack end-to-end AI products and solutions tailored to the needs of specific industries and scenarios. By bringing AI into every aspect of their operations, so it'll help enterprises improve efficiency, reduce cost and eventually transform their interior workflows. With this [indiscernible], we have captured the opportunity presented by industry shift and repositioned ourselves as China's top tier cloud provider in the AI era. The increasing market recognition of our AI expertise continues to drive strong momentum in our client pipeline, as we build and deepen partnerships with leading enterprises. And we are also increasingly becoming the preferred choice for mid-tier businesses. As for enterprise adoption, so we are seeing rising interest across sectors. Early movers like Internet, tech and online education companies are adopting AI quickly, while others such as automotive, financial services, utilities and the public sector are also actively exploring with openness. So as technology advances and costs decline, we're ready to lead the next wave of enterprise AI adoption and translate innovation into real world value. Thank you. Operator: Your next question comes from Thomas Chong with Jefferies. Please go ahead. Thomas Chong: Hi. Good evening. Thanks, management for taking my questions. Can management elaborate about the overall capital allocation trend and the key priorities for 2025? Thank you. Junjie He: Hi, Thomas. This is Jackson. I will take your call. So, we are firmly committed to our investments in AI. So, as we believe this will generate meaningful returns over the long-term. So, when quantifying such investments, please note our AI investments are reflected not only in CapEx, but also in operating cash flow outflow. So we are taking these two together, so our total AI investments in 2024 significantly increased from 2023, reflecting our conviction in the huge future growth potentials. In 2025, we plan to continue to increase our AI investment to further solidify our AI foundation and prepare for future growth. So, let me walk through the key areas that we are now focusing on. The first in AI cloud business. We are investing in AI infra to meet rising market demand driven by accelerating AI adoption. So, this is prompting us to quickly scale up our AI infra to capture emerging opportunities. As you've seen, our AI Cloud revenue grew 42% year-over-year this quarter with non-GAAP operating margin in the teens. Secondly, we continue to invest in advancing our earning models. Ongoing technical progress has enabled us to train better models more efficiently and at a lower cost. As a result, we brought a series of high quality earning models to market in quick succession. Also, we are investing in autonomous driving technology. Last quarter, Apollo Go validated its business model in its large operational area in China. This milestone has motivated us to move faster in expansion, including entering the Middle East market, while revenue volume continues to accelerate across our existing operations. We will continue this momentum going forward. Lastly, we continue to invest in AI search transformation with a focus on user experience. As Julius said, when we step up this investment, while monetization for AI search results remains at early stage, we do expect some margin pressure in the near term, but we see this as a necessary step to unlock long term growth. Another key focus of our capital allocation is shareholder returns. As I said earlier, since last year, we have significantly accelerated our share repurchase (ph) program. We further repurchased $445 million from the beginning of Q1 this year. These are strongest repurchase efforts in the past three years. We expect to keep a similar pace this year, reflecting our long standing commitment to shareholders and our confidence in our long term growth. Thank you. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.

Operator: Hello and thank you for standing by for Baidu's Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin : 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 Li, our Co-Founder and CEO; [Rong Luo, our EVP in charge] (ph) of Baidu Mobile Ecosystem Group, MEG; Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG; 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. [Private] (ph) Securities Litigation 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 unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures, and is available on our website at ir.baidu.com. As a reminder, this conference will be recorded. In addition, the webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. Baidu core total revenue for the fourth quarter saw a slight year-over-year increase, reaching RMB27.7 billion. Our AI Cloud business 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 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 businesses. Our cloud business demonstrated strengthening momentum towards the end of the year with both robust revenue growth and margin expansion. As we continue to rebuild the entire product portfolio of our mobile ecosystem with AI, most notably in Baidu Search. Meanwhile, Baidu's autonomous ride-hailing service, Apollo Go has proven the viability of its business model, strengthening our confidence in pursuing global expansion and exploring asset-light business models. ERNIE has demonstrated industry-leading capabilities in instruction following and state-of-the-art RAG technology that minimizes hallucination. This 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 a 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 cost is driven by two reasons. First, businesses are finding enough value from integrating ERNIE 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 ERNIE Bot 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 Grid Corporation of China to develop a tailored AI solution based on ERNIE and our MaaS 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 our AI Cloud services, further deepening its collaboration with us. We also collaborated with [indiscernible] a leading recruitment company to adopt [indiscernible] ERNIE-powered outbound calling product for campus recruitment, featuring highly humanlike 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, [JobKing] (ph) achieved a 50% higher acceptance rate for job fair invitations and 70% lower labor costs. The growing market recognition and adoption reinforced 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 ERNIE and our AI Cloud potential, we foresee an ever-expanding horizon of possibilities unfolding before us. On the consumer-facing product, 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 App and AI-powered creativity platform. This integration allows Wenku to combine personal cloud storage with AI-powered search and the document creation capabilities, while enabling users to streamline their workflow from searching, accessing files to creating and sharing are 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 on a unified Campus. Free Campus 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 search, 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 search. This has been a challenging but deeply meaningful journey like pioneers crossing unfamiliar waters, we embraced the uncertainties that come with starting new characters. 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 result pages contain AI-generated content. During the quarter, we mainly focused on redefining and enhancing the quality of our AI-generated search results. Through ERNIE's 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, nodes, agents, digital humans and live streaming. Through this more dynamic and varied content combinations, users can now discover a broader range of information that was previously inaccessible, presented in more engaging ways that's 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 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 retention rates and longer time spent. 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 pioneered, breaking new ground in how agents interact with users. Taking our newly introduced lawyer agents as an example. This embodied lawyer agents can transform legal expertise and industry know-how into engaging multimodel content, featuring lawyers' actual appearance in live streaming and AI-generated short videos. Through these agents, 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 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, 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 validated our pioneering business 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 Go feeds have accumulated more than 130 million autonomous kilometers with an outstanding safety record, underscoring our industry-leading standards. This 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, Apollo Go 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 ride 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, we 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 minimize the performance loss, and automatically resolve for 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 our MaaS platform, which improves the model and app development experience for our customers and partners. Our platform features the ERNIE family of models and offers access to a selection of high-quality models across the globe with DeepSeek being one of our latest additions. We offer post-train, SFT, data labeling and preparation for our models hosted on Tianfeng , 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] (ph) 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 ERNIE agents on a daily basis with rapid growth in health care, 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 these from standard customer inquiries through intelligent multi-round interactions. For intelligent driving, in Q4, Apollo Go 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 leverage 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 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. Junjie He: Thank you, Robin. Now let me walk through the details of our fourth 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 2024 were RMB133.1 billion, decreasing 1% year-over-year. Baidu core's Q4 revenues were RMB27.7 billion, increasing 1% year-over-year. In 2024, Baidu Core generated RMB104.7 billion in revenue, increasing 1% year-over-year. Baidu Core’s online marketing revenue decreased 7% year-over-year to RMB17.9 billion in Q4, accounting for 65% of Baidu Core's total revenues. Baidu Core online marketing revenue decreased by 3% year-over-year in 2024. Baidu Core's non-online marketing revenue was RMB9.8 billion, up 18% year-over-year. 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 RMB29.2 billion in 2024, decreasing 8% year-over-year. Cost of revenues was RMB18 billion in Q4, increasing 3% year-over-year, primarily due to the increase in traffic acquisition costs, costs related to AI cloud business and a one-time write-down of inventories, partially offset by a decrease in personnel-related expenses and content costs. Cost of revenue was RMB66.1 billion in 2024, increasing 2% year-over-year primarily due to an increase in traffic acquisition costs, bandwidth costs and server custody 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 an increase in expected credit losses, server depreciation expenses and server custody fees, which is for Gen-AI research and development input and the channel spending and promotional marketing expenses, partially offset by a decrease in personnel-related expenses. [RMB561 million] (ph) of the increase in expected credit losses was pertaining to a one-time accrual. Operating expenses were RMB45.8 billion in 2024, decreasing 4% year-over-year, primarily due to a decrease in personnel related expenses. Operating income was RMB3.9 billion in Q4 compared to RMB5.4 billion for the same period last year. Baidu Core operating income was RMB3.6 billion, and Baidu Core operating margin was 13% in Q4 compared to RMB4.7 billion and 17% for the same period last year. The decrease due to one-time losses of RMB101 billion, including accrual of credit losses, write-down of inventories and others. Operating income was RMB21.3 billion in 2024. Baidu Core operating income was RMB19.5 billion, and Baidu Core operating margin was 19% in 2024. Non-GAAP operating income was RMB5 billion in Q3 -- non-GAAP Baidu Core operating income was RMB4.6 billion and non-GAAP Baidu Core operating margin was 17% in Q4. Non-GAAP operating income was RMB26.2 billion in 2024. Non-GAAP Baidu Core operating income was RMB23.9 billion and non-GAAP Baidu Core 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 increase in net foreign exchange gain arising from exchange rate fluctuation between renminbi 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 loss pickup in 2023. Income tax expense was RMB1.6 billion. In 2024, total other income net was RMB7.4 billion, increasing 120% year-over-year, primarily due to a decrease in pickup losses. 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 Core was RMB5.3 billion and net margin for Baidu Core is 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 [RMB3.7] (ph) billion and non-GAAP net margin for Baidu Core is 24%. In 2024, net income attributable to Baidu is up RMB23.8 billion, and diluted earnings per ADS was RMB65.91. Net income attributable to Baidu Core was RMB23.4 billion and net margin for Baidu Core was 22%. Net -- non-GAAP net income attributable to Baidu was RMB27 billion. Non-GAAP diluted earnings per ADS was RMB76.85. Non-GAAP net income attributable to Baidu Core was RMB26.3 billion. And non-GAAP net margin for Baidu Core was 25%. As of December 31, 2024, cash, cash equivalents, restricted cash and short-term investments were RMB139.1 billion, and cash, cash equivalents, restricted cash and short-term investments, excluding iQIYI were RMB134.7 billion. Free cash flow was RMB13.1 billion and free cash flow, excluding IT, was RMB11.1 billion in 2024. We define net cash position as cash and cash equivalents plus total restricted cash, deposits and others, less total loans, convertible senior notes and notes payable. As of December 31, 2024, net cash position for Baidu was [RMB170.5 billion] (ph). Baidu Core had approximately 31,000 employees as of December 31, 2024. With that, operator, let's now open the call to questions. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Alicia Yap with Citigroup. Please go ahead. Alicia Yap : Thank you and good evening management. Thanks for taking my questions. My question is on the latest hot topic. So we have seen DeepSeek gaining a lot of attention lately and by do a 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 the current competitive landscape of the foundations models? How does Baidu plan to stay ahead of this evolving market? Thank you. Robin Li : Hi, Alicia, let me answer your questions. The GenAI and Foundation Model market is still nascent, but moving at a very fast pace. The DeepSeek success story will certainly accelerate the adoption rate of foundation models. As foundation models become more accessible and affordable, I believe we are entering a truly transformative phase. We are seeing 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 DeepSeek is that open sourcing the best models can greatly help adoption. When the model is open source, people naturally want to try it out of curiosity, which helps drive broader adoption. ERNIE 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 ERNIE 4.5 series, is also backed by our deep confidence in our technology leadership. This conviction stems from our decade-long commitment to R&D investment. Our continuous technological innovation and our unique position as one of the few companies worldwide with 4-stack AI capabilities. ERNIE has already demonstrated strong market traction with daily API costs surging from 50 million to 1.65 billion in just one year. So through open sourcing, we believe more developers and users will recognize ERNIE's true-value, driving even broader adoption and expanding its impact across more scenarios. Similarly, making ERNIE Bot free, will enable more users to compare our Foundation models with other models on an apple-to-apple basis because they don't charge. Last time we had a major upgrade of ERNIE was in October 2023. So it is a long time ago. So stay tuned for ERNIE 4.5 in the next couple of months. Having said that, I want to emphasize one crucial point. No matter open source or close source, Foundation models become truly valuable on the only when they can effectively address real world problems at scale. We have been committed to an application-driven approach in continuously iterating ERNIE. With this mindset, since launching, we’ve been using ERNIE to renovate our products while serving enterprise customers. Internally, we've leveraged ERNIE to successfully transform our consumer-facing products like Baidu Search and Baidu Wenku. Externally through our MaaS platform Tianfeng , we are enhancing the model and application development experience for enterprise clients. ERNIE's industry-leading capabilities in instruction following and state-of-the-art retrieval augmented generation technology, minimizes hallucination, have enabled wide adoption across various scenarios. And Tianfeng comprehensive tool chain, allows our customers to customize any model for their own application scenarios. Going forward, we plan to accelerate ERNIE's iteration based on the performance improvement and cost cutting potential. We will continue evolving it in areas with the greatest potential for real-world impact. We’re 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. Operator: Thank you. Your next question comes from Lincoln Kong from Goldman Sachs. Please go ahead. Lincoln Kong: 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 GenAI result? And what's our target mix? And also as AI integration continued to deepen, could you share more color around the user metrics? Given that AI chatbot such as DeepSeek and Doba also offering search capability. So how do you view the competitiveness or the competition dynamics between Baidu Search and those are AI chatbots? Thank you. Unidentified Company Representative: Lincoln, let me answer questions. And currently, around 22% of all search result pages which have contained AI-generated content. However, there is much more premium listing. We have fundamentally transforming search and making more powerful and efficient than ever before. And then as Robin said in the prepared remarks, with ERNIE, we have expanding the search beyond text, links to offer diverse content formats, including short videos, live streaming, agents, nodes and short plays. And these different formats can be dynamically combined to create a personalized search experiences. As we continue to transform search, we are also developing capabilities which allow for the deep personalization adapting to each user's habits and preference. Our efforts have led to the better user results. In January, we can see the amount monthly active users who conduct search on Baidu App. 83% engaged with the generative 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. And we focus on continuously improvement in user experiences, expanding AI's role, as we see increasingly positive user engagements. Building on this, let me share a small case of how ERNIE 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 peak, our ERNIE agents effectively bridge this gap. For example, here is a company should increase inquiries as a family reunited and chat on elderly parents’ health needs. But their customers – by their own customer service team, actually were away because they were on holiday. Through the ERNIE agents, we have the company effectively, identify and qualify the highly relevant sales leads, enabling them to efficiently flow out and serve their customers seamlessly, even with a [reduced holiday] (ph). And regarding your question about AI chatbots and search, we believe that we are still in the very early stage of the AI revolution, driven by the financial models. Whether it is AI native chatbot like DeepSeek or our AI-driven products, this kind of efforts. And this all represent different ways to explore AI potential. As the leader in China’s search market with hundreds of millions of users to maintain agility and holistic market view by [increasing] (ph) the best innovations and incorporating the truly innovative AI features. As 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 and text understanding, which aligns perfectly with the large languaging model capabilities, which position us well to lead in the AI empower search transformation. We believe search is evolving into an 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. While AI chatbot represents an important early phase, AI application development, the [indiscernible] today has not yet emerged. And for us, the key is to maintain this rapid and determined pace of the AI transformation, focusing on discovering what users truly need and one from the next generation of search. Thank you, Lincoln. Operator: Thank you. Your next question comes from Alex Yao from JPMorgan. Please go ahead. Alex Yao : Hi, management. Thank you for taking my question. So could you comment on core ads growth outlook for first quarter '25 and full year 2025? What are the macro assumptions you made underlying this outlook, as the advertising business truly bottomed out in 4Q '24 and started to recover? And lastly, what are the potential opportunities for monetizing GenAI search and what is the expected timing? Thank you. Unidentified Company Representative: Thank you, Alex. This is [indiscernible]. Let me answer your question. Yes, we are seeing the different kinds of seamless policies rolling on in the past few months. And like monetary easing, physical stimulus and trading policies. And while we believe that these measures will eventually 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 is a persistently challenging competitive landscape. And we haven't really seen any improvements in Q4 yet. Despite the near-term pressures, our efforts to transform search with financial models are progressing steadily. And we believe that this AI transformation will continue to enhance the user experiences and create new opportunities. This quarter, we further deepen AI transformation of search, 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 and open new monetization opportunities in the long-term. Also we haven't started monetize our AI-generative results at scale, which is around 22% of total queries. Once our AI-powered such features are sufficiently refined, we will move forward with monetizations. With higher quality user products, we are seeing opportunities for future growth. Based on these factors, we think that we are reaching the 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. Operator: Thank you. Your next question comes from Gary Yu from Morgan Stanley. Please go ahead. Gary Yu : Thank you for that 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 trajection going into 2025, and both in terms of revenue and also profitability? What are the main drivers 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. Unidentified Company Representative: Thank 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 '24. Notably, GenAI related revenue nearly tripled year-over-year in 2024. So this growth was fueled by rising demand for ERNIE and our AI infrastructure, and scoring the market's strong recognition of our technical leadership. So as a result, we’ve 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 lots of AIGC start-ups. 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 MaaS platform, Tianfeng it provides comprehensive foundation models with the industry-leading press and performance. So we offer the ERNIE family of models from flagship to lightweight variants, designed to meet diverse needs. And besides ERNIE, we also provide access to a wide range of high-quality third-party foundation models, including DeepSeek V3 and R1 Models. Thanks to our full stack AI capabilities and end-to-end optimization, we can ensure optimal performance and stability for any hosted on our platform, while maintaining highly competitive presence. So in addition to that, Tianfeng provides a full sight 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 language models became a widely discussed topic. This not only further increased public awareness foundation models, but also encourage more people to think simply 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 cost 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&D to production and to sales, which will drive explosive growth in the API cost. Thereafter, we anticipate increased spending on Baidu AI Cloud, as we have observed a clear trend in the past that the consumers who adopted foundation models through API costs on our Tianfeng MaaS platform also tended to increase their 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 strategic priorities, which drives sustainable robust growth. So looking into 2025, we are confident that our AI cloud revenue growth will maintain strong momentum, while continuing to generate positive operating profit. Thank you Gary. Operator: Your next question comes from Xiong Wei from UBS. Please go ahead. Wei Xiong: 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. Junjie He: Thank you Wei for your question. This is Jackson. So despite the near-term pressure, so we remain optimistic that our strategic AI investment will 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, driven by our plan to monetize our AI generated search results at scale, and also our revenue to capture growth opportunities when the macro improvement. Secondly, 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 4-layer AI architecture and first step AI capabilities. So we remain confident in maintaining this strong momentum going forward. Third, for our entire driving business, particularly Robotaxi, Apollo Go, we remain focused on narrowing losses with better operational efficiency and improved UE. We are also exploring innovative operational models, including asset-light models. As you asked for the investments and optimization in 2025, we will maintain optimal resource allocation to high growth opportunities, while they align 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 ERNIE's capabilities, deepening the AI transformation 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 and fostering synergies across business group to maximize the impact of these strategic investments. Thank you. Operator: Thank you. Your next question comes from Miranda Zhuang from Bank of America Securities. Please go ahead. Miranda Zhuang: Good evening. Thanks management for taking my question. My question is about the Robotaxi business. Can management provide updates to the 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 leveraging ecosystem strategies with automakers and also ride-hailing platforms. So wondering what is Baidu's approach to compete and scale? Thank you. Robin Li : Yes, this is Robin. We've invested in autonomous driving technology for over a decade. 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 world's most complex due to its massive population, diverse road conditions, dynamic traffic scenarios and complicated urban layouts. The price for ride hailing in China it's 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 autonomous vehicle from the ground up. It is the most cost-effective global taxi vehicle, the world has ever seen. With these strengths, we've successfully validated our business model and laid a strong foundation for further scaling and global expansion. In Q4, Apollo Go provided approximately 1.1 million rides nationwide. That's a 36% increase year-over-year. And in January, the cumulative rides provided to the public exceeded 9 million. Furthermore, as I mentioned, we've achieved 100% fully driverless operations in China which means that we don't have any safety drivers 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 Apollo Go got the green light to start open testing in Hong Kong. And this is an important stand because Hong Kong is our first right-hand drive and right-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 fleet size and ride volumes faster than ever. As we push forward, 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 and other potential partners. This asset-light approach will allow us to scale up efficiently while maintaining flexibility. By working with a diverse range of 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 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. Operator: Thank you. Your next question comes from Thomas Chong from Jefferies. Please go ahead. Thomas Chong: 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. Junjie He: Thank you, Thomas. This is Jackson. So as we evaluate our capital allocation opportunities in 2025, so our approach are guided by the following strategic considerations. So we will continue to invest in advancing our AI capabilities, as a long-term strategic priority. So with that, we will further deepening the AI transformation across our product portfolio, particularly search. For AI Cloud, we aim to drive the adoption of our AI infrastructure, our MaaS platform, Tianfeng and the ERNIE among enterprise customers, meeting their growing demand for our AI products and solutions, as well as AI Cloud services. In [intent] (ph) driving, 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 drive our decisions to strengthening our technology leadership and accelerating the adoption of our AI products and AI cloud services across different sectors. So as you ask for shareholder returns, we repurchased over $1 billion, since the beginning of 2024, which is significantly higher than our total buybacks in 2023. So in total, we have repurchased $1.7 billion under our $5 billion purchase 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. Operator: ladies and gentlemen, that is all the time we have for questions. That does conclude our conference for today. Thank you for participating. You may all disconnect.

Operator: Hello, and thank you for standing by for Baidu's Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's third quarter 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 Li, our Co-Founder and CEO; Rong Luo, our EVP in charge of Baidu Mobile Ecosystem Group, MEG; Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG; and 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 US Credit Securities Litigation 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 the 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 directly-comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. Baidu core total revenue was RMB26.5 billion. That's roughly flat for the third quarter on a year-over-year basis. Revenue growth from AI cloud was 11%, continuing its double-digit growth trajectory, thanks to the sustained momentum in Gen AI-related revenue. Our non-GAAP operating profit and non-GAAP operating margin remained stable, which demonstrates the resilience of our business. While navigating the ongoing macroeconomic weakness, we remain patient on our strategic focus of AI-driven innovation, with a particular emphasis on transforming our existing products and businesses, as well as fostering a new ecosystem for earning. Despite near-term headwinds, we are deeply convinced that this AI-focused strategy will position us well to capture significant growth opportunities in the long run. Underpinning our long-term strategic focus is the advancement of our AI capabilities, which serves as the cornerstone of our AI-driven transformation. In the third quarter, we continued to improve earning through pre and post training, optimizing model efficiency, while tailoring to the needs of our diverse application scenarios. Our flagship model, ERNIE 4.0 Turbo, has achieved notable improvements in inference efficiency, with throughput increasing by 48% compared to its [indiscernible] in June. The efficiency gains were driven by the optimization of our self-developed four-layer AI infrastructure. And we expect such improvements to further reduce model inference costs going forward. We have also expanded our lightweight model offerings with the introduction of Speed Pro and Lite Pro in the third quarter, as enhanced versions of their predecessors, Speed Pro and Lite Pro, featured lower latency, higher throughput, improved stability and superior accuracy. Over the past 24 months, we have focused on resolving LLM hallucinations through RAG, Retrieval-Augmented Generation. However, we observed that image generation still faces widespread hallucination issues, leading to inaccurate and logically inconsistent output, particularly in e-commerce and marketing scenarios where sellers need to generate images that precisely match their text descriptions. Aiming at mitigating hallucinations in text-to-image generation, we launched ERNIE iRAG at Baidu World 2024 to revolutionize image generation, delivering more precise and demand-driven results with substantially enhanced accuracy. These additions have made our offerings more comprehensive, extending the reach and effectiveness of ERNIE across diverse scenarios. Thanks to ERNIE's enhanced capabilities, wide ranging applications and improved cost efficiencies, we've seen a substantial increase in API costs. In November, ERNIE handled approximately 1.5 billion API costs daily, a significant jump from 600 million in August. Meanwhile, over 1.7 trillion tokens were generated on a daily basis. The surging API call volume and token generation demonstrate strong market adoption of ERNIE, validating its value in real-world applications. Powered by the enhanced ERNIE models, we are achieving comprehensive penetration of AI capabilities across our entire product line, from consumer-facing products to enterprise solutions. Our continuous efforts to transform search have yielded promising progress with encouraging user-centric outcomes emerging this quarter. Currently, over 20% of all search result pages contain AI-generated content, increasing from 18% in August. On Baidu App, where the majority of our search queries were conducted, an increasing number of users are engaging with generative content, reaching nearly 70% of its monthly active users. Users exposed to AI-generated search results spend longer time on Baidu, used a more complicated queries and were more likely to return the next day. These positive changes become increasingly pronounced from quarter-to-quarter, indicating that our Gen AI-enabled search is better serving users' needs and enhancing user satisfaction. We have also observed changes in user behavior patterns, suggesting Baidu is evolving beyond the traditional search in users' minds, serving as a more comprehensive destination for their needs. Users are staying longer to interact with our AI features after initial queries. We are proactively engaging in more complex, multi-round conversations with growing interaction frequency, reaching tens of millions of daily interactions. Users are also moving beyond pure search to content creation on Baidu. For example, during this year's Mid-Autumn Festival, we saw a surge in both image creation and text generation, indicating changes in how users interact with our platform and their growing exploration of ERNIE-powered functions. These changes inspire us with new ideas for future enhancements. Going forward, we will enrich our content diversity, explore more comprehensive and unified ways of content presentation, and promote chat-based interaction. We envision agents as the most prominent form of AI-native application and a transformative force in driving meaningful innovation. This quarter, we continued to enhance ERNIE agents' capabilities and expand their applications across various scenarios. We have witnessed significant growth in the conversation rounds with ERNIE agents, reaching an average volume of 15 million daily. The recently released Top 100 Agent List at Baidu World covers a wide array of scenarios and industries, showcasing the breadth and variety of our agents. The ERNIE agent we created for BYD demonstrates how agents can enhance brand engagement and create significant value. Rather than navigating through traditional websites, users can now discover BYD through dynamic conversations with its agent on Baidu. This innovative approach has naturally inspired users to explore the brand more proactively, leading to a higher engagement and stronger purchase intent. The effectiveness of the agent is further validated by the fact that around 70% of users who engaged with the BYD agent returned to Baidu within seven days for BYD-related searches, highlighting how the agent's compelling content sparked genuine interest and motivated further brand exploration. Beyond BYD, we also partnered with leading enterprises such as Samsung and [indiscernible] to build their own agents on Baidu. While these examples demonstrate the versatility of ERNIE agents, we believe their transformative potential is just a beginning to unfold. We envision agents redefining information in the AI era, much like how websites shifted the internet age or apps and social media accounts transformed the mobile internet era. We believe agents are emerging as the fundamental carrier of content, information and services. What sets agents apart is their human-like capabilities. They can serve as your sales representative, customer service agent or personal assistant, delivering content and services in a more intelligent and interactive way. As we continue to advance our AI technology, we expect agents to unlock unprecedented value for our users. Another standout in our product transformation journey is Baidu Wenku, our one-stop shop for document creation. Since the official ramp-up of Wenku's AI renovation late last year, the MAU of AI-enabled features has grown rapidly, exceeding 50 million in September, representing a year-over-year increase of over 300%. Users of AI-enabled features demonstrated a stronger willingness to pay, contributing to accelerated growth in our paying user base. And in the third quarter, Wenku's subscription revenue continued its robust growth trajectory, reaching a year-over-year growth of 23%. We continue to roll-out new AI-powered features to facilitate users in their thinking, learning and creative process. After enabling natural language instructions for PowerPoint slide building and editing last quarter, we introduced a new feature to transform even the most basic text slides into visually stunning, sophisticated and professional presentations, making presentation creation easier than ever and significantly boosting productivity. With a 14-year-long history at massive user base, Wenku is now experiencing a remarkable transformation as AI technology rejuvenizes this product and -- with unprecedented capabilities. Building on this momentum, we expect such -- we expect such revolution to ripple through our entire product ecosystem, unleashing extraordinary potential and creating breakthrough innovations. Our vision extends beyond our consumer-facing products by collaborating with our clients across businesses and public sectors, we can unlock greater potential of our advanced AI technologies. This quarter, we partnered with Yum China, a leading Chinese restaurant company to deploy KEYOU, our ready-to-use customer service product powered by ERNIE. KEYOU's key advantage lies in its superior intelligence and ability to significantly reduce the need for human intervention in customer service as its AI capabilities can resolve most user inquiries independently. This simplified solution has enhanced customer service efficiency and reduced operational costs, driving substantial growth in KEYOU's API call volume, with peak API costs reaching several millions a day. The partnership serves as a strong testament to the reliability and excellence of our product. Another example that highlights the expanding use scenarios of ERNIE is called [indiscernible], an online exam preparation platform that leverages ERNIE 4.0 Turbo and ERNIE Speed Pro through public-cloud API core. Initially, [indiscernible] question bank was limited by missing answers and explanations. ERNIE tackled this by automatically generating answers and explanations for existing questions, while also creating new answer explanation pairs, making the question bank far more effective. This resulted in a 150% increase in effective questions in [indiscernible] question bank. Besides, by replacing manual explanation writing, the cost of creating explanations dropped by 99.8%. Additionally, ERNIE powers real-time tutoring services where users receive instant explanations from AI tutors by simply uploading their questions. With this improvement, users showed a stronger willingness to pay, as the paying user ratio increased dramatically by over 100%, leading to a 246% increase in revenue. Our strategic focus on AI innovation continues to drive transformation in consumer-facing applications, as well as industry-wide solutions. And we are seeing great results. Now, let me review the key highlights for each business for the third quarter. AI Cloud revenue reached RMB4.9 billion in the third quarter, maintaining double-digit year-over-year increase at 11%, while sustaining non-GAAP operating profitability. Gen AI-related revenue maintained strong growth momentum and remained a key growth driver, accounting for about 11% of our total AI cloud revenue in the third quarter, up from 9% in the previous quarter. This trend reflected increasing recognition of ERNIE’s value among enterprise customers. Our strong technological advantages in AI infrastructure served as a key enabler for this momentum. During the quarter, we advanced our AI infrastructure management across our GPU cluster that is composed of tens of thousands of GPUs, achieving 99.5% valid LLM training time. Also, we further improved our capabilities in combining GPUs from different vendors for training and hosting models by minimizing throughput loss to within 5%. With this advancement, we further reinforced our position as a leading provider of the most powerful and cost-effective AI infrastructure. Our mass platform continued to evolve, with a strong focus on developing comprehensive toolkits that enhance the model and app development experience for our customers and partners. In Q3, we improved model builder to make lightweight model fine tuning easier. With model builder lightweight models can be finetuned into purpose specific models, achieving performance comparable to ERNIE 4.0, while offering faster inference speed at lower costs. We are leveraging our AI capabilities to improve internal R&D efficiency and facilitate enterprise application development. Internally, we've widely adopted AI coding through Comate, our coding assistant for developers. AI now contributes to generating over one-third of our new code, with our developers providing oversight and approval. We are also lowering the barrier for enterprise in AI native application development. Enterprises can build sophisticated applications through simpler approaches on our mass platform, for example, using natural language instructions with minimum coding efforts to develop the most part of business application. We introduced Miaoda at Baidu World 2024, marking our first step in delivering no code capabilities. We are excited about its potential to democratize AI, as we believe expanding AI accessibility beyond developers will drive innovation at a speed we've never seen before. Meanwhile, the growing recognition of ERNIE’s capabilities continues to attract new clients, with notable partnerships established this quarter with FlashEx, [indiscernible]. This partnership with leading enterprises reflect the strengths and credibility of Baidu AI Cloud. We have also seen significant growth in adoption from mid-tier enterprise customers, as reflected in their increasing investments in GPU public-cloud service. In Q3, the incremental revenue from the mid-tier enterprise customers on our public-cloud increased by 170% year -- quarter-over-quarter. With this positive trend and developments, we reinforce our long-term optimism about the growth trajectory of our AI cloud revenue stream. For our mobile ecosystem, Baidu Core's online marketing revenue declined by 4% year-over-year in the third quarter due to challenging macroeconomic conditions, our ongoing AI-driven search renovation and an evolving internet content ecosystem. In the third quarter, we saw continued growth in incremental ad revenue from Gen AI and LLM enhancements to our advertising system. This reflects our ongoing efforts to refine our monetization system and marketing platform, particularly in improving ad targeting capabilities and scaling up real-time ad generation. We believe agents open up a lot of new possibilities for our advertising business. This quarter has seen significant improvements in ERNIE agents for advertisers in terms of response accuracy and intense recognition capabilities. As agents become increasingly sophisticated and effective, we've observed a growing recognition of their value among advertisers. As of September, approximately 20,000 advertisers have been generating ad spending through our ERNIE agents on a daily basis. A case in point is one of our healthcare clients. After building its own agent, the client was impressed with its performance. They then proactively contributed their proprietary medical insights to further enhance the agent's capabilities. Through continuous fine-tuning, the agent demonstrated good intelligence and service quality, particularly in terms of dialog accuracy and content -- and context comprehension. This enables the agent to deliver more professional and accurate responses to customer inquiries around the clock. Through extended conversations, the agent can better identify customers' underlying needs and provide tailored service recommendations, significantly enhancing the customer experience. As a result, the client has seen a notable increase in customer engagement, with customers' willingness to initiate the conversations rising by 13.6% and lead conversion rate increasing by 50% from July to September. Overall, while our online marketing business is going through a transitional period, we remain steadfast to aggressively drive forward our AI transformation. We are confident this will deliver long-term value for our users, customers and shareholders. Turning now to intelligent driving, we've reached another significant milestone. The sixth-generation of our autonomous vehicle, RT6, is now operating on public roads in multiple cities in China. This not only expands our vehicle lineup, but also reaffirms our commitment to scaling operations and providing users with safer, more affordable and comfortable mobility experiences. Following our achievements of 100% fully driverless operations in Wuhan last quarter, the proportion of fully driverless operations nationwide surpassed 70% in the third quarter and 80% in October. Recently, we have taken another step forward in expanding fully driverless operations. We are delighted to share that in October, we achieved 100% fully driverless operations in Chongqing, where we currently operate a growing fleet of autonomous vehicles. We continued to scale up our services in third quarter, with Apollo Go providing about 988,000 rides to the public nationwide, representing year-over-year increase of 20%. The cumulative rides provided to the public surpassed 8 million in October, further solidifying our leadership in smart mobility. We're fully confident that our autonomous driving technology has achieved technical maturity, with proven safety and reliability through extensive testing and real-world operations. While our technology is ready for wider deployment, safe and responsible autonomous driving requires a solid foundation of a harmonized regulatory framework. We remain patient as we continue to work alongside the evolving regulatory framework, standing ready to rapidly scale-up our operations when the time is right. Meanwhile, we are also actively exploring expansion into additional cities and new operational models, such as asset-light strategies to enhance operational resilience and unlock new growth potential. In summary, while our overall revenue growth remains measured in the near-term, we have strong conviction in our strategic direction, supported by encouraging progress across multiple fronts from increased user metrics in search to the growing adoption of our large language models and cloud solutions. Looking ahead, we are confident that our strategic focus and execution will yield meaningful returns. Before I hand over the call, I'm pleased to welcome our Interim CFO, or Jackson. With that, let me turn the call over to Jackson to go through the financial results. Junjie He: Thank you, Robin. Hi, everyone. I'm honored to step into the role of Interim CFO. Following my initial conference call, I look forward to engaging with analysts and shareholders in the coming period. Now, let me walk through the details of our third quarter financial results. Total revenues were RMB33.6 billion, decreasing 3% year-over-year. Revenue from Baidu Core was RMB26.5 billion, which was basically flat from last year. Baidu Core's online marketing revenue was RMB18.8 billion, decreasing 4% year-over-year. Baidu Core's non-online marketing revenue was RMB7.7 billion, up 12% year-over-year, mainly driven by AI Cloud business. Revenue from iQIYI was RMB7.2 billion, decreasing 10% year-over-year. Cost of revenues were RMB16.4 billion, increasing 1% year-over-year, primarily due to an increase in traffic acquisition costs and the costs related to AI Cloud business, partially offset by a decrease in personnel-related expenses and the cost of goods sold. Operating expenses were RMB11.2 billion, decreasing 5% year-over-year, primarily due to a decrease in personnel-related expenses and partially offset by an increase in channel spending and the promotional marketing expenses. Baidu Core's operating expenses were RMB9.9 billion, decreasing 5% year-over-year. Baidu Core SG&A expenses were RMB5 billion, increasing 4% year-over-year. SG&A accounted for 19% of Baidu Core's revenue in the quarter compared to 18% in the same period last year. Baidu Core R&D expenses were RMB4.9 billion, decreasing 13% year-over-year. R&D accounted for 19% of Baidu Core's revenue in the quarter compared to 21% in the same period last year. Operating income was RMB5.9 billion. Baidu Core's operating income was RMB5.7 billion and Baidu Core's operating margin was 21%. Non-GAAP operating income was RMB7 billion. Non-GAAP Baidu Core operating income was RMB6.7 billion and non-GAAP Baidu Core operating margin was 25%. Total other income net was RMB2.7 billion, increasing 40% year-over-year, primarily due to an increase in fair-value gain from long-term investments and disposal gains, partially offset by an increase in net foreign-exchange loss arising from exchange rate fluctuation between renminbi and the US dollar. Income tax expense was RMB814 million compared to RMB1.3 billion in the same period last year. Net income attributable to Baidu was RMB7.6 billion and diluted earnings per ADS was RMB21.6 billion. Net income attributable to Baidu Core was RMB7.5 billion and net margin for Baidu Core was 28%. Non-GAAP net income attributable to Baidu was RMB5.9 billion. Non-GAAP diluted earnings per ADS was RMB16.6. Non-GAAP net income attributable to Baidu Core was RMB5.7 billion and non-GAAP net margin for Baidu Core was 21%. As of September 30, 2024, cash, cash equivalents, restricted cash and short-term investments were RMB144.5 billion and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB140.3 billion. Free cash flow was RMB2.6 billion and the free cash flow excluding iQIYI was RMB2.4 billion. Finally, Baidu Core had approximately 31,000 employees as of September 30, 2024. With that, operator, let's now open the call to questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Alicia Yap with Citigroup. Alicia Yap: Hi, thank you. Good evening, management. Thanks for taking my questions. My questions is related to AI and search. So how should we think about the ramp-up pace for the generative AI results penetration rate? And what does management think of the optimal level? And how long do you plan for the search product transformation period to last? And could management also give more color on the recent developments in the monetizations of the AI search? So, when does management expect to commercialize the AI search results? Thank you. Rong Luo: Hi, Alicia. This is Julius. Let me take your question. We have been continuously transforming our core search with AI technology. I'm saying as well, Robin has said just now today, over 20% of pages and over 50% of the monthly active users that have engaged with the Gen AI contents already. However, I think the number merely represents our initial progress in one aspect of our AI-driven transformation of search. It should not be taken as a comprehensive indicator of our AI-generated content nor should it be used as the only benchmark for our progress. What really matters goes beyond it. In fact, we aim to revolutionize the search through ERNIE and transform every aspect of search experiences, providing the users with unlimited, on-demand and personalize their content through a combination of various formats whenever they need. Leveraging earnings we gain the deeper insights into user intent behind increasingly complicated queries, which can enable us to customize the content generation to better fulfill their needs. While continuously enhancing AI generating content quality, we also try to diversify our content formats such as AI summaries, you can see in the top page, and images and videos, agents, posts and even digital humans. All of these different formats can be dynamically combined to create some personalized search experiences with ERNIE, and we can tailor both the Gen AI content and its presentation format, which can best match what users want to see and how they prefer to consume this kind of information. This can allow us to optimize the user experiences and drive higher engagement. The AI-driven transformation of our search has already shown initial progress across certain user metrics, which give us some kind of confidence to keep pushing forward with our efforts. Through ongoing explorations, we are charging the new frontiers of possibility, unlocking unprecedented potentials with the power of AI. And quarter-by-quarter, we will continue to see an update of achievement across various aspects of AI-driven search transformations. Specific about your question, in the monetization side we are seeing some encouraging early results in certain verticals, including legal, education and B2B services. For example, our ERNIE agents for advertisers today have demonstrated increase in effective sales leads, which can bring the value to advertisers while enhancing the overall user experiences. As our early foundation models continue to evolve, we expect agents to unlock greater revenue opportunities in the future. That said, we are still in the early stages of exploring monetization opportunities for AI search and we are taking a mature approach at our own pace. In the near-term, we will prioritize the user experience enhancement instead of rushing into monetization. In fact, our product transformation journey strongly reflects our strategy direction, which is, we are making deliberate choices to prioritize the long-term value-creation over short-term gains. It's true that we experienced some short-term pressures, but these near-term trade-offs are something we're waiting to assess as we work towards our long-term vision. Beyond such, we also have cultivated comprehensive mobile ecosystem with multiple consumer-facing products that serve the massive user bases such as Speed, Wenku and [indiscernible]. And we're also leveraging ERNIE to revolutionize the entire product lines across our mobile ecosystem, enhancing the content production and try to optimize the distribution mechanism and try to strengthen the monetization capabilities. We remain fully committed to these transformations and are focusing primarily on enhancing the user experiences and engagement. This kind of encouraging early results have reinforced our confidence in the strategy direction, and we believe that following this period of adjustment, we expect to start to seeing improvements in our advertising business next year. Thank you for your question. Operator: Your next question comes from Alex Yao with J.P. Morgan. Alex Yao: Thank you, management, for taking my question. My question is about the ERNIE’s API. I think that the API of course have been growing fairly rapidly in the recent months. Could you guys share more details on the key drivers behind this growth? In addition, has any potential killer app emerged in the 2B or 2C markets? Finally, what is management's outlook of ERNIE adoption over the medium to longer-term? Thank you. Robin Li: Hi, Alex, this is Robin. Yes, we're seeing remarkable growth in API cost. I think a number of factors are driving this growth. First, ERNIE gets smarter every day and hallucinations have been reduced significantly, so more and more applications can use it to add value to the users. And second is the inference cost. It gets lower and lower, so more customers can afford it. And third, it's a tool chain we provide to our customers, they can tailor the model to address their own specific needs easily in each application scenario. The substantial volume of ERNIE API cost is driven by both internal and external demand. We began our product transformation in Q2 of last year. We first upgraded our monetization system, delivering higher advertiser ROI and generating hundreds of millions of incremental revenues each quarter. And then, we extended the AI transformation across our major consumer-facing products that includes those products over 100 million MAUs, Baidu Search, Wenku, Baidu Drive, Baidu Keyboard and Baidu Map. We are encouraged by how AI could thoroughly revolutionize and rejuvenate these longstanding products with massive user bases. And this year, we accelerated the renovation of search, showing more and more generative content on our search result page. We believe that new Baidu Search has the potential and is well positioned to become a killer app in the age of Gen AI. This is because search is by nature deeply rooted in language and text understanding, which aligns perfectly with LLM capabilities. We're fortunate to have hundreds of millions of search users every day and the most advanced foundation models. And along this line, millions of agents are being built to answer users and customers' questions. This also contributed to the growth of ERNIE API calls. While most API calls currently come from the renovation of our 2C products, ERNIE has gained a strong recognition in helping businesses tackle challenges effectively. External API calls have grown quite quickly, roughly like 240% year -- quarter-over-quarter in the last week of Q3. We see strong adoption across sectors, including online education, social media, restaurant and food services, healthcare, legal consultation and recruiting. The widespread adoption shows that enterprises recognize the value of our powerful models and are willing to invest in them. We're thrilled with our progress and committed to accelerating ERNIE's adoption across all our product lines, as we transform from an internet-centric business to an AI-first business. With Gen AI becoming central to our entire product lineup, we are confident it will unlock new revenue streams and strengthen our market leadership. Thank you. Operator: Your next question comes from Gary Yu with Morgan Stanley. Gary Yu: Hi, thank you for the opportunity to ask question. I have a macro-related question. Can management comment on the underlying ad demand trend? And also, have you seen any ad spend sentiment improvement, especially after the latest stimulus policy? And what's management's view on the macro outlook heading into 2025? Thank you. Rong Luo: Hi, Gary. Let me take your question. I think our advertising business is highly correlated to the macro environment, especially with offline small and medium enterprises across a wide range of industries, which make the majority of our net advertisers bases. As these small and medium enterprises are both deeply connected to the domestic consumption and highly sensitive to macro conditions, their vitality and recovery pace suffers, are more relevant indicators for our business. In Q3, we have seen the continued weakness across the verticals, such as the real asset franchising and healthcare. And so far in Q4, we have not observed a notable improvement in advertiser spending patterns, and the consumer spending remains subdued. And having said that, we are particularly encouraged by the strength and the timeliness of the recent stimulus policies, which continue to be rolled out as constructive initiatives we are seeing across the market. And while we think it will still take some time for these measures to reach offline small and medium enterprises and boost their confidence in advertising spending, so we remain conservatively optimistic about the recovery trend ahead. We believe that once the macro environment improves and the domestic consumption can pick up, small and medium enterprises' confidence will quickly rebound. And Baidu has long been the primary platform of choices for these advertisers. With proven effectiveness in driving the customer acquisition and growth, we expect them to return for advertising spending, which can help us to drive meaningful recovery in the advertising business. With our intensive reach and unique value propositions to offline small and medium enterprises, we believe that our advertising business will rebound with strong recovery momentum once the market confidence comes back. Thank you, Gary. Operator: Your next question comes from LincoIn Kong with Goldman Sachs. LincoIn Kong: Thank you, management, for taking my question. So, we -- given the ongoing ad advertising pressure and our plan to accelerate and broaden our AI transformation, so could management share more color around our business focus at the moment, our priority in terms of our investment, resources spending and the capital allocation? And how should we think about the margin trend in 4Q as well? Thank you. Junjie He: Hi, Lincoln, this is Jackson. I will take your call. Yes, currently -- we will remain committed to our AI-focused strategy as both our near-term priority and long-term strategic emphasis. Given our ongoing AI-driven renovation of search and the fact that we will not heavily monetize AI-generated search results soon, we expect the circumstances will remain under pressure for our online marketing business in the near-term. Well, however, we remain steadfast in this strategic direction, as we see strong long-term value ahead. In line with this strategy, we are going through a period of continued initiatives where we further intensify our product renovations with a strong emphasis on AI search and continue to invest in advancing earnings capabilities while enhancing our AI core offerings to maintain a healthy margin and expanding our autonomous driving initiatives where we view has a viable path to profitability. We believe these initiatives are essential to sustain our position as a leading technology innovator in China. As a result, the near-term margins will be in a period of adjustment. While looking to 2025, we will focus on optimal resource allocation to high-growth opportunities while staying aligned with our long-term strategy. Thank you. Operator: Your next question comes from James Lee with Mizuho. James Lee: Great. Thanks for taking my questions. I have several follow-up questions on cloud. In terms of revenue growth, it has moderated maybe compared to the last couple of quarters. And maybe can you unpack the performance of both personal and enterprise cloud? And in addition, can you give us an update in terms of competitive landscape in the market? And lastly, can you share the outlook the cloud business, particularly contribution from Gen AI? And how should we think about the long-term margin assumptions? Thank you. Dou Shen: Thank you, James, for your question. This is Dou. Since last year, we have observed an accelerating shift in China's cloud industry towards AI computing, driven by the development of Gen AI and foundation models. We have seen more customers choosing Baidu's AI Cloud infrastructure and foundation models. The growing adoption is evidenced by our Gen AI business revenue. It started at about 5% of our total AI Cloud revenue when we first reported it in Q4 last year and has now more than doubled, reaching 11% in the third quarter. So, we are confident that this upward trend will continue. And so, as you know, our AI Cloud business consists of two main parts, personal cloud and cloud service for enterprise and public sector. This quarter, total AI Cloud revenue growth slightly moderated, primarily due to a temporary impact on our personal cloud revenue brought by a short-term business adjustment. However, we believe ERNIE's ongoing renovation of the personal cloud will help mitigate this short-term impact and position it well for greater long-term growth opportunities. Meanwhile, our cloud service for enterprise and public sector, which makes up the majority of our AI Cloud revenue, actually maintained a strong momentum this quarter, continuing to outpace our overall AI Cloud business. So, the growth in enterprise cloud revenue has been driven by a strong demand for model training and inference across various sectors, including internet education, finance and so on. This reflects our customers' strong recognition of our AI infrastructure and mass platform capabilities. In particular, the major customers in industries like [in-night] (ph), tech and automotive increased their spending on our GPU public cloud. So, we are also seeing a rise in both the number and spending of mid-tier enterprises, especially in sectors like marketing software and other growing industries. In today's cloud market, foundation model capabilities have become more and more essential. Given the significant requirement for powerful AI infrastructure, specialized AI expertise and substantial capital investments, only a slight few foundation models will survive, both in China and overseas. And for sure, we will be the one of them standing as the front-runner. So, we are proud that ERNIE has already demonstrated its market leadership through widespread adoption and advanced technology. So, these experiences position ERNIE to stay at the forefront, attracting more cloud customers and fortifying our market leadership. So, on the profit side, our AI Cloud is healthier than ever, with non-GAAP operating profit margin expanding year-over-year. So, this improvement is driven by a continued margin enhancement from our Gen AI business revenue and our commitment to achieving high-quality revenue growth. So looking forward, we are confident that our AI Cloud business will maintain strong revenue growth momentum over time, while continuing to deliver a healthy operating profit. Thank you, James. Operator: Your next question comes from Thomas Chong with Jefferies. Thomas Chong: Hi, good evening. Thanks, management, for taking my question. My question is related to robotaxi. Given the recent IPO wave of autonomous driving related companies that have partnerships with big automakers and marketing platforms, what are your thoughts about how -- the competitive dynamic going forward? Looking ahead, how do you see the Apollo Go mobile taxi business strategy development? Can management share any details about the future plans for expanding and growing Apollo Go? Thank you. Robin Li: Yes, autonomous driving has a high bar. It requires best-in-class technical expertise, top talent as well as strong commitment to long-term investment and significant capital reserve. We have built an unparalleled foundation in all these areas, giving us a strong competitive edge and setting a high bar for others to follow. As one of the earliest players in the market, we've consistently demonstrated our unwavering commitment through over a decade of investment. This long-term dedication has fielded our technological advancements, positioning us as the global leader in autonomous driving technology. As mentioned earlier, Apollo Go hit a significant milestone of 8 million total rides, making us the world's top automating service provider. In addition to our cutting-edge technology and strong operational capabilities, we've achieved significant cost-effectiveness in hardware. RP6 stands out with a competitive price of under $30,000 for mass production, making it the most competitive option in the market. All the strengths just mentioned above are driving us forward, paving the way to validate our business model. The overall market is still in its infancy. So, competition should help accelerate the growth of the market and foster a more friendly, pro innovation regulatory environment. We believe such regulatory environment is essential for the healthy growth of the -- of this industry and we remain prepared for expansion when the time is right. Meanwhile, we are actively seeking new opportunities for international expansion. We see significant potential in cities that enable large-scale, fully driverless operations, similar to Wuhan, Chongqing. Additionally, we are open to exploring different business model options, focusing on asset-light strategy to keep our operations flexible and efficient as we grow. Thank you. Operator: Your next question comes from Xiong Wei with UBS. Wei Xiong: Good evening, management. Thank you for taking my question. My question is regarding capital allocation. I was wondering, could management provide any updates on capital return plans for shareholders such as share buyback and dividend? Thank you. Junjie He: Hi, Wei, I will take your question. So, since becoming a public company in 2005, we have made consistent efforts to generate long-term value to our shareholders through our growth as a leading technology company in China, complemented by share buyback programs. So, over the past few years, we have maintained a steady pace of share repurchases, averaging about $1 billion annually. So, I'm pleased to share that through our consistent share repurchase efforts, we have seen a decline in our total number of shares outstanding this year. While the pace of share buybacks may vary from quarter-to-quarter, according to our established execution rhythm, we remain firmly committed to our share buyback programs as a key component of delivering value to our shareholders. While we are currently focused on executing our sustainable and recurrent share buyback programs, we remain open to evaluating various options for returning value to shareholders. As always, we firmly believe in Baidu's long-term and sustainable growth potential and we'll ensure that our shareholders will be rewarded for their trust in us. The ultimate way of serving shareholders' interests is to have a solid business foundation and capitalize on growth opportunities. We are in the midst of a paradigm-shifting technology transformation based on Gen AI and the foundation models. At Baidu, we have the AI infrastructure, technical expertise, as well as financial and human resources to execute on our plans. So, we want to have the flexibility to invest as needed to propel our new business forward and with that, bring long-term value to our shareholders. Thank you. Operator: Your next question comes from Miranda Zhuang with Bank of America Securities. Miranda Zhuang: Thank you, management, for taking my questions. So, can management provide an overview of ERNIE's technology roadmap for the future development? And what are the upcoming milestones for the Company's AI model? And then when can we expect to achieve them? Thank you for my question about ERNIE. Thank you. Robin Li: Well, we launched ERNIE bot in March of last year. Since then, we've been continuously enhancing our foundation model capabilities, particularly our flagship models. In October last year, we introduced ERNIE 4.0, China's first [TCD4] (ph) type model with world-leading capabilities. And then, we launched ERNIE 4.0 Turbo in June of this year and delivering even greater performance. Building on these milestones, we are committed to continuously advancing our flagship models to deliver better performance, accuracy and broader support for diverse user needs. We expect to launch a new version of ERNIE early next year to further strengthen our leadership position in foundation models. Compared to overseas companies, we distinctly take an application-driven approach. We believe foundation models hold real value only when they power widely-used, practical applications that meet user needs. Over the past 18 months, our model development has centered on addressing real-world problems according to market demand. With this approach, we've made significant progress in resolving hallucinations and improving accuracy while also introducing a series of models tailored to diverse needs. To make ERNIE models more accessible and affordable, we boosted the performance, lowered inference costs and enhanced response speed. What sets us apart is that we really have a clear sense of our strengths and where we are heading. We are tied to those technologies that align most closely with our business and create the most value. Earlier this year, I mentioned that we have expanded our visual foundation model capabilities to our autonomous driving this, aiming to further enhance our leading position in this space. Now, we are also proactively exploring model capabilities and applications based on ours to insist in language models, seeking to create more synergistic value and unlock new possibilities. Throughout all areas, we are very thoughtful about how we allocate our resources optimizing our foundation models in directions that maximize impact across our business and help maintain our market leadership. Thank you. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Hello, and thank you for standing by for Baidu's Second Quarter and Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's second quarter 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 Li, our Co-Founder and CEO; Rong Luo, our CFO; and Dou Shen, our EVP in-charge of Baidu AI Cloud Group, ACG. 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 US Private Securities Litigation 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 a detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the 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 includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures, and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. Baidu Core total revenue grew slightly to RMB26.7 billion in Q2, thanks to the continuous acceleration of our AI Cloud business despite the headwinds in our online marketing business. Even with the ongoing investment in AI, Baidu Core's non-GAAP operating margin improved by close to 2 percentage points year-over-year to 26% and non-GAAP operating profit grew by 8% year-over-year, thanks to the operational efficiency gains we continue to implement. Despite the near-term pressure, we remain fully confident in our strategic direction and the transformative potential of GenAI and foundation models. As we move further into 2024, we are happy to observe a significant change as Baidu is scaling AI to address real-world problems and generate substantial value, both externally and internally. Central to this effort is our commitment to making ERNIE increasingly affordable and accessible. I'd like to highlight some key points of our progress. The scaling of AI is accelerating at a breakneck pace, reflecting the real value that ERNIE creates for people and for businesses alike. We find that the most tangible benefit from AI comes from the adoption and use of applications built on top of LLMs. Just three months ago, we announced that ERNIE handled about 200 million API calls daily. Recently, it surpassed 600 million or over 1 trillion tokens are generated every day. To make ERNIE more affordable, we continue to expand our model portfolio and enhance our model capabilities to meet diverse customer needs. Last quarter, we launched three lightweight ERNIE models, and they have quickly gained traction among enterprises and developers. Building on this momentum, we introduced ERNIE 4.0 Turbo in June. It offers superior capabilities compared to ERNIE 4.0 for typical use cases, yet it's designed to be much cheaper and faster to run. Our current lineup now includes our flagship models, ERNIE 3.5 and ERNIE 4.0 and the enhanced model ERNIE 4.0 Turbo and several lightweight models. This diverse portfolio allows us to accommodate the varying needs of our customers, optimizing for performance, cost and latency. In May, we made a strategic move to make API cost free of charge for three lightweight ERNIE models, that's ERNIE Speed, ERNIE Lite, and ERNIE Tiny. And in July, we significantly lowered the price of API cost for the two ERNIE flagship models, ERNIE 3.5 and ERNIE 4.0. This decision is rooted in our commitment to enabling wider access to ERNIE and making AI accessible to all. At the same time, we continue to lower the cost of model inference. One optimization of note this quarter is the upgrade of PaddlePaddle, our open-source deep learning framework, to version 3.0. This upgrade significantly improves the framework's compatibility with our AI infrastructure and ERNIE, which we expect will further help reduce model inference costs in the future. I briefly mentioned earlier that Baidu scales AI to address real-world problems and generate substantial value, both externally and internally. I'd like to discuss this in more detail. Externally, we have empowered our AI Cloud customers to achieve greater efficiency and scalability by using ERNIE. Our solutions have enabled clients to optimize their operations and realize significant benefits across various initiatives. Let me offer you some use cases to illustrate the real business problems we have addressed and how we add value to our customers. In the healthcare industry, doctor burnout is one of the greatest challenges. By leveraging ERNIE Speed and our ModelBuilder, we helped a healthcare automation solution provider to train and finetune an industry-specific model that enables automatically-generated medical records for doctors. This solution significantly reduces the administrative burden on doctors, a major factor in burnout, and enhances clinical efficiency. After two months of model deployment, doctors using it were able to treat 50% more patients in -- on average. In the recruitment industry, we have collaborated with a recruiting service company. By leveraging ERNIE's capabilities through API calls, our customer has significantly upgraded the matching process between job description and resumes. The smart matching upgrade has reduced the labor costs in this process by over 50%, measured by total working hours, while maintaining high-quality results. This automation allows the customer to expand its services to a broader client base, thereby increasing revenue-generating capability and demonstrating the tangible benefits of integrating ERNIE into its operations. The customer is very satisfied with the result and is now exploring new collaboration opportunities. In the public service sector, we utilized ERNIE Speed to deliver tailored, personalized and scalable services, addressing challenges like limited resources and efficiency needs. This is particularly valuable in China's grassroots public services, where shortages in manpower make large-scale personalized services challenging. We have collaborated with the customer to help over 6,000 villages in China improve public services, offering citizens more personalized and efficient support. Since the large-scale launch of this service in April, its daily usage has surged over 15-fold to more than 2 million times per day, helping locals handle tasks such as household registrations, social security inquiries and tax declarations. Internally, we have accelerated the renovation of Baidu Search with ERNIE, significantly enhancing our consumer-facing products at large scale. Generative AI is transforming user search experience, pushing beyond traditional boundaries. Since the second half of last year, we have been testing ERNIE-powered features on a small scale. This quarter, our focus has shifted to substantially amplifying search capabilities with advanced AI features. Currently, 18% of search result pages contain generated content, up from 11% in mid-May. This AI-generated search results deliver more accurate and direct answers, enhancing content quality and providing previously unattainable information. This improvement has led to increased user satisfaction and engagement, as more users are now turning to Baidu Search for more complex queries, increasing Baidu Search versatility. AI-generated search results may reduce ad impressions and, therefore, have a negative short-term impact on monetization, but they provide significant value to our users. By prioritizing long-term user experience over immediate revenue and profits, we see the strategic implementation of generative search as essential to driving future success. Our AI investments are fostering deeper user interaction. New interactive features enable users to refine their questions through multi-round conversations, enhancing the overall user experience. Additionally, there is a significant increase in users utilizing text and image creation tools within search. This development opened doors for long-term value creation. Last quarter, I mentioned that we planned to accelerate the distribution of ERNIE Agent. So far, we have seen more and more developers, advertisers and partners gather on our platform to develop innovative AI agents. ERNIE Agent distribution within Baidu increased dramatically in July, exceeding 8 million daily, more than double the number in May. Currently, the most frequently used agents by users are for content creation, personal insights, such as personality testing, and tools, such as translation and schedule planning. At the same time, we also see a trend of ERNIE agents being more widely developed and applied, both internally and externally. Our first college application assistant agent is one example of how ERNIE agents are being distributed within Baidu to assist users with complex problem-solving and decision-making. Every year after China's National College Entrance Examination, selecting universities after checking exam results is crucial for the 10 million-plus candidates. In June, Baidu launched an innovative college application assistant agent, which is designed to meet personalized needs for selecting universities and majors. Following the National College Entrance Exam, the peak daily active users of the agent approached 2 million, highlighting its significant impact and utility. While all these new features for more sophisticated user needs have not yet been monetized, they are transformative for us for search and are crucial for our future success. This strategic focus positions us to capture substantial long-term growth opportunities, transforming the usage of search and solidifying our leadership in the AI-driven search landscape. Our one-stop shop for document creation is another example of how Baidu scales AI to address real-world problems and generate substantial value. As our most pioneering internal product to embrace generative AI and LLMs, Baidu Wenku is now [revamping] (ph) the benefits of its product renovation efforts. In the second quarter, Wenku's subscription revenue marked a year-over-year increase in high teens. AI is rejuvenating the platform with comprehensive content understanding and generation capabilities, while continuously improving in versatility. Since May, Baidu Wenku has launched new features resonating particularly well with young users, such as crafting lengthy documents with tens of thousands of characters, building and editing PowerPoint presentations, and creating children's picture books with natural language guidance. The highlight -- the heightened engagement underscores Wenku's appeal to the next generation and signals promising future growth. Moving from the digital realm to addressing changes and scaling AI in real -- in physical world, our decade-long dedication to autonomous driving innovation and long-standing investment is bearing fruit. Apollo Go, our autonomous ride-hailing service, has recently achieved two significant breakthroughs. It's establishing a robust foundation for making commuting more affordable and benefiting more people through technological innovation. First, since June 19th, building on our proven track record of safe operation, Apollo Go has successfully transitioned to offering 100% fully driverless ride-hailing services in practically the entire Wuhan municipality. This means all vehicles are now operating without the need for human safety officers on board, a major step forward in making autonomous ride-hailing [business] (ph) commercially viable. Another milestone was the large-scale open-road testing of our sixth-generation autonomous vehicle, the RT6. Equipped with a battery-swapping solution, RT6 is competitively priced at below US$30,000 for mass production. After thorough testing, we plan to officially roll out RT6 into our fleet, establishing a strong foundation for further substantial cost reductions in Apollo Go operations. All in all, our efforts to scale AI to solve real-world problems fully align with our broader vision of creating a more efficient, equitable and sustainable future. Looking at how our efforts are yielding promising results, we believe we are well-positioned to capitalize on the growing demand for AI-driven applications. By leveraging AI to address complex challenges, we can continue our journey of innovation and growth and create long-lasting value for our stakeholders. I want to thank our employees for their effort and contribution and our customers and shareholders for their trust in us. Now, let me review the key highlights for each business for the second quarter. AI Cloud revenue reached RMB5.1 billion, marking a consecutive acceleration to 14% year-over-year growth, while sustaining non-GAAP operating profitability in the second quarter. The strong growth is mostly attributable to the following two factors. First, GenAI-related revenue continued its robust momentum, accounting for nearly 9% of our total AI Cloud revenue in Q2, up from 6.9% in the previous quarter. As more enterprises integrate GenAI and foundation models into their daily operations, they increasingly come to us, thanks to our reputation as China's most-advanced and cost-effective AI infrastructure provider and our excellent MaaS platform for model training and inference. During the quarter, we further advanced our AI infrastructure management, enhancing our ability to combine GPUs from more vendors for optimal training and hosting of models. This ensures flexibility, reliability and efficiency, positioning us to capture a larger share of the GPU cloud and LLM market. We also continued to develop toolkits on our MaaS platform for our customers and partners, enabling the ERNIE family of models to deliver a superior price performance ratio. We're proud that our ModelBuilder now supports the full model development lifecycle, including data management, finetuning, evaluation, optimization and prompt engineering. A major upgrade has been the introduction of diverse high-grade training data science, spanning from general to specialized industry-tailored data sets. This enables efficient finetuning and ensures high performance for industry-specific applications, while retaining strong general LLM capabilities. Also, thanks to our continuous refinement to AppBuilder, the number of AI-native apps on our cloud now runs into the hundreds of thousands. These applications span a wide array of industries and scenarios, from online education and e-commerce to public service sectors, and are integrated into both online platforms and smart devices. The second major driver of AI Cloud revenue acceleration is cross-selling of our CPU Cloud services to our GPU Cloud customers. In Q2, we continue to observe an increase in CPU spending among our GPU Cloud customers. We see that our strong brand recognition in GPU Cloud is helping us win businesses in the CPU Cloud industry. With revenue acceleration, AI Cloud business continue to deliver positive non-GAAP operating profit and improved margins. Legacy Cloud saw margin expansion, and GenAI-related businesses are expected to have higher normalized margin compared to the traditional cloud service. Overall, we remain confident in the strong growth outlook for our AI Cloud revenue, and we aim to continue generating non-GAAP operating profit going forward. For Mobile Ecosystem, Baidu Core's online marketing revenue declined by 2% year-over-year in the second quarter due to broader macroeconomic challenges, competition and our aggressive AI-driven search renovation. Key offline verticals, such as real estate, franchising and automobile, remained subdued. Despite these challenges, we remain committed to optimizing our operations to maintain both a healthy margin and cash flow, while accelerating the AI-native transformation of our products. In Q2, incremental ad revenue from GenAI and LLM enhancements to our advertising system continue to grow quarter-over-quarter, driven by the ongoing reconstruction of our monetization system and marketing platform. We envision ERNIE Agent as a compelling opportunity for our ad business. ERNIE Agent has the potential to revolutionize our traditional CPC model into a more efficient CPS model in the future, as it transitions from pre-sale consultations to catalyzing more direct sales on our platform. Serving as a virtual salesperson, ERNIE Agent empowers advertisers to provide more personalized content and product introduction, thereby ensuring better pre-sale consultation. Early adopters from the education, legal and B2B sectors are pioneering ERNIE Agent and have already seen a notable increase in effective sales leads. We are proud to see that 16,000 advertisers already have their own ERNIE agents, which are now being distributed on the Baidu platform. Looking ahead, we believe ERNIE Agent is poised to deepen its penetration and broaden its reach across more sectors, unlocking promising potential for our advertising business. And moving into Intelligent Driving. I mentioned earlier that Apollo Go has made remarkable breakthroughs. In Wuhan, achieved 100% fully driverless operations in practically the entire municipality, reducing Q2 cost per vehicle by more than half compared to Q2 of last year. On top of that, Apollo Go has started scalable testing of the latest RT6 vehicles on open roads. These two factors are critical milestones in our strategy aimed at reaching UE breakeven in targeted cities. In addition to cost reduction, Apollo Go's operations continue to offer more expedient services. In Wuhan, its services is now available to 9 million people. The number of Apollo Go's pickup points at the end of June has increased by over three-fold from the previous quarter, enhancing accessibility and convenience for passengers. The deepening of our operational footprint and increased station density have propelled utilization rate for our vehicles, significantly driving up the daily rides per vehicle and the distance per ride. Nationwide, Apollo Go provided about 899,000 rides to the public in the second quarter, marking a 26% year-over-year increase. In July, the cumulative rides provided to the public surpassed 7 million. Even with these milestones, our share in the entire ride-hailing service market is very small. It will take many years for us to reach a meaningful market share in China or elsewhere. Looking ahead, we are committed to providing increasingly affordable, convenient and safe travel for more passengers and drive long-term sustainable growth. We will remain resolute in executing on our operational strategy, aimed at boosting efficiency and steering our Intelligent Driving business towards profitability. In summary, by extrapolating the ongoing progress from leveraging ERNIE to revolutionize product usage and transform business operations for our users, customers and developers, and driven by a deep belief in technological innovation, we aim to create value for society and contribute to the greater good. With that, let me turn the call over to Rong to go through the financial results. Rong Luo: Thank you, Robin. Now, let me walk through the details of our second quarter financial results. Total revenue was RMB33.9 billion, which was basically flat from last year. Our revenue from Baidu Core was RMB26.7 billion, increasing 1% year-over-year. Baidu Core's online marketing revenue was RMB19.2 billion, decreasing 2% year-over-year. Baidu Core's non-online marketing revenue was RMB7.5 billion, up 10% year-over-year, mainly driven by the AI Cloud business. Our revenue from iQIYI was RMB7.4 billion, decreasing 5% year-over-year. Cost of revenue was RMB16.4 billion, increasing 1% year-over-year, primarily due to an increase in traffic acquisition costs and the costs related to AI Cloud business. Operating expenses were RMB11.6 billion, decreasing 9% year-over-year, primarily due to a decrease in personnel-related expenses, expected credit losses and the channel spending and promotional marketing expenses. Baidu Core's operating expenses were RMB10.2 billion, decreasing 10% year-over-year. Baidu Core SG&A expenses were RMB4.8 billion, decreasing 11% year-over-year. SG&A accounting for 18%, one-eight, of Baidu Core's revenue in this quarter compared to 20% in the same period last year. Baidu Core R&D expenses were RMB5.4 billion, decreasing 8% year-over-year. R&D accounting for 20% of Baidu Core's revenue in the quarter compared to 23% in the same period last year. Operating income was RMB5.9 billion. Baidu Core's operating income was RMB5.6 billion and Baidu Core's operating margin was 21%. Non-GAAP operating income was RMB7.5 billion. Non-GAAP Baidu Core operating income was RMB7 billion, and non-GAAP Baidu Core operating margin was 26%. Total other income, net was RMB771 million, decreasing 44% year-over-year, primarily due to a decrease in net foreign exchange gain and disposal gain, partially offset by a decrease in fair value loss and impairment loss from long-term investments. Income tax expenses was RMB1.1 billion compared to RMB1.3 billion in the same period last year. Net income attributable to Baidu was RMB5.5 billion and diluted earnings per ADS were RMB15.01. Net income attributable to Baidu Core was RMB5.5 billion and net margin for Baidu Core was 20%. Non-GAAP net income attributable to Baidu was RMB7.4 billion. Non-GAAP diluted earnings per ADS were RMB21.02. Non-GAAP net income attributable to Baidu Core was RMB7.3 billion and non-GAAP net margin for Baidu Core was 27%. As of June 30, 2024, cash, cash equivalents, restricted cash and short-term investments were RMB162 billion, and cash, cash equivalents, restricted cash and short-term investments, excluding iQIYI, were RMB155 billion. Free cash flow was RMB6.3 billion, and free cash flow, excluding iQIYI, was RMB5.9 billion. Finally, Baidu Core had approximately 31,000 employees as of June 30, 2024. With that, operator, let's now open the call to questions. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Alex Yao with JPMorgan. Please ask your question. Alex Yao: Thank you, management, for taking my question. I have a few on AI development. So, first of all, how do you guys foresee the competition in AI evolving over the next two to three years? Will Baidu's current first-mover advantage sustain? Or will the technology gap among key players narrow over time? How do you guys view the current competitive landscape compared to, for example, Kimi, Doubao, BABA and Tencent? In addition to technology leadership, what other factors are crucial to build a successful ecosystem in the AI industry? Thank you. Robin Li: Hi, Alex, this is Robin. Competition will be fierce over the next two to three years. Ultimately, I think whoever can make money from it will be able to survive. Last year, when China's AI industry was still at the so-called "war of hundred foundation models" period, I predicted that the industry would go through consolidation, and only a few foundation models would survive. We are seeing a strong demand for our GenAI products, and I'm proud that ERNIE has continued to strengthen its market lead. And I'm confident we will maintain our leadership going forward. Our decade-long investment in AI provided us with the first-mover advantage and technological leadership. We were the first public company globally to launch a GPT-like model in March of last year. And since then, we kept leveraging our self-developed four-layer AI architecture for model upgrade. Last October, we launched ERNIE 4.0. That's China's first GPT-4-type model. And this June, we launched ERNIE 4.0 Turbo, which offers superior capabilities over 4.0. We will continue to rollout upgraded versions of our flagship foundation models. And our application-driven approach further expands our competitive advantage and sets us apart from the others. We believe that foundation models hold little practical value without real applications built upon them that are widely used by users and customers. So, I mentioned earlier that currently, ERNIE handles about 600 million API calls and generates about 1 trillion tokens every day, which we believe is the highest in China. We have been heavily using ERNIE to renovate our own products, like Baidu Search or Baidu Wenku into AI-native applications on a large scale. And this approach has helped us gain valuable insights from users and continuously supported the upgrade of ERNIE. And this experience allows us to create better solutions for our external customers when they use ERNIE. At the same time, we have been working really hard to make ERNIE increasingly accessible and affordable, so it can be used widely to address real-world needs. We continue to lower the cost of model inference, expand our model portfolio and develop toolkits for model building and app building, so that our customers, partners, developers can leverage the power of ERNIE more efficiently and effectively. And this application-driven approach has helped us create a dynamic and expanding ecosystem. By the end of June, PaddlePaddle and ERNIE developer community had grown to around 14.7 million. Meanwhile, hundreds of thousands of enterprises are now engaged with us, highlighting the expanding influence and the utility of our ecosystem. Looking ahead, we will be patient. We will continue to iterate on ERNIE's capabilities to ensure we stay at the forefront of this new AI wave. By leveraging real-world applications and feedback from our ecosystem partners, we gain valuable resources and insights to continuously refine our model. The synergy among our vibrant ecosystem, advanced model capabilities and an application-driven approach will continue to strengthen our leadership in this rapidly-evolving AI landscape. Thank you. Operator: Your next question comes from Gary Yu with Morgan Stanley. Please ask your questions. Gary Yu: Hi. Thank you for the opportunity to ask questions. My questions are related to AI and search. So, what kind of progress has been made in renovating traditional search using GenAI and the large language models? What kind of KPI is the company monitoring for AI in search? And have you observed any changes in user behavior since implementing AI in the search business? Related to that, what is the rollout plan for AI search moving forward? Any specific KPI that the company aim to achieve by the end of the year? For example, certain percentage of search results generated by AI either by the end of this year or by in coming years? Thank you. Robin Li: Yeah. We are very committed to using cutting-edge AI technologies to transform our search capabilities and blend search with speed in one app. So, KPIs related to Baidu App will override search-only KPIs. In the second quarter, we accelerated the pace of renovating our search by leveraging ERNIE. Our primary goal is to improve user experience, offer more capabilities and boost user engagement on Baidu. As highlighted in my opening remarks, we've made several important progresses. First, we are providing smarter search results at an expanding pace. Currently, 18% of search results are provided by GenAI. These results are more comprehensive and relevant than traditional search results, offering information that was previously unavailable or scattered around different places. Furthermore, GenAI enables infinite supply of content on demand and can effectively hedge the decline of the open web system. Second, when GenAI results can already meet user needs from the current query, we will recommend other content or services, just like a user would find in a typical newsfeed context. This will enhance users' time spent and retention. Third, the new interactive function in Baidu Search allows users to refine their questions and follow-up through multi-round conversations, reshaping how users express their need and making the search experience more natural and efficient. Additionally, I would like to point out that we are rapidly rolling out ERNIE Agent within search results to provide intelligent assistance to our users. By opening up our platform, developers can create a wide range of agents tailored to meet the unique needs of each and every user. Our vision is to create an ecosystem where many developers contribute to building a robust network of agents, collectively enriching the user experience and outperform the most powerful frontier models, addressing a broad spectrum of challenges and opportunities. With all the efforts mentioned, the types of search queries on Baidu have become more diversified. Users are increasingly posing complex questions, seeking comprehensive and in-depth answers from Baidu Search. While these demands were once challenging to meet, they can now be efficiently addressed. On top of that, users are also using Baidu to create content, such as writing and editing text and images. GenAI is transforming Baidu Search into a multi-functional creative platform, offering a wider range of services to users. We're still in the early stages of an exciting yet uncharted opportunity. As we [re-invent] (ph) the product, we are listening to feedback from users, creators and partners. We're focused on long-term sustainability over short-term monetization. We will be patient and make sure that we set the right foundation for new ecosystem and closely track user metrics. We believe this approach will deliver greater value to all our shareholders. Thank you. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Please ask your question. Lincoln Kong: Thank you, management, for taking my question. So, my question is about cloud business. So, what are the drivers behind this accelerating growth of cloud revenue this year? How much of this incremental revenue in cloud this year is AI related? And how does this contribute to the long-term AI Cloud revenue growth? Also, what's the margin profile for the AI Cloud compared to the traditional cloud business? So, how should we think about the intense pricing competition among different players in the market? And ultimately, what should be optimal longer-term profit structure for our cloud business? Thank you. Dou Shen: Hi, Lincoln. Thanks for your question. This is Dou. So, as you may have noticed, our AI Cloud revenue shifted from a year-over-year decline in Q3 last year to a positive growth in Q4 and then kept accelerating. So this quarter, AI Cloud revenue grew by 14% year-over-year. The rapid growth is driven by strong demand for our GenAI and LLMs across various industries. Thanks to our reputation for having the most powerful and cost-effective AI infrastructures in the MaaS platform, so we're gaining recognition across a wide range of sectors, from early adopters like Internet companies and online education providers to the industries like automotive, financial services and utilities. Leading companies like State Grid, SF Express and Guomin Pension & Insurance and also the rising AI startups, such as Shengshu Technology, so they all intend to form in-depth partnership with us, leveraging our industry-leading AI capabilities. So, as Robin just mentioned, right, a key revenue driver for AI Cloud is the fast-growing GenAI and foundation model-related revenue. It has increased from about 5% of the total AI Cloud revenue in Q4 last year to almost 9% this quarter. To meet the diverse needs of our customers, we offer a wide range of products and solutions. So, for those seeking model training and hosting services, we provide the most cost-effective and powerful AI infrastructure. This quarter, we have observed a notable increase in spending on our public cloud from GPU customers, reflecting their high satisfaction and trustiness. So, this strong customer endorsement reinforces our confidence in continuing to gain market share. For the customers who are looking to harness the power of LLMs through API calls, we offer the ERNIE family, which includes some of the most powerful LLMs available in the China market. MaaS platform also provides comprehensive toolkits for easy finetuning of custom models and the development of applications tailored to specific needs. We see the LLM and GenAI market is still in its very early stages. We're educating the market and making AI accessible or key. On top of the model capabilities and ease of use, wide adoption also depends on affordability. So, to encourage usage, we have made API calls free for three lead ERNIE models and cut price for our flagship models. So, this has led to a rapid increase in ERNIE API calls. As Robin just said, the total number of daily API cost has surged from around 200 million in mid-May to over 600 million, which means over 1 trillion [days] (ph) tokens. We believe that demand for ERNIE through API calls will continue to grow rapidly, given ERNIE's superior and continuously improving efficiency and performance. For our traditional cloud services, by cross-selling CPU cloud services to our existing GPU cloud customers, we have noticed a significant increase in CPU cloud revenue from these customers. So overall, we are pretty confident that our AI Cloud revenue growth will maintain strong momentum in the coming quarters and capitalize on significant long-term growth opportunities. So, on the profit side, we are committed to a sustainable and healthy growth. So, our AI Cloud business is healthier than ever and consistently generating non-GAAP operating profit, and we have been improving the margins. So, regarding the price competition issue in your question, we already know that GenAI and LLMs market is still in its very early stage. And accessibility with superior price and performance is essential for growing the market. While we were working very hard to improve the capability of early models, we are also continuously lowering the inference cost. Considering the SKU effect as leading player in the market, I believe we will keep growing our market share. And also with the SKU, I believe the normalized margin for our GenAI-related cloud business should exceed that of traditional cloud business. Thank you. Operator: Your next question comes from Thomas Chong with Jefferies. Please ask your question. Thomas Chong: Hi, good evening. Thanks management for taking my question. Can management quantify the impact of the soft advertising revenue, distinguishing between weak macro, the cannibalization impact from generative AI implementation, as well as the competition, particularly in search separately? What is the core advertising growth for the second half this year? If we expect to see a trend around by year-end, is it more driven by better macro or better monetization in AI? Looking at 2025 and beyond, what's the sustainable growth rate? Thank you. Robin Li: Yeah. As I mentioned in my opening remarks, our advertising business is currently facing pressure caused by a combination of external factors and our proactive efforts to accelerate the AI-driven renovation of search. Externally, macro weakness and competitive pressure are the primary challenges. So, on the macro front, the recovery of consumer spending has been sluggish, causing many advertisers, especially the small- and medium-sized advertisers who heavily rely on offline activities, to adopt a very cautious approach to their ad spending. Certain verticals, such as real estate and its related sectors, franchising and automobile, have been particularly weak. In addition to this, Chinese Internet users' behavior has changed a lot. Users are increasingly concentrating their time on a selected few leading short video and social media platforms. The user time spend share change can be a proxy into the loss of our online advertising business. And as I mentioned earlier, 18% of our search results contain GenAI content, which is not monetized at this time. This number will increase over time. Of course, our aggressive rollout of GenAI features in the monetization system, partly offset the revenue sacrificed here. While these are all the big challenges for the time being, we strongly believe technological innovation will be the key for our future success. Specifically, we need to focus on what we can actively shape influence, leveraging our strengths and the resources to seize new opportunities within our reach and foster sustainable growth over time. So, to this end, we are renovating our entire Mobile Ecosystem with GenAI and ERNIE. For the advertising system, the renovations are already showing some results. We talked about this during the previous quarter. The incremental ad revenue generated by GenAI and LLM continue to grow in Q2. This is mainly due to the improvement in the monetization system, which have improved ad conversion and efficiency. And on top of that, we're actively exploring opportunities for ERNIE agents to further enhance our advertising capabilities. However, using AI to upgrade our existing advertising system, it's just a near-term step. We believe that the two long-term value lies in the renovation of our consumer-facing products. With over 20 years of experience in general search and our industry-leading capabilities in GenAI and LLMs, Baidu is uniquely positioned to innovate and transform general search into AI search. This transformation is not just about enhancing the traditional search experience. It's about redefining what search can do for users. Since Q2, we have accelerated the pace to renovate Baidu Search using ERNIE. New features such as AI-generated search results, interactive features within search and ERNIE agents have been rolling out rapidly. This renovation has high potential, but it's not something that will be completed in a short time. During this process, there may be a negative impact on revenue, but we are confident that the result will be a completely different new AI ecosystem, one that is much more versatile, productive and user-friendly. So, it may take some time before we see a noticeable revenue contribution from the AI enhancements in our search product, but we are confident that focusing on creating long-lasting user value rather than short-term revenue while ultimately create tremendous value and drive sustainable revenue growth. Thank you. Operator: Your next question comes from Miranda Zhuang with Bank of America Securities. Please ask your question. Miranda Zhuang: Thank you, management, for taking my questions. So, my question is about the AI agent and the monetization. So, can the company explain how the AI agent is actually used in your users experience and monetization? How do you drive the adoption of this AI agent, especially among the SME advertisers, which have less data and less tech capability? What kind of ramp-up pace do you expect by the end of this year for the AI agents? And also, can management give us more color on the recent development in AI monetization, especially the progress from the CPC to the CPS model? What are the advertisers feedback on the effectiveness and the future budget allocation on the Baidu platform? Thank you so much. Robin Li: Yeah, there are more than 10,000 ERNIE agents right now on our platform. The beauty of ERNIE agents is that anyone can create them, whether you are a user, a creator, a service provider, an advertiser or a company. The barrier to entry is very low. It's really important to understand that the value of ERNIE agents extends far beyond just being a tool for monetization. It will significantly improve the user experience in our Mobile Ecosystem. A recent example is a lawyer agent created and distributed on our platform. A user had a conflict with a law enforcement officer and started this consultation with this agent. We had, I don't know, 288 rounds of conversation and lasted for five hours. It's hard to imagine a real human lawyer would have the time and patients to talk to a potential client like that. But the benefit for the user, for the advertising law firm and for our platform are self-evident in this case. Today, ERNIE Agent is still in its early stages and it's evolving quickly, but we are glad to see that advertisers are using ERNIE agents to get better sales fee conversions than the traditional search ads. As I mentioned before, more and more advertisers, especially in fields like legal, education and B2B are starting to use ERNIE Agent. These areas often require long decision-making time and personalized pre-sales consultation. ERNIE Agent with its interactive feature is getting better and better at addressing these kind of needs. Plus, as ERNIE Agent becomes smarter, it has the potential to drive direct sales and even more value for our advertisers, therefore, moving us from a CPC model to a more effective CPS model. We believe ERNIE Agent has the potential to become the new website system in the AI era. Early-stage ERNIE agents might not always improve the user experience right way, but as they start providing greater interactions, boosting engagement and offering personalized services, monetization opportunities will naturally follow. Thank you. Operator: Your next question comes from Alicia Yap with Citigroup. Please ask your question. Alicia Yap: Hi, thank you. Good evening, management. Thanks for taking my questions. I have questions on the margin. So, Baidu Core continue to achieve the expansions in the operating margins in the second quarter. Just wondering, is this expansion sustainable? What is your outlook on the profit margin trend for Baidu Core in the entire year 2024? Thank you. Rong Luo: Thank you for your question. Let me take your question. As you know, we don't give the guidance for quarters ahead, but I would try to give you some insights into our business priorities and what could that mean for our cost and expenses. For AI Cloud, we continue to phase out the low-margin businesses, so we can continue generating operating profit and margins on a non-GAAP basis. Looking to the long term, the normalized margins for the GenAI-related cloud businesses should be higher than the legacy cloud business. And this kind of revenue today is already [9%] (ph) of our total cloud revenue. For Intelligent Driving, the other growth initiatives, we tend to reduce our losses and particularly our Intelligent Driving businesses with the operational efficiency gains and try to reach improvements in robotaxi business. Overall, we believe that high-quality growth and the investments should be well balanced. For many years now, we have delivered a solid track record of the top-line revenue growth and with the resolute cost discipline, and intend to continue building our future on this basis. Sometimes, of course, though, the investment runs ahead of the high-quality growth. We continue to operate our legacy search businesses in a challenging environment. That pressures our ad revenue. To tackle these kind of challenges, it's very important to focus on offering the users improved experiences, and in particular, a whole new AI-based search experience for Baidu Search. As Robin has mentioned just now, this quarter, we have accelerated the renovation of Baidu Search with ERNIE. In the short term, we have seen a significant increase in AI-generated search results. 11% of all search result pages contain the generative content in mid-May, and this percentage has risen to 18%, one-eight, as of now. The scaling of the AI-generated search results and other new features require a lot more computing capacity and users interact more in [indiscernible] conversations. They ask more complicated questions and use the new content creation capabilities within search. All of this raised the total cost of the more computing power is needed, but the new AI search features has not yet been monetized now. So, the accelerated AI-native transformation of search will inevitably put some pressures on our margins in the short term. So, we reduced our powerful and efficient AI infrastructures and our technical expertise to make efficient gains over time. Thank you so much for the question. Operator: Your next question comes from Wei Xiong with UBS. Please ask your question. Wei Xiong: Sure. Thank you, management. Good evening. Thank you for taking my question. My question is regarding the robotaxi business. So, with government support on accelerating the robotaxi license approval in more cities, how would that translate to Baidu's robotaxi opportunities, and also cost associated to that? And what are the targets for Apollo Go this year and for the next few years? How do we plan to replicate Wuhan success nationwide? For example, do you consider partnership or collaboration for future development? And lastly, could management share your view on the competitive landscape change in the robotaxi market? Thank you. Robin Li: Yeah. We've been investing in autonomous driving technology for over a decade, guided by steady focus and unwavering patients. Robotaxi services have long been considered as a breakthrough, so advanced that no one can predict exactly how long it will take to bring it to full fruition. For a long time, many doubted whether we or anyone else in this world would make it, but we kept moving forward. Now, as we see regional UE breakeven approaching, our vision is becoming a scalable reality. Our persistence, even in the face of doubt, is not only driving progress, it's shaping the future. Our dedication has made Apollo Go the world's largest autonomous ride-hailing service provider. This is measured by a number of rides. Our track record of safe operations has earned public and regulatory trust, allowing us to expand services and reach more people. We're happy to see that more and more passengers are choosing Apollo Go, not just for testing rides, but as their go-to-option for daily community. Wuhan stands as our largest operational area. It's a fleet of around 400 vehicles offering 24/7 service to 9 million residents there. Our focus on cost reduction through innovation has also made our services increasingly affordable. Since launching in Wuhan in Q3 of 2022, we have steadily increased the number of fully driverless vehicles and rides, and I mentioned that 100% fully driverless ride-hailing operation has been achieved in practically the entire city. This has a significant impact on costs. With our RT6 vehicles being tested at scale, we expect continued cost reduction once RT6 are officially put into operation. So please note, our share of ride-hailing market in Wuhan is still very small, at around 1%. And the scaling will be a gradual process and it could take many years. The potential of China's ride-hailing market is enormous. As robotaxi inherently offers more affordable services, it will naturally drive demand and open up great new opportunities. This is where innovation meets the vast scale of the market and creating a powerful synergy that will reshape the landscape of transportation and beyond. As Apollo Go scales up, it will offer an increasingly affordable, convenient and much safer options to an expanding population. Also need to note that entering the robotaxi market requires deep belief in technology, long-term investment and strong capital reserves. Apollo Go stands out in these critical areas, setting the benchmark for the industry. As for your question regarding to future business model, currently, all of our vehicles are owned by us, and we bear the hardware CapEx and depreciation costs, but we are open to various business models and partnerships. While our immediate focus is still achieving UE breakeven in key cities. In the long run, we aim to innovate this asset-light models, like technology licensing and fleet operation, to capture the huge market opportunities, and ultimately, benefiting society with better transportation solutions. Thank you. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

Operator: Hello, and thank you for standing by for Baidu’s first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After management’s prepared remarks, there will be a question and answer session. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today’s conference, Juan Li, Baidu’s Director of Investor Relations Juan Li: Hello everyone and welcome to Baidu’s first quarter 2024 earnings conference call. Baidu’s earnings release was distributed earlier today and you can find a copy of our IR website as well as on newswire services. On the call today, we have Robin Li, our Co-Founder and CEO; Rong Luo, our CFO, and Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG. 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. Private Securities Litigation 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 a detailed discussion of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC and Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward-looking statement except as required under applicable law. Our earnings press release and this call includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu’s IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello everyone. Our business continued to grow in the first quarter. Baidu Core total revenue increased by 4% year-over-year to RMB 23.8 billion, and non-GAAP operating margin reached 23.5%, an improvement from a year ago. In particular, revenue growth from Baidu AI Cloud accelerated to 12% year-over-year [indiscernible] while continuing to deliver operating profit on a non-GAAP basis. 2024 is the second year of our march on the gen-AI path. As we solidify our leadership position in foundation models, we are transforming the company from an internet-centric business to an AI-first business. Given that ERNIE is the most powerful LLM in China, we are aggressively pushing the envelope for both our 2C business and 2B business to adopt ERNIE to provide better user experience, to increase advertiser ROI, to enable developers to write agents and applications, to let customers enjoy more effective and more efficient models. While we operate our legacy business in a challenging environment and experience lower revenue growth in the near term, we remain confident that AI will bring us sustained growth in revenue and profit in the long run. We expect our cloud business to accelerate and the loss of our robotaxi business to narrow for the rest of the year. We expect mobile business to be soft in the near term and start to recover when gen-AI becomes the new core of our existing products next year. Looking beyond the near term, gen-AI and foundation models will bring us tremendous opportunities, ushering in a new innovation cycle. Enterprise and individual developers have swiftly transitioned from the fear of missing out on this opportunity to leveraging foundation models like ERNIE to build AI applications. Baidu is well prepared to benefit greatly from this technology transformation. We believe one of the most important long-term opportunities in model inferencing, which will be a key growth driver for our AI Cloud revenue in the future. In April, ERNIE handled about 200 million API calls daily, a significant jump from around 50 million in December last year. This considerable growth indicates that increasing adoption of ERNIE can point to strong future revenue potential from model inferencing. To accelerate the adoption of ERNIE, we are building a vibrant and healthy ecosystem around it. We believe ERNIE ecosystem will over time contain millions of applications, especially agents developed by a diverse community of enterprise and individual developers across various industries, meeting a wide range of needs in people’s everyday lives and work. Our large user base in mobile and desktop will enable us to distribute these agents and apps to whoever needs it, whenever appropriate. The anchor of this ecosystem is the ERNIE family of models, including our flagship models, ERNIE 3.5 and ERNIE 4.0, as well as the lightweight models we introduced in Q1. Throughout the quarter, we continued improving ERNIE’s efficiency, leveraging our unique proprietary four layer AI architecture and our strong ability in end-to-end optimization. For example, ERNIE has increased its training efficiency to 5.1 times and its inference cost is only about 1% compared to the March 2023 version. To make ERNIE increasingly accessible and affordable, we now offer three sets of tools on our mass platform. Last quarter, we introduced AppBuilder and ModelBuilder for enterprise and individual developers to develop apps and build models. In April, we took it a step further by introducing AgentBuilder, a platform encompassing tools for easily creating AI agents. This is because we envision AI agent will become one of the most important forms of applications powered by gen-AI and foundation models. With the ability to use natural language as the programming language, developers will be able to build AI agents without the need to write a single line of code. Currently, new early agents are created on our platform every day, and together they are distributed millions of times per day, serving a wide range of verticals including education, legal, B2B, travel, and more. All these initiatives derive from our extensive experience and insights in building and running ERNIE, as well as developing AI-native applications. We believe that ERNIE’s true value will only be realized when numerous applications built on top of it are widely used by users and customers. I’m pleased to note that ERNIE is extending [indiscernible] across smart devices through API. Last quarter, we proudly announced a partnership between all the smart phone brands, such as Samsung China and Honor, assisting them in enhancing their native app experiences using ERNIE. This quarter, we are excited to extend our collaboration with more leading smartphone makers such as Oppo, Vivo and Xiaomi, who leveraged ERNIE APIs to elevate user experiences. Moreover, our reach now extends beyond smartphones to include PCs and electric vehicles. ERNIE APIs are now utilized by Lenovo, a top PC brand to empower its AI assistant in the default browser of its PC. Nio, China’s leading smart EV manufacturer, began using the ERNIE API to enhance the in-cabin experience for its vehicles. This broadening of our partnerships into various smart devices opens up ample opportunities for large scale user adoption, paving the way for ERNIE-enabled applications to become the entry point into the world of generative-AI. In addition the brands I just mentioned, we have also acquired many notable new customers, such as Trip.com, [indiscernible] and Singapore Tourism Board. Another long term opportunity is in our consumer-facing business. We have been reconstructing all of our consumer-facing products . Our goal is to build our proprietary AI-native applications, potentially killer apps for the ERNIE ecosystem. By doing so, we should be able to generate new growth opportunities. For example, after rebuilding with gen-AI and LLMs, Baidu Wenku, our one-stop shop for document creation, experienced double-digit year-over-year increase in paying users in the first quarter. Penetration of ERNIE for Baidu Search in feed took longer than expected because the user base is on the order of hundreds of millions and use cases are generally very sensitive to cost and response time. We needed a wide range of ERNIE models in different [indiscernible[ optimized for different scenarios for best price-performance ratio. After trial and error for a few quarters, we are firming up our strategy. Going forward, we plan to accelerate the launch and adoption of new product features such as multi-model generative search results, multi [indiscernible] interaction in search, and more recently distribution of ERNIE agents. We are at the forefront globally of this unique technological change and we are confident in our abilities to innovate. By definition, we are operating in uncharted territory. As always, we want to be flexible to make timely adjustments with evolving consumer needs and how users incorporate new product features in their day-to-day lives. Now let me review the key highlights for each business for the first quarter. In the first quarter, AI Cloud revenue reached RMB 4.7 billion, up 12% year-over-year, and continues to generate operating profit on a non-GAAP basis. The revenue growth was mainly driven by gen-AI and foundation models. In the first quarter, such revenue accounted for 6.9% of total AI Cloud revenue. Currently the majority of this revenue is from model training, but revenue from model inferencing has been growing quickly. We believe revenue from gen-AI and foundation models will continue to rise as customer adoption improves. For instance, within our internal cloud revenue, Baidu Core, other [indiscernible] groups such as mobile ecosystem groups and intelligent driving groups are increasingly leveraging the power of ERNIE. As a result, 15% of their payments to the AI Cloud group are allocated to gen-AI and foundation models. Enterprises choose Baidu AI Cloud to train and host their models because they believe we have the most powerful and efficient AI infrastructure for model training and inferencing in China. Compared to our peers, we help enterprises to train models of all sizes on our AI Cloud while also reducing model inferencing cost. This is primarily attributable to two reasons: number one, our self-developed four layer AI architecture has allowed us to innovate and optimize at each layer, enabling continuous efficiency gains; and number two, we have superior capabilities and insights in GPU cluster management. Leveraging our technical expertise, we can now integrate GPUs from various vendors into a unified computing cluster to train an LLM. Our platform has demonstrated very high efficiency with this set-up on a GPU cluster that is composed of hundreds, even thousands of GPUs. This is an important breakthrough because of the limited availability of imported GPUs. Another growth driver for AI Cloud is cross-selling of our CPU cloud services to our GPU cloud customers. With high recognition of our GPU cloud among existing and new customers, we have seen customers increasingly switch more and more of their CPU cloud usage to Baidu. [Indiscernible] earlier on the mass side, we took many initiatives to make the ERNIE family of models increasingly affordable and more efficient than open source models. Here are some highlights for this quarter. We have expanded and enhanced our ERNIE model portfolio offering a total of three lightweight LLMs and two task-specific LLMs on ModelBuilder. These models help enterprises and professional developers balance model performance with cost using ERNIE to reach a broader audience for model development. In addition, our mixture of experts, or MOE approach can partition a user query into distinct tasks, assigning the most suitable models to handle each task and use ERNIE 3.5 or 4.0 only for the most complex tasks. This approach allows for faster responses and lower inferencing cost while maintaining similar performance levels to using more advanced models. Last quarter, we introduced AppBuilder to developers. Throughout the quarter, we continued enriching and refining the tools for AppBuilder, enabling developers to easily create AI-native apps in just three steps on our platform. With the launch of AgentBuilder in April, anyone can create an AI agent with just a few sentences on Baidu. Overall, we remain confident in the [indiscernible] for our AI Cloud revenue and we aim to continue generating operating profit on a non-GAAP basis. Mobile ecosystem has continued to deliver healthy margins and strong free cash flow. In the first quarter, our online marketing revenue grew by 3% year-over-year. Revenue growth was impacted by a challenging macro environment. At the same time, we have been pushing hard to transform the user experience from a traditional mobile product to a generative-AI experience. This transition is ongoing and monetization has not yet started. [Indiscernible] to leverage earnings to reconstruct our monetization system for better conversion and efficiency gains. During the quarter, we further enhanced our ad targeting capabilities and scaled up real-time ad generation. This effort resulted in an improvement in conversion and generated incremental revenue. ERNIE agents stand for a long-term opportunity for monetization upgrade, too. Recently we have seen not only brand advertisers but also SMEs gradually adopting ERNIE agents. We have designed these agents for SMEs as virtual storefront and service desks, serving consumers around the clock. We believe that the use of agents can improve SMEs’ sell-through rate, enhance their proximity and expand their reach among users. This will be an important step for us to transform our traditional CPC model to a significantly more efficient CPS model, and meanwhile enhancing user experience on Baidu. Going forward, I believe greater opportunities will arise from AI-native apps, particularly for gen-AI enabled search. Gen-AI complements traditional search, expanding the total addressable market. Since Q2 last year, we have been reconstructing Baidu Search with ERNIE. Now more and more search results are generated by ERNIE in a growing variety of home apps like text, image, third party links, point of interest, and citation. These results are [indiscernible] produced in real time to directly address users’ questions and problems. By doing so, we have improved and will continue to enhance the search experience, which is crucial for increasing the usage of Baidu Search. While user feedback on this product and feature renovations has been encouraging, it is important to note that we are still in the early stages of reconstructing Baidu Search with ERNIE. This process will likely take time given that Baidu Search has a history spanning over 20 years and user behavior will evolve gradually. Overall, I believe that Search will be one most likely killer apps in the gen-AI era, and we are on the right trajectory to capitalize on this potential. I mentioned Ernie agents as an important opportunity for monetization. With the newly introduced AgentBuilder, creators, publishers and service providers will find it increasingly easy to build agents on Baidu. This is key to enhancing Baidu’s content offerings and ultimately providing an AI-native user experience on our platform. Moving onto intelligent driving, we believe Apollo Go stands as the largest autonomous ride hailing service provider globally, measured by the rides provided to the public. In the first quarter, Apollo Go offered about 826,000 rides to the public, marking a 25% year-over-year increase. In April, the total number of rides surpassed 6 million. We are continuing to move towards achieving unit economics breakeven for Apollo Go. To make this happen, our strategy is to reach UE breakeven in key regions and then replicate the success in other regions. To reach the regional breakeven point, we are focusing on scaling up [indiscernible] a fully driverless ride hailing service and enhance the utilization of each vehicle. Wuhan, Apollo Go’s largest regional operation is progressing towards this goal. In Wuhan, Apollo Go is gradually becoming an integral part of the city’s transportation network. Apollo Go more than doubled its operational area from a quarter ago, serving a population of over 7 million and achieving the remarkable milestone of crossing Yangtze River with fully driverless vehicles as part of its expansion. Moreover, our vehicles started to operate 24/7 in Wuhan in early March, further expanding Apollo Go’s reach and improving the vehicle utilization. All this progress has led to the rapid growth of fully driverless rides. In Q1, the rides provided by fully driverless vehicles accounted for over 55% of total rides in Wuhan, which is up from 45% in the fourth quarter last year. This figure continues to rise, exceeding 70% in April with expectations of sustained rapid growth ahead and reaching 100% in the coming quarters. Looking ahead, we plan to deploy our RT6, our generation robotaxi in our Wuhan Apollo Go operation this year, which will significantly reduce hardware depreciation costs. With the scaling of driverless operations and continuous improvement of cost structure, we believe Apollo Go will achieve operational UE breakeven in Wuhan in the near future. As Apollo Go continues to progress, we will closely monitor efficiency and persist in optimizing the operation of our overall intelligent driving business. On auto solutions, our Apollo self-driving or ASD technology continues to evolve. I mentioned in our last earnings call that Apollo is a global pioneer in the use of visual foundation models in autonomous driving. Now our state-of-the-art autonomous driving solution solely reliant on vision is made available to OEMs. ASD can effectively navigate complex urban environments across over 100 cities in China, with plans to expand into hundreds of cities in the coming months. This allows us to make advanced autonomous driving attainable across a broad spectrum of passenger vehicles from high end to economy models priced as low as RMB 150,000, and serves as another proof of our technology leadership. With that, let me turn the call over to Rong to go through the financial results. Rong Luo: Thank you Robin. Now let me walk through the details of our first quarter financial results. Total revenues were RMB 31.5 billion, increasing 1% year-over-year. Revenue from Baidu Core was RMB 23.8 billion, increasing 4% year-over-year. Baidu Core’s online marketing revenue was RMB 17 billion, increasing 3% year-over-year. Baidu Core’s non-online marketing revenue was RMB 6.8 billion, up 6% year-over-year mainly driven by the AI Cloud business. Revenue from [indiscernible] was RMB 7.9 billion, decreasing 5% year-over-year. Cost of revenue was RMB 15.3 billion, increasing 1% year-over-year primarily due to an increase in traffic acquisition costs and costs related to the AI Cloud business, partially offset by the decrease in content costs. Operating expenses were RMB 10.7 billion, decreasing 2% year-over-year primarily due to a decrease in personnel-related expenses and other R&D expenditures, partially offset by the increase in server depreciation expenses and lower custody fees which support gen-AI research and development inputs. Baidu Core operating expenses were RMB 9.4 billion, decreasing 1% year-over-year. Baidu Core SG&A expenses were RMB 4.5 billion, decreasing 1% year-over-year. SG&A accounting for 19% of Baidu Core’s revenue in this quarter compared to 20% in the same period last year. Baidu Core R&D expenses were RMB 4.9 billion, decreasing 1% year-over-year. R&D accounting for 21% of Baidu Core’s revenue in this quarter compared to 22% in the same period last year. Operating income was RMB 5.5 billion. Baidu Core’s operating income was RMB 4.5 billion, and Baidu Core’s operating margin was 19%, and non-GAAP operating income was RMB 6.7 billion. Non-GAAP Baidu Core operating income was RMB 5.6 billion, and non-GAAP Baidu Core operating margin was 23.5%. Total other income net was RMB 2 billion, decreasing 52% year-over-year primarily due to a decrease in favorable gain from long term investments, partially offset by the increase in net foreign exchange gain. Income tax expenses was RMB 883 million compared to RMB 1.2 billion in the same period last year. Net income attributable to Baidu was RMB 5.4 billion, and diluted earnings per ADS were RMB 14.9. Net income attributable to Baidu Core RMB 5.2 billion and net margin for Baidu Core was 22%. Non-GAAP net income attributable to Baidu was RMB 7 billion. Non-GAAP diluted earnings per ADS was RMB 19.91. Non-GAAP net income attributable to Baidu Core was RMB 6.6 billion, and non-GAAP net margin for Baidu Core was 28%. As of March 31, 2024, cash, cash equivalents, restricted cash and short term investments was RMB 191.8 billion, and cash, cash equivalents, restricted cash and short term investments excluding iQIYI were RMB 185.8 billion. Free cash flow was RMB 4.2 billion. Free cash flow excluding iQIYI was RMB 3.3 billion. Finally, Baidu Core had approximately 36,000 employees as of March 31, 2024. With that, Operator, let’s now open the call to questions. Operator: Ladies and gentlemen, we will now begin the question and answer session. [Operator instructions] Your first question comes from Alicia Yap with Citigroup. Alicia Yap: Hi, thank you. Good evening Robin, Rong, and also--sorry, so thank you for taking my questions. I wanted to ask, are you able to quantify [indiscernible] AI technology been helping Baidu to improve app monetization rate, can management share some feedback on those advertisers who have adopted this system? In what kind of areas do they see the largest improvements, and are there any areas that can be further enhanced? Thank you. Robin Li: Hi Alicia, this is Robin. As you know, our monetization system was the first to benefit from gen-AI, generating several hundred million RMB per quarter in incremental revenue. Since the second half of last year, we have been utilizing ERNIE to upgrade our monetization system, enhancing various aspects of ad technology. This includes adding capabilities, refining the [indiscernible] system, automating creative generation, and add strategy formation for our advertisers. Advertisers have been seeing better conversion and more sales leads. This improvement has motivated advertisers to increase their spending with Baidu. In the first quarter, AI-related incremental advertising revenue grew on a quarter-over-quarter basis and we expect this trend to continue. The incremental revenue has helped us mitigate the broader macro weakness and also bought us some time to reconstruct our user product with ERNIE. As I emphasized in my opening remarks, we believe ERNIE offers a significant long term opportunity for our online marketing business. Agents function as virtual [indiscernible] for domains. Advertisers can establish their online presence and interact with potential customers using natural language through multi [indiscernible] conversations. With the introduction of AgentBuilder, advertisers can easily create customized ERNIE agents. When advertisers express their intentions to these agents, they can more effectively achieve their goals, whether it’s helping potential customers understand their products or improving customer service quality. Agents can also help enrich our content offering and improve user experience on Baidu. While still in early stage, ERNIE agents have helped some advertisers achieve better LOIs. For example, we have a customer in online education. They used AgentBuilder to create its AI agent, injecting it with key insights like product introduction and subject matter expertise, while continually providing feedback for refinement. This agent has significantly enhanced the company’s online customer service by offering round the clock high quality consultations. The adoption of ERNIE agent led to a 20% increase in ad conversion rate for this online education company. I think this is just the beginning. We believe Agent will be a major form of content and services in the new AI era. We will continue to improve the capabilities of ERNIE Agent. Agents will not only elevate user experience, both conversion and ROI for advertisers, but also over time foster increase in transactions directly generated on our platform. This shift should help us to transform our tradition CPC model into a more efficient CPS model. Operator: Your next question comes from Gary Yu with Morgan Stanley. Gary Yu: Hi. Thank you, management, for the opportunity to ask questions. I have a question regarding AI Cloud business. How has the price cut initiative by some of your peer companies affected Baidu AI Cloud business, and how should we think about the cloud revenue profitability as competition heats up, and also how should we--what should be the sustainable level of cloud growth outlook going forward? Thank you. Dou Shen: Yes Gary, this is Dou. As we have already mentioned, gen-AI and foundation models are transforming the cloud industry from general purpose computing to AI computing. This shift is re-shaping the competitive landscape within the cloud industry, presenting with valuable opportunity to establish ourselves as a leader in AI Cloud. We believe we offer China’s most efficient AI infrastructure and most advanced mass platform for model training and inference. As a result, more and more enterprises are choosing us for model training, fine-tuning and AI-native app development on our public cloud. This increasing demand has significantly boosted our AI Cloud revenue. Since the second quarter, the second half of last year, our AI Cloud revenue growth has started to accelerate from a year-over-year decline in the third quarter to an 11% increase in the fourth quarter last year, and then further accelerated to 12% in the first quarter this year. The revenue acceleration was supported by two main factors: the incremental revenue directly generated by gen-AI and foundation models, and also the new opportunities they provide to our legacy cloud business. As Robin just mentioned, in the first quarter of this year, revenue from gen-AI and foundation models accounts for 6.9 of our AI Cloud revenue, and then our traditional CPU cloud businesses were capitalizing on the opportunities presented by gen-AI and foundation models. Both factors were important growth drivers of our AI Cloud. On a separate note, while the smart transportation business remained subdued, its impact on overall AI Cloud business in Q1 was substantially smaller than the previous quarters, so overall we expect our AI Cloud to continue benefiting from the mega trend to maintain strong revenue growth momentum in the upcoming quarters. On the profit side, Baidu AI Cloud continued to generate non-GAAP operating profit as we have seen in previous quarters. We are committed to sustainable and healthy revenue growth. During the quarter, we maintained our focus on achieving high quality revenue growth by scaling down low margin business. Regarding the business of gen-AI and foundation models, the market is still at a very early stage, so our focus remains on educating the market and broadening our footprint across more enterprises. Looking to the long run, we expect the normalized margin for gen-AI and foundational models related business to improve further and to be higher than our traditional cloud business. Regarding the change of pricing policies of some competitors that you just mentioned, it is actually pretty common for cloud vendors to adjust their pricing for certain products. This is a trend we have observed multiple times in the past. Given that our cloud offering has expanded beyond traditional CPU cloud to a high value AI product and services, the industry change on CPU cloud pricing has a minimum impact of the development of our AI Cloud. Actually for cloud platform services, by leveraging our unique proprietary four-layer AI architecture and our strong ability in end-to-end automation, we have lowered ERNIE’s inference cost to only 1% over the variant in March last year. This May, ERNIE handles about 200 million API calls, or approximately 250 billion tokens daily. We are confident that ERNIE’s expanding adoption will continue to enhance its performance, boosting efficiency and then further reduce costs. It’s also important to evaluate price and performance ratio for different models at different workloads, rather than just focusing solely on some superficial prices. We believe our state-of-the-art AI infrastructure and advanced mass platform delivers the best value to our customers. Looking forward, leveraging our strong AI capabilities, we aim to continuously attract new customers and encourage existing ones to increase their spending on Baidu AI Cloud. At the same time, we aim to consistently generate positive non-GAAP operating profit. Thank you Gary. Operator: Your next question comes from Alex Yao with JP Morgan. Alex Yao: Hi, good evening management, and thank you for taking the question. Given the chip shortage in China, how does Baidu maintain its commitment to deliver differentiated value while enhancing its leading advantage in [indiscernible] technology in China? Thank you. Robin Li: Hi Alex. We do think very differently in this aspect. We are taking an application driven approach for our AI push. For example, solving all the high school math problems using the most advanced LLM may not be the highest priority at this time, while generating convincing reasons for users to buy the right products is more important in a lot of applications. With that in mind, we are taking advantage of our unique four-layer AI tech stack to optimize the cost and performance of ERNIE models, and we make sure customers and developers can easily build applications using tools like AgentBuilder, AppBuilder and ModelBuilder. For the AI infrastructure layer, a key factor contributing to our high efficiency in model training and inference is our superior capability in GPU cluster management. We have recently made a breakthrough by integrating GPUs from different vendors into one large scale, unified computing cluster, allowing us to use less advanced chips for highly effective model training and inference. Our deep learning framework, PaddlePaddle, has through continuous innovation and enhancement helped reduce the cost of model training and inferencing on a constant basis. PaddlePaddle is compatible with over 50 different chips, many domestically designed, and the developer community has grown to 13 million. With ERNIE 3.5 and ERNIE 4.0 remain to be the flagship models for sophisticated tasks, we’re making ERNIE more accessible and affordable by launching lightweight LLMs, introducing a toolkit for model development and app development, applying an MOE approach for model inference for better performance and lower cost. With our application driven mindset, we have used ERNIE extensively to renovate our own products and we have gained experience and insights in training and using ERNIE, as well as developing AI-native applications on it. We’re making all these capabilities available to our customers and developers. With all these efforts, we are fostering a vibrant and healthy ecosystem around ERNIE. We can see that we are actually taking a holistic approach to developing gen-AI and LLM which is very different from some of our competitors. Our reserve and access to the chips on the market should be sufficient for us to support millions of AI applications in the future. In the long run, I think China will form an ecosystem of its own, probably with less powerful chips but most efficient home grown software stack. There is ample room for innovation in the application layer, model layer, and framework layer. With ourselves developing a four-layer AI infrastructure as well as our strong R&D team, our dedication to AI and our application-driven approach in building an ecosystem around ERNIE, I’m quite confident that Baidu will stand as a leader in China’s AI ecosystem in the long term. Thank you. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Lincoln Kong: Thank you management for taking my question. My question is about the advertising business. What’s the major drag for the advertising growth if we compare it with our peers? What are the trends we have seen for advertising budgets and advertiser sentiment, especially into second quarter, April and May? How should we think about normalized advertising growth for 2024? Thank you. Robin Li: Yes, you know, our online marketing revenue grew by 3% year-over-year in the first quarter. While traditional search is maturing, we are working hard to renovate the user experience with gen-AI. Right now, about 11% of our search result pages are filled with generated results. These results provide more accurate, better organized and direct answers to user’s questions, and in some cases enable users to do things they could not do before. We have not started the monetization of those gen-AI results, so it will take some time for revenue to catch up. The weak macro also contributed to the softness of our ad business. Our advertisers come from a wide range of industries with the majority being SMEs. This makes our advertising revenue highly sensitive to the macro environment, particularly to the offline economy. In the first quarter, advertiser sentiment in some verticals, such as real estate and franchising, remained weak. Specifically in the real estate industry, not only was ad spending from developers and agencies muted, but the impact also extended to both upstream and downstream sectors. For example, energy, chemicals, machinery, building materials for upstream and home renovation, furniture, which is kind of downstream, all saw constrained ad spending on our platform. Also, many SMEs in offline sectors need more time to recover as they have been hit hard in the past few years. As we enter the second quarter, we have not seen improvement in advertiser sentiment. Given the limited visibility for sentiment improvement and paired with tough comps in Q2, our online marketing revenue should remain fundamentally solid but from a growth perspective soft over the next few quarters. Beyond the near term challenges, we expect online marketing to remain a bread-and-butter business for Baidu for the foreseeable future. Search is one of the most popular apps in the internet age, and Baidu remains the largest search engine in China with close to 700 million MAUs. Search will likely be one of the killer apps in the age of gen-AI. Technology innovation will enable us to better engage users with developers and merchants, directly connect users’ intentions with the most relevant product and service offering in more natural ways. Thank you. Operator: Your next question comes from Thomas Chong with Jefferies. Thomas Chong: Hi, good evening. Thanks management for taking my question. My question is about how much more room do we see in cost cutting? Previously, you mentioned there will be a lag between the investment and AI revenue contribution. How should we look at margin trends in 2024 if you intend to expand your AI offering? Thank you. Rong Luo: Hi Thomas, thanks so much for your question. I think our macro challenges are still weighing on our [indiscernible] business, but we are confident that there still will be some ways for us to continue optimizing the operational efficiency. We will stringently manage our cost [indiscernible] for each business and we will take some further steps as necessary, including we try to streamline the [indiscernible] structures to enhance the agility and support strategy flexibility, and we also will reallocate resources to prioritize the key structure areas. If I take look into our businesses, for mobile ecosystem, I think we can still manage the costs and expenses, so mobile ecosystem grew and continues to remain strongly profitable and cash flow positive. For AI Cloud, as Dou just mentioned, we will continue to phase out low margin businesses and products so we can continue generating the operating profits and margins on a non-GAAP basis. If we’re looking to longer term, the normalized margin for the gen-AI related cloud businesses should be higher than the legacy cloud businesses. For other businesses, we aim to reduce our loss, as we talked about in the past few quarters, particularly our intelligent driving business with more operational efficiency gains and UI improvements for robotaxi. Many investors ask me how our investments in ERNIE will impact net margins. In fact, our reinvestments are mainly related to capex for model training and inference. In 2023, we made a large purchase which has arrived at different times, and the different depreciation [indiscernible]. While the annualized depreciation expenses will be available in the whole year 2024, the impact on our overall cost expenses and quarterly earnings is quite predictable and manageable. The depreciation expenses book under R&D expenses for computing power use and training, and the cost of revenue for computing power reduced for model inference and business expenses. In the first quarter, we can see that Baidu Core’s non-GAAP R&D and the cost of revenue both increased very slightly, while non-GAAP operating margin actually we have expanded to 23.5% due to [indiscernible] spending on other items such as SG&A. We believe that the chips we have in hand are sufficient to support [indiscernible] of earnings for the next one or two years, and because of an ability of high performance chips in China in this year, 2024, we expect our capex to be smaller versus last year. In conclusion, the investments in gen-AI and large language models will have a manageable impact on the near term margins, and with our monetization of earnings already taking off, we expect that more and more revenue and profit will be generated from that kind of business, for both mobile ecosystem and AI Cloud. Overall, we believe that high quality growth and investment should be very balanced. For many years now, we have delivered a solid track record of top line growth with very resolute cost discipline, and we intend to continue building our future on this kind of business. Thank you so much. Operator: Your next question comes from Billie Wan [ph] with UBS. Billie Wan: Good evening. Thanks management for taking my question. My question is about shareholder return. How should we think about the execution pace of the current RMB 5 billion buyback program in addition to your current buyback program? Should we expect other diversified approach to improve shareholder return? Thank you. Robin Li: Yes, thanks so much for your questions. I think we highly value our shareholders and we have been making efforts to increase the shareholder returns. We have consistently repurchased our shares on the market over the past four years, averaging around $1 billion annually. In total, we have allocated around 37% of our free cash flow towards the share buyback progress. I think the RMB [indiscernible] and going forward, we will continue to buy back more shares from the market as we believe in our long term growth opportunities, and we are very committed to the shareholder returns. In addition, we have utilized our current share repurchase program to prevent any significant increase in the total outstanding share count, aiming to reduce the potential dilution of our shareholders’ economic stake in Baidu. In the year 2023, you can see that our total number of shares outstanding was flat year-over-year compared to a 1.2% increase in the year 2022 and a 3.2% increase in the year 2021. In this quarter, the total shares outstanding began to decrease - we can see that it has been declining by 0.5% as compared to the prior quarters. We are adopting a strategy of sustainable and recurring share buyback programs for the open market. At the same time, we are taking into consideration the opportunities ahead of us. Now we are facing a huge opportunity in gen-AI and foundation models, and we have structured a [indiscernible] plan to capitalize it, so we want to have the flexibility to invest as we consider necessary and in the best interests of long term value to the shareholders. Furthermore, we believe that the most effective way to create value for shareholders is by building strong base fundamentals. Our core marketing business remains steady and we believe that AI will help us to build another growth engine over time. Thank you so much for your question. Operator: Your next question comes from Miranda Zhuang with BofA Securities. Miranda Zhuang: Thank you, good evening management. Thanks for taking my question. My question is about robotaxi. Can management share more updates on the robotaxi initiative and the geographic coverage for this year? I think previously you’d mentioned that Apollo Go will achieve operating UE breakeven in Wuhan in the near future. I want to understand what’s the logic behind the efforts to continue to improve the UE. What’s the projected size of the vehicle fleet for this year, and how will it potentially impact the cost? Thanks. Robin Li: Sure Miranda, let me give you some more color on the robotaxi business. In 2023, Apollo Go made significant progress in improving the regional unit economics in key cities. Let me use Wuhan, Apollo Go’s largest operation to explain how we achieved that. We launched Apollo Go’s commercial operations in Wuhan back in 2022. Since then, we’ve witnessed a consistent enhancement in operational UE which can be attributed to the expanding scale of driverless operations and decreasing cost per vehicle. Regarding scale expansion, our vehicle fleet has been steadily growing. Compared to one year ago, our fully driverless fleet in Wuhan has grown threefold, reaching about 300 vehicles today. Meanwhile, both the operational area and service hours for our fully driverless operations have been consistently expanding thanks to the increasing recognition of our autonomous driving technology by the local government. The operational coverage area for our fully driverless ride hailing service increased by eightfold from a year ago, now covering over 7 million people in Wuhan. Apollo Go’s operational hours also gradually expanded from only the off-peak hours in the beginning to adding peak hours to its operations and eventually extending to 24/7 in March of this year. The scale expansion resulted in a consistent improvement of UE in terms of revenue. Both daily rides per vehicle and distance per ride have been growing. When it comes to cost, the majority is labor cost and hardware expenditures. We have been demonstrating consistent track record of safe operations, which helps us to increase deployment of fully driverless ride hailing operations. In April, the proportion of fully driverless orders rose to 70% - that’s up from only 10% in August 2022, and 45% Q4 of last year. We expect this figure to reach 100% in the coming quarters, thereby enabling us to minimize the cost related to safety officers. In addition to lowering the labor cost, we are steadfast in driving down hardware costs. The mass production and timeline of RT6, our sixth generation robotaxi, remains on track. Adopting a battery swapping solution, the mass production price for RT6 excluding battery is below US $30,000. We will use RT6 as the primary vehicle in the future fleet expansion and it should help to significantly reduce the hardware depreciation cost for each vehicle, further improving our UE and bringing us closer to profitability. Looking to this quarter, we plan to expand the fully driverless fleet of our Wuhan operation to 1,000 vehicles by the end of the year, more than tripling from the end of last year. Our focus remains on improving regional UE and narrowing the losses for Apollo Go business. With continued improvement in operational efficiency and cost reduction, we believe Apollo Go will achieve operational UE breakeven in Wuhan first, and once that’s achieved, we can scale up the operation quickly. Thank you. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Hello and thank you for standing by, for Baidu’s Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. At this time, all participants are in listen-only-mode. After management's prepared remarks there will be a question-and-answer session. Today's conference is being recorded. [Operator Instructions] I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu’s Director of Investor Relations. Juan Lin : Hello everyone and welcome to Baidu’s fourth quarter and fiscal year 2023 earnings conference call. Baidu’s earnings release was distributed earlier today and you can find a copy on our website as well as on our newswire services. On the call today, we have Robin Li, our Co-Founder and our CEO; Rong Luo our CFO, and Dou Shen our EVP in charge of Baidu AI Cloud Group ACG. 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 Provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ maturity from our current expectations. For detailed discussions of these risks and uncertainties. Please refer to our latest annual report and other documents filed with the 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 includes discussion of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most comparable with GAAP measures and it's available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu’s IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hi. And when we concluded 2023 with the solid note. Baidu’s total revenue for the fiscal year increased about 8% year-over-year, and the non-GAAP operating margin expanded from 22% to 24%. This improvement highlighted the resilience of our core business, which serve as a strong foundation for our ventures in ERNIE and ERNIE Bot. 2023 marked a year of Gen AI and foundation models. A massive technology shifts that will re-engineer this process and bring about a real renaissance in every sector of the economy. Baidu is well prepared to benefit greatly from this groundbreaking economic revolution. We progressed from talking about the opportunities of Gen AI and foundation models to activity of high ERNIE and ERNIE Bot at scale. As the front runner in AI, Baidu probably became the first public company globally to launch a GPT model with our EP 4.0 standing high as the most powerful foundation model in China. ERNIE continues to gain market recognition, as evidenced by ERNIE API calls from multiple well known companies. Notably, Samsung uses ERNIE API on its Galaxy S24 5G sales. Honor uses ERNIE API in its Magic 8.0 and Autohome using ERNIE API to power multiple AITC apps. The partnerships further solidify our leadership in Gen AI. Furthermore, we continued improving the efficiency of ERNIE. For example, the inference cost of EB 3.5 is only about 1% of the March 2023 version. With lower infant costs, ERNIE will become increasingly accessible to users and enterprises. We are able to do that primarily because of our unique four-layer AI architecture and our strong ability in end-to-end optimization. Additionally, we are offering our RMs in smaller sizes. This small models can balance between performance and efficiency, better serving wherever customer needs things. Since Q2 2023, we have actively utilized ERNIE to revolutionize our products and services, creating AI native experiences. We believe real applications are essential to unleashing the full business potential of ERNIE and ERNIE Bot. Recently, we began to generate incremental revenues from ERNIE and ERNIE Bot. In the fourth quarter, we earned several hundred million RMB primarily from ad technology improvement, and helping enterprises build their own models. I'll provide a more detailed explanation in the business review section. Looking into 2024, we believe this incremental revenue will multiply to several billion RMB primarily from advertising and AI cloud building. While we are beginning to commercialize Gen AI and foundation models, we see enormous monetization potential in this ground breaking technology. We invasion ERNIE as the future foundation system, serving as the foundation for millions of AI native applications developed by third-party and Baidu. This paradigm will enable us to create an ecosystem around ERNIE which opens up whereas revenue sources. Now the key highlights in Baidu’s native AI application. Equipped within AI copilot, Baidu Wenku has become a platform for users to create content in a wide range of formats, helping them express their ideas. In addition to summarizing, creating and expanding content users particularly appreciate Baidu Wenku’s features for assisting them in automatically turning their inspiration into PowerPoint. We have been consistently improving and enriching its AI features. For example, we recently introduced a new one, such as Mind-Maps for organizing information. We are reconstructing Baidu search using ERNIE. Last quarter, we talked about how we used ERNIE to generate search results, improving the on shop experience. In Q4, Baidu search introduced a news feed like information alongside the generated a search results at scale to offer users useful and relevant content to explore. In Q4, we also began facilitating certain search queries with multi-round conversations to delve deeper into understanding users’ intention. Overall, Gen AI enabled search complements traditional search expanding the TAM of Baidu search by serving a wider range of information meaning and answering content creation related questions. We are actively encouraging SMEs in service industries to build AI chatbot as new landing pages for Baidu search. AI chatbots enable them to better serve potential buyers directed to them by us driving transactions on our platform. At the same time, our AI chatbot can help merchants increase productivity. Currently, about 4,000 merchants are using our AI chatbots, particularly in healthcare, education, travel, legal, B2B and auto, where users often interact with merchants to learn about their offerings before making purchasing decisions. We believe that Gen AI enabled search will help increase user intention on Baidu, reinforcing our position as the primary entry point for users seeking information and services. We are also expanding the range of ERNIE by enabling enterprises to easily develop AI native application of ERNIE. In December, we introduced app builder, and comprehensive set of tools on our public cloud to support enterprises to swiftly view AI and easy applications from the ground up. This tool enable enterprises to incorporate capabilities, such as organizing unread messages for prioritization, creating draft, summarizing meeting notes, and facilitating Gen AI enabled data analysis. Additionally, we have included several readymade templates, such as AI agent to enable enterprises to promptly create Application for validating their ideas. Such progress is in large part based on our own pioneering experience in developing AI native applications. In addition to the tools for app development, enterprises partner with us, because we have the most powerful and most efficient foundation models. And the most cost effective cloud platform for running app. In December about 26,000 enterprises are activity using ERNIE through API on a monthly basis, increasing 150% quarter-over-quarter. And ERNIE is now handling more than 50 million queries every day. That's up 190% quarter-over-quarter is a significant rise in third party quality. As the number of AI native applications hosted our public clouds continue to rise, we are poised to accelerate the enhancement of our model performance by incorporating feedback from our users and customers. This will further widen the gap between ERNIE and our domestic peers. Moreover, as more and more AI native applications on ERNIE become popular, ERNIE will likewise be successful, and to support a robust ecosystem around it, steering our multi-year growth forward. In conclusion, we find ourselves amidst tremendous opportunity in Gen AI and information model. With the ERNIE and ERNIE Bot, we have started generating incremental revenue. In 2024, we expect AI revenues contribution to become more meaningful, while our core business will remain resilient. Moreover, we are preparing to serve the next wave in the development of ERNIE. In the future, we believe that there will be millions of AI native applications of ERNIE and the majority of them divided by our cloud customers. The expanding ERNIE ecosystem will then unlock numerous monetization potentials for Baidu. Now let me recap the key highlights for each business for the fourth quarter of 2023. Mobile ecosystem exhibited solid performance across revenue margin and cash flow. In the fourth quarter Baidu’s core online marketing revenue increased by 6% year-over-year, driven by verticals in travel, healthcare, business services, and others. In Q4, we generated several hundred million RMB incremental ad revenue due to improvements in ad tech. We continue to use ERNIE to enhance our monetization system, including targeting capability and bidding system in the quarter. Starting from January, our money violations system has been able to generate real time text-based ads for search queries. Demonstrating significant technology improvements in both targeting and ad creation. As of today, our new marketing platform has attracted about 10,000 advertisers. An advertiser in the medical aesthetics industry began to adopt our new marketing platform in Q4. With the AI copilot, if the advertiser can articulate its requirements comprehensively through native language, and multiband conversations for further clarify -- clarification, and explanation. The conversational experience has assisted in building optimized search and feed campaigns by generating relevant ad content. Our platform has also helped them reach highly targeted audiences, while dynamically allocating budget to drive conversions. The advertiser achieved increase of 22% in conversion rate, and that reduction of 5% in cost for sales lead acquisition after using this enhanced platform, and capabilities. Currently, only a small portion of our entire advertiser base has adopted this new marketing platform, which means there is a significant opportunity for future growth. All these initiatives have helped advertisers improve their conversion, leading to an increase in their ad budget, our platform in the quarter. We expect to continued growth in ad revenue from Gen AI and foundation models in 2024 and beyond. While we enhanced our ad technologies, we also introduced AI chatbot for brands, an innovative ad product building on top of ERNIE Bot in Q4. AI chatbots has further enriched our app product portfolio. It can enhance user engagement and customer surveys, while also capturing customer attention and driving customer demand. Since last October, China Feihe [ph], a local infant formula company has adopted AI chatbot to promote its brand. The AI chatbot has been enabled for Facebook to have multi-round interactions with our customers, increased brand recognition and gain valuable insights into its potential consumers. These profound insights have also helped the player Facebook understand customers views of the brand and products leading to an enhanced marketing strategy AI chatbot for brand has garnered significant interest from brand advertisers and we expect more interest to embrace the AI chatbot in the future. As I previously mentioned, we're using ERNIE to build our apps. With continuous enhancement of our AI native product offerings, we believe more and more users will come to Baidu platform. This, in turn, will assist us in gaining more market share in both user engagement and online advertising revenues. Looking into 2024, mobile ecosystem should continue to generate steady profits and cash flow. AI Cloud revenue grew by 11% year-over-year to RMB5.7 billion and continue to improve profitability in the fourth quarter. Revenue from Gen AI and foundation model represents 4.8% of our AI Cloud revenue in Q4. The increasing demand for model building played a significant role in this accelerated revenue growth, along with increasing distributions from inference. We have seen a growing number of enterprises, in particular, tech companies turning to our public cloud to build their models. Additionally, the AI cloud revenue generated by Baidu Core, other business groups, such as the Mobile Ecosystem Group and the Intelligent Driving Group was about RMB2.7 billion in Q4. Within the Q4 internal cloud revenue, Gen AI and foundation model accounted for about 14%. On a combined basis, the total internal and external AI Cloud revenue was RMB8.4 billion in Q4, with Gen AI and foundation model contributing around RMB656 million. Gen AI and LLM have become pivotal considerations for many enterprises driving a shift in the cloud industry from general purpose computing to AI computing. This evolution is reshaping the competitive dynamics within the cloud industry strengthening our lead in AI and expanding our total addressable market. Enterprises choose us, thanks to our position of the most powerful and cost-effective AI infrastructure for both model training and inference in China. Thanks to our unique four-layer AI infrastructure to drive consistent efficiency gains and years of experience in ERNIE. Last quarter, we explained that 98% of LLM training time on our AI infrastructure was valid. Moreover, our GPU networking is running at a 95% utilization for training LLMs. Both of these metrics have set industry benchmarks. Within our Maps, we offer model builder and app builder, which are two set of tools that help enterprises effortlessly build models and develop apps. As of now, enterprises have built about 10,000 models on our Maps. Since its inception, App Builder has facilitated the creation of thousands of AI native apps. As more and more applications are being built on our Maps, we will have greater revenue potential going forward. Looking into 2024, AI Cloud should maintain strong growth in revenue and generate profit as a non-GAAP operating level. Our intelligent driving business continued to focus on achieving new breakeven for Apollo Go. In Wuhan, Apollo Go's largest operation, about 45% of our orders were provided by fully driverless vehicles in Q4. This metric surpassed 50% in January. The increase is because we intensified operations during peak hours in areas with complex traffic conditions and further expanding our operating area in the past few months. This development resulted from our ongoing efforts to improve technology through safety -- through safely operating Apollo Go on public doles. In China, Apollo Go provided about 839,000 ride in the public in Q4, marking up 49% year-over-year increase. In early January, the cumulative rides offered by Apollo Go exceeded 5 million. The substantial data collected from operations will further help us enhance the efficiency of safe operations. Looking into 2024, we will remain focused on getting closer to Apollo Go's UE breakeven target and managing our costs and expenses to reduce losses in intelligent driving. Upon reaching UE breakeven, we plan to swiftly replicate our successful operations in Wuhan to other regions. In summary, we are facing tremendous opportunities in Gen AI and foundation models. We will continue to invest in these opportunities. And at the same time, we will strive to optimize our cost and expense structure for each business line to improve operational efficiency. With that, let me turn the call over to Rong to go through the financial results. Rong Luo : Thank you, Robin. Now let me walk through the details of our fourth quarter and full year 2023 financial results. We closed 2023 with solid financial results. Total revenues in the fourth quarter was RMB35 billion, increasing 6% year-over-year. Total revenues for the full year 2023 were RMB134.6 billion, increasing 9% year-over-year. Baidu Core's Q4 revenue was RMB27.5 billion, increasing 7% year-over-year. In 2023, Baidu Core generated RMB103.5 billion in revenue, increasing 8% year-over-year. Baidu Core's online marketing revenue increased 6% year-over-year to RMB19.2 billion in Q4, accounting for 7% of Baidu Core's total loan. Baidu Core online marketing revenue was up 8% year-over-year in 2023. Baidu Core's non-online marketing revenue was RMB8.3 billion, up 9% year-over-year. For the full year 2023, our online marketing business increased 9% year-over-year. The increase in our online marketing business was mainly driven by the AI Cloud business. Revenue from IT was RMB7.7 billion in Q4, increasing 2% year-over-year. Revenue from IT was RMB31.9 billion in 2023, increasing 10% year-over-year. Cost of revenue was RMB17.4 billion in Q4, increasing 3% year-over-year, primarily due to an increase in causes related to AI cloud business, partially offset by a decrease in quantum costs. Cost of revenue was RMB65 billion in 2023, increasing 2% year-over-year primarily due to an increase in track acquisition costs, partially offset by a decrease in the content costs and the costs related to AI Cloud business. Operating expenses were RMB12.1 billion in Q4, increasing 5% year-over-year, primarily due to an increase in server depreciation expenses and the server custody fees which support Gen AI research and development improves and channel spending and promotional marketing expenses. Operating expenses were RMB47.7 billion in 2023, increasing 9% year-over-year, primarily due to an increase in channel spending and promotional marketing expenses and server depreciation expenses and sever custody fees, which support Gen AI research and development improves. Operating income was RMB5.4 billion in Q4. Baidu Core's operating income was RMB4.7 billion, and Baidu Core's operating margin was 17%, 1-7, in Q4. Operating income was RMB21.9 billion in 2023. Baidu Core's operating income was RMB18.8 billion, and Baidu Core's operating margin was 18%, 1-8, in 2023. Non-GAAP operating income was RMB7.1 billion in Q4. Non-GAAP Baidu Core operating income was RMB6.2 billion, and non-GAAP Baidu Core operating margin was 23% in Q4. Non-GAAP operating income was RMB28.4 billion in 2023. Non-GAAP Baidu Core operating income was RMB24.7 billion and non-GAAP Baidu Core operating margin was 24% in 2023. In Q4, total other loss net was RMB2.5 billion compared to total other income net of RMB1.8 billion for the same period last year mainly due to a peak of losses from equity method investments as a result of a modification of certain terms of underlying preferred shares. Income tax benefit is RMB96 million. In 2023, total other income net was RMB3.3 billion compared to total other loss net of RMB5.8 billion last year mainly due to a fair value gain of RMB198 million from our long-term investments this year compared to a fair value loss of RMB3.9 billion last year and a decrease of RMB2.2 billion in impairment of long-term investments. Income tax expenses was RMB3.6 billion. In Q4, net income attributable to Baidu was RMB2.6 billion, and diluted earnings per ADS was RMB6.77. Net income attributable to Baidu Core was RMB2.4 billion, and net margin for Baidu Core was 9%. Non-GAAP net income attributable to Baidu was RMB7.8 billion, non-GAAP diluted earnings per ADS was RMB21.86. Non-GAAP net income attributable to Baidu Core was RMB7.5 billion, and non-GAAP net margin for Baidu Core was 27%. In 2023, net income attributable to Baidu was RMB20.3 billion and diluted earnings per ADS were RMB55.08. Net income attributable to Baidu Core was RMB19.4 billion, and net margin for Baidu Core was 19%, 1-9. Non-GAAP net income attributable to Baidu was RMB28.7 billion, non-GAAP diluted earnings per ADS was RMB80.85. Non-GAAP net income attributable to Baidu Core was RMB27.4 billion, and non-GAAP net margin for Baidu Core was 26%. As of December 31, 2023, cash, cash equivalents, restricted cash and short-term investments were RMB205.4 billion and cash, cash equivalents, restricted cash and short-term investments, excluding IT, were RMB200 billion. Free cash flow was RMB25.4 billion, and free cash flow, excluding IT, was RMB22.1 billion in 2023. Baidu Core had approximately 35,000 employees as of December 31, 2023. With that, operator, let's now open the call to questions. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Alicia Yap of Citi. Please go ahead. Alicia Yap : Hi, thank you. Good evening, management. Thanks for taking my questions. My question is on the outlook. How does management think about the macroeconomic landscape in China for 2024? What's management view on 2024 growth outlook for Baidu as a whole? And also, what is the percentage of total revenues of Baidu will be contributed from the AI-related revenue in 2024? Thank you. Robin Li: Hi, Alicia, this is Robin. Before we dive into the outlook, let's take a quick look back last year. We had a very challenging macroeconomic environment, but our business demonstrated very solid performance. We invested very aggressive in Gen AI, but our non-GAAP operating margin expanded year-over-year and revenue experienced solid growth. More importantly, we began to generate incremental revenue from Gen AI and foundation models. And for this year, we have noticed that both the central and local governments are putting efforts to grow the economy. And during the eight-day Chinese New Year holiday, we saw a growth in consumption, particularly in the travel sector. But we're still operating in a macro environment with a lot of uncertainty. We are closely monitoring significant economic stimulus plan, which we think is essential for achieving this year's goals. But that being said, by defacing a lot of opportunities. Our core business remains solid, and the incremental revenue from Gen AI and foundation models will increase to several billion RMB in 2024. This will contributing to the growth of our total revenue. And more specifically, thanks to our leading position in LLM and Gen AI, enterprises are increasingly building models and developing apps, the Baidu Cloud. And for our mobile ecosystem, we have already accumulated a huge user base and we keep renovating our products and enhancing our monetization situation capabilities through AI innovation. So when we combine Cloud and Mobile, I think we will be able to sustain our long-term growth which we think will be faster than China's GDP growth. Thank you. Alicia Yap : Thanks. Operator: Okay. And our next question today will come from Alex Yao of JPMorgan. Hi, Alex, your line is open. Are you muted? Alex Yao : Yeah. Sorry, I was muted. Good evening, management. And thank you for taking my questions. I have a couple of questions on cost structure and the margin trends. First of all, how much more room do we see in the cost cutting and optimization, how should we look at AI-related investments. In the past, you guys discussed that there will be a lag between chip investments and AI revenue contribution? How should we look at the margin trend into 2024, if you intend to expand? Rong Luo : Alex, thank you so much for your questions. This is Julius. I think alongside the investments in our Gen AI businesses, it's pretty sure that there is still room. We can manage the cost and the expenses in our legacy businesses. As we look into the 2024, we will continue to focus on our core businesses, and we also will be ready to reduce our resource allocations to the non-strategic businesses. Additionally, we are continuously enhancing our overall organization efficiencies by removing the layers, simplifying the executions and flattening the organization structures. So heading into this year, we are very committed to the ongoing optimization of our operations, ensuring we have a more productive HR team. And with all these measures in plan, and we aim to keep Baidu Core's earnings solid with our mobile ecosystem continue to deliver the very strong margins and generate very strong cash flows while the AI Cloud business continues its profitability. We have managed to maintain a solid operation profit margins despite our investments in AI. If you still remember from year 2023 and on, we started to invest in Generative AI and large language models. This investment is primarily reflected in our [Indiscernible] and mainly related to the purchasing chips and servers for the model training and services. As you know, the CapEx will be depreciated over several years, so despite a 58% year-over-year increase in Baidu's cost CapEx in 2023, our non-GAAP operating profit margins still saw a 2 percentage growth on a year-over-year basis. Looking forward in the process of developing our new AI business, it is inevitable that we will make new investments. However, these investments are not expected to significantly affect our margins or profits. And during the early stage of the market development, we also will now overly prioritize margins for our AI Cloud business. And as we believe that in the long run, this business is expected to yield much better margins. And additionally, there may be some promotional activities for the AI native 2C products, but we will carefully manage and closely monitor the online to balance the investments and growth. We are happy to see that our efforts in investing in new initiatives have begun to yield the early results. As Robin has mentioned just now, the incremental revenue generated from the ad tech improvement have reached several million hundred RMB in Q4 and the incremental AI Cloud revenue generated from Gen AI and foundation models also contributed to 4.8% of the total AI Cloud revenue. I think all of these promising and top line achievements have strengthened our confidence in our business strategy. So going forward, we will remain steadfast in our commitment to development – to the development of the Gen AI and large language modal use. Thank you, Alex. Operator: Our next question today will come from Gary Yu of Morgan Stanley. Please go ahead. Gary Yu : Hi, good evening. And thank you for taking my question. I have a question regarding AI contribution. So for AI-related revenue contribution, is there a way you can quantify or prove that the ad revenues Baidu will be generating is purely incremental contribution from AIGC and not cannibalizing from your existing search business? And if AI is purely incremental, should we be expecting faster than average growth. And excluding AI, how should we think about the core growth rate for 2024? Thank you. Robin Li: Hi, Gary, this is Robin. We are the largest search engine in China. We have close to 700 million monthly active users and we have established a very robust brand presence among the Chinese Internet and mobile users. They rely on us for comprehensive and reliable information. So we have a strong and stable base revenue and profits. But we are also very sensitive to macro because our advertising business has very broad coverage of different verticals. I mentioned earlier that there are still uncertainties with the macro environment. But Gen AI and LLM are unlocking new opportunities both at the monetization front and the user engagement front. I think it's easier to quantify the incremental revenue on the monetization front. I mentioned earlier that Gen AI has already helped increase advertising ECPM. And our upgraded monetization system has allowed us to improve targeting capabilities, thereby generating and presenting more relevant ads. We earned a several hundred millions in Q4 from this kind of initiative. And the incremental revenue will grow to several billion this year. It's harder to quantify the user engagement part, Gen AI is helping us improve user experience. We have seen initial outcomes in search and one pool, and we will continue introducing new features going forward. These initiatives will help us improve the user mind share and time spent over time and bring us even larger potential. So I think the purely incremental revenue will come from both side and the user engagement side. Thank you. Operator: Our next question today will come from Lincoln Kong of Goldman Sachs. Please go ahead. Lincoln Kong: Hi, thank you, management for taking my questions. So my question is regarding the Cloud business. How should we look at the incremental revenue growth that's driven by Generative AI, so what is the product mix for Generative AI Cloud? And what exactly are the offerings that primary growth drivers here. And then when we're looking at 2024, how should we expect the overall AI Cloud revenue growth this year and that will be the margin trend this year as well. Thank you. Rong Luo : Thank you for the question. This is Julius. As Robin just mentioned, the total revenue from our -- from the Gen AI and the foundation model related businesses, including both internal and external revenue already reached RMB656 million in Q4, and this number should grow to several billion RMB for the full year 2024. We have seen increasing interest from enterprises in using Gen AI and LLM to develop new applications and features. To achieve this goal, so they are actively building models to power their products and solutions. So this is how we generate the majority of the revenue from external customers. Meanwhile, we were seeing a significant increase in model inferencing revenue from external customers. So the revenue from inferencing is still small. We believe that over the long term, it will become a significant and sustainable revenue driver. We think revenue generated by internal customers is also quite important because a significant portion of such revenue is for model inferencing. So Baidu is the first company to use Gen AI and LLM to reconstruct all the businesses and products. So with the number of products and features powered by Gen AI and ILM continue to increase ERNIE API costs from internal customers have been increasing rapidly and have reached a significant magnitude. As such development has proven that ERNIE and ERNIE Bot can well enhance the productivity and efficiency in real-world applications. And we also believe a growing number of external customers will use ERNIE to develop their own apps and drive our external revenue in the future. So regarding your question about our product offerings, we have the most powerful AI infrastructure for model training and inferencing in China. So this infrastructure helps our customers build and run models cost effectively. Additionally, as Robin mentioned earlier, our model offers various models and a full set of tools in terms of model builder and app builder for model building and application development. So in addition to that, we have developed our own AI native solutions, such as GBI, that is a Generative Business Intelligence. So those applications are helping enterprises increased productivity and efficiency. In addition to the incremental opportunity related to AI, Gen AI and foundation models also bring new opportunities to our legacy cloud businesses. So firstly, we continue to win customers and projects for CPU-centric cloud because we are being highly recognized for our AI infrastructure and the CPU-centric cloud offerings, especially in the Internet and tech and education sectors. Secondly, Gen AI and foundation models have allowed us to build AI solutions for our customers more efficiently than before, facilitating digital and intelligent transformations for traditional industries. So both of these two factors are driving growth for our cloud revenue. And overall, we should see cloud revenue growth accelerate in 2024 over last year. Additionally, we are pretty confident in maintaining profitability for our AI Cloud. For Enterprise Cloud, we should be able to consistently improve gross margins for the legacy cloud businesses. As for Gen AI and LLM businesses, the market is still at a very early stage of development. So we should hold a pretty dynamic pricing strategy to quickly educate the market and expand our penetration into more enterprise customers. So we believe over the long term, the new business should have a higher normalized margins than the traditional cloud businesses. Thank you. Operator: Our next question today will come from Thomas Chong of Jefferies. Please go ahead. Thomas Chong : Hi, good evening. Thanks, management for taking my questions. May I ask about the pace for our AI 2C product development how has the traffic growth been? And any key metrics which can be shared on the new generative search? How AI benefits search traffic time spent? And when should we see the exposure of traffic or super app? Thank you. Robin Li: Yeah, we are reconstructing all of our 2C products using generative AI. I think Gen AI and foundation models are making all of our products more powerful. Over the past few months, we made significant strides in this kind of efforts and the initial user feedback has been encouraging. For search, the introduction of Gen AI has enabled Baidu to answer a broader range of questions, including more complex, open-ended and comparative queries. With ERNIE Bot, we can provide direct and clear answers in a more interactive way. During the past few months, instead of just lending some content and providing some links, more and more search results were generated by ERNIE bot. As a result, users are engaging with Baidu more frequently and asking new questions. For example, more and more users are coming to Baidu for content creation, be it text or images. During the Chinese New Year holiday, Baidu helped users create New Year greeting messages and generate personalized e-card for their loved ones. This is not a typical use case for search engine, but we see a large number of users rely on Baidu for this kind of need. Going forward, we will increasingly use ERNIE Bot to generic answers for search queries and then use multi-round conversation to clarify user intent, so that complicated user needs can be addressed through natural language. While these initiatives have resulted in an enhanced search experience, we are still in the early stages of using ERNIE Bot to reconstruct Baidu search. We will continue to test and iterate Gen AI enabled features based on user feedback. And we will follow our typical playbook for testing and fine-tuning new experiences before upgrades are ready for a larger scale rollout. Overall, we believe Gen AI will complement to traditional search. Ultimately, increasing user retention engagement and time spent on Baidu. And in addition to search, ERNIE bot acting as a copilot Wenku has transformed from an application for users to find tablets and documents to a one-stop shop for users to create content in a wide range of format. And year-to-date, I think about 18% of new paying users were attracted by Gen AI features for Wenku. I want to emphasize that we are in the early stages of using ERNIE Bot to reconstruct our apps and build new ones. And at the same time, we are attracting and helping enterprises build apps on ERNIE. We believe the success of ERNIE depend on its wide and active adoption, whether through Baidu app or through third-party apps. Thank you. Operator: Our next question today will come from James Lee of Mizuho. Please go ahead. James Lee : Great. Thanks for taking my questions. Can you guys maybe talk about ERNIE's technology road map for 2024? Does it include multimodal feature, maybe similar to Sora or maybe opening up an AI store or potentially launching AI engine. Is there any sort of milestone or key metrics you can speak to? And the second part to that question is on the cost of running Gen AI, how should we think about maybe puts and take on managing inferencing costs going forward? And obviously, you talked about some ways to make it more efficient. Are there any additional levers to optimize this process? Thanks. Robin Li: Yeah, the chips we have on hand should enable us to advance EB4 to the next level. As I mentioned earlier, we will take an application-driven approach to intense ERNIE and that our users and customers tell us where we should improve and adjust for our models. It could be building multi-modalities, agents increasing reliability and so on. It's important to note that we are focusing on using ERNIE to bring real value to users and customers rather than simply achieving high ranking downloads and research publication. And you're right, price is a very important issue, making high-performance foundation model affordable is critical for large-scale operations. I mentioned earlier that we have been continuously reducing model inference cost. Now the inference cost of EB3.5 is about 1% of March of 2023 version. By doing so, more and more enterprises are increasingly willing to test, develop and iterate their applications on ERNIE. We understand that for many customers, they tend to balance efficiency with cost and speed. So we also offer smaller language model and help our customers leverage MOE that's a mixture of experts for our best performance. With our end-to-end approach, we believe there is still ample room to reduce the cost of our most powerful models and make them increasingly affordable to our customers. And this will help further drive the adoption of ERNIE. Internally, we are closely monitoring the number of apps developed by -- developed on ERNIE. As I mentioned previously, ERNIE now handling over 50 million queries per day. And right now, ERNIE API costs from internal application as still larger than external app cost. The cost for ERNIE in different sizes from external apps have been increasingly -- have been increasing rapidly. We're just at the beginning of this journey. ERNIE will only become more powerful, smarter and more useful as more and more end users use it be it through Baidu apps or through third-party apps. This will enable us to cultivate an ecosystem around ERNIE. As this app and models are actively used by end users, they will also generate significant inferencing revenue for us. Thank you. Operator: Our next question today will come from Charlene Liu of HSBC. Please go ahead. Charlene Liu : Thank you. Good evening, management, and thank you again for the opportunity. I have a question related to ERNIE. How does earnings enterprise adoption compared to its peers? Can you please kindly share with us the latest number of enterprises that are using ERNIE to build models and applications and help us understand how that has gone versus last quarter and what the underlying drivers may be? Lastly, can you help us also understand whether we can assume that enterprises who apply the ERNIE API integration will very unlikely be using other elements. Thank you so much. Rong Luo : Great question, Charlene. So as Robin just mentioned, right, about 26,000 and prices of different sizes, spreading over different verticals, caused our ERNIE API from our cloud in December marching a 150% increase quarter-over-quarter. The ERNIE API costs have exceeded 50 million on a daily basis, and we believe no one else in China has gained so many customers and received such a high volume of API requests. The enterprises choosers primarily for the following reasons. Firstly, we have the most cost-efficient AI infrastructure for modal cleaning and inferencing in China, primarily because of our strong ability of end-to-end optimization. Just mentioned before, Gen AI and large language models for reshaping the competitive landscape China's public cloud inventory and enhancing our competitive advantage. So our strong ability in managing extensive GPU-centric cloud with very high GPU utilization reach has continuously enhanced our AI infrastructure. So as a result, we can help enterprises build and run their models and develop AI native apps at low cost on our cloud. Secondly, the EB family of models have attracted many customers to our cloud. Over the past few months, we have consistently enhanced ERNIE’s performance, receiving positive feedback from the customers. We also offer ERNIE models in different sizes to better accommodated customers' needs regarding cost structures. And thirdly, we were the first company in China to launch a model-as-a-service offering, which is a one-stop shop for LLM and AI native application development. So ERNIE Bot [ph] makes it easy for enterprises to use LLMs. We're also providing toolkit to help enterprises easily trim or fine-tune their models and develop applications on our cloud. So with the toolkits, customers can purpose build to cost effectively by incorporating their proprietary data, and they can directly use ERNIE API to power their own applications as well. We can also help them to support different product features using different models adopting the MOE approach in the app development. So as a result, enterprises can focus on identifying customers' pinpoints rather than expanding their efforts on the program. So all of these initiatives have helped us establish a first-mover advantage in Gen AI and LLMs. For your last question, as more customers use our Maps platform to develop AI native applications aimed at attracting users, substantial user and customer insights will be generated and accumulated on our cloud. So these insights will also allow us to further refine the toolkits. As our tools become increasingly customer friendly and help enterprises effortlessly fine tune models and create apps. They will be more inclined to stay with us. Additionally, it is worth noting that at the current stage of employing large language models, it is crucial for customers to create suitable prompts for their chosen models. So since they had to invest a considerable effort in building and accumulating their best props -- prompts for using large language models. And it becomes intelligent for them to switch to another model because they will have to reestablish their prompt portfolio. So as a result with increasing adoption and active usage of our platform, customer satisfaction and switching costs will help us increase the customer retention. Charlene Liu : Thank you. Operator: Our next question today will come from Miranda Zhuang of Bank of America Securities. Please go ahead. Miranda Zhuang : Good evening. Thank you for taking my questions, which is about the AI chip, wondering what's the impact on your AI development after the recent further chip restriction from U.S. Is there any update on the alternative chips? And given the chip concern, how is Baidu developing the AI model product and monetization differently versus the overseas peers, what can be achieved and what may become difficult? And what will the company do to keep up with the overseas peers in the next few years? Thank you. Robin Li: In the near term, the impact is minimal for our model development or product inventions or monetization. As I mentioned last quarter, we already have the most powerful foundation model in China and our AI chip reserve enables us to continue enhancing earnings for the next one or two years. And for model inference, it requires less powerful chips. Our reserve and the chips available on the market are sufficient for us to power many AI native application for end users and customers. And in the long run, we may not have access to the most cutting-edge GPU. But with the most efficient homegrown software stack. Net-net the user experience will not be compromised. There's ample room for innovation in the application layer, the model layer and the framework layer. Our end-to-end self developed four-layer AI architecture along with our strong R&D team will support us in using less advanced chips for efficient model training and inferencing. This provides Baidu with a unique competitive advantage over our domestic peers. And for enterprises and developers, building applications on ERNIE will be the best and most efficient way to embrace AI. Thank you Operator: Our next question today will come from Ken Fong of UBS. Please go ahead. Unidentified Analyst: Good evening, management. This is [indiscernible] on behalf of Kenneth. Thanks for taking my question. So my question is, recent days, we have seen numerous developments in text to video or video generation technology. So how do you envision this technology impacting the broader AI industry development in China and what implications that it would hold for ERNIE. Could you elaborate on your strategic road map for ERNIE moving forward? Furthermore, how does ERNIE currently perform in text generation and text to image, text to video generation task? And what improvements do you foresee in these areas. Thank you. Robin Li: This is Robin. First of all, multi model or the integration of multi-modalities such as text to audio and video is an important direction for future foundation model development. It is a must-have for AGI. And Baidu has already invested in this area, and will continue to do so in the future. Secondly, if we look at the development of foundation models, the market for large language models is huge and still at very early stages. Even the most powerful language models in the world are still not good enough for a lot of applications. There are plenty of room for innovation. Smaller-sized models, MOE and agents are all evolving very quickly. We strive to make this offering more accessible to all type of enterprises and solve real world problems in various scenarios. And thirdly, in the realm of visual foundation model. One, notably, a significant application with vast market potential is autonomous driving, in which Baidu is a pioneer and global leader. We have been using diffusion and transformer to train our video generation models for self-driving purposes. We have also consistently made strides in object classification, detection and segmentation, thereby better understanding the physical world and the rule of the physical world. This has enabled us to translate images and videos captured on the road into specific tasks resulting in more intelligent, adaptable and safe autonomous driving technology. Overall, our strategy is to divest the most powerful foundation models to solve real-world problems, and we continue to invest in this area to ensure our leadership position. Thank you. Operator: Thank you. And ladies and gentlemen, at this time, we will conclude the question-and-answer session and conclude Baidu's fourth quarter and fiscal year 2023 earnings conference call. We do thank you for attending today's presentation. You may now disconnect your lines.

Operator: Hello and thank you for standing by for Baidu’s Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Today’s conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today’s conference, Juan Lin, Baidu’s Director of Investor Relations. Juan Lin: Hello, everyone and welcome to Baidu’s third quarter 2023 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 Li, our Co-Founder and CEO; Rong Luo, our CFO; and Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG. 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 provision of the U.S. Private Securities Litigation 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 auditable law. Our earnings press release and this call include discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu’s IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. Baidu Core delivered solid revenues, profit and cash flow in Q3 despite navigating in a challenging macro climate for both our online marketing business and AI cloud business. I am proud that our team managed to strengthen operational efficiency and maintain stable margins, a full-scale reinvention of our product portfolio with ERNIE and ERNIE Bot. Today, I would like to share an update on the new opportunities that ERNIE and ERNIE Bot have opened up for us. After that, I will discuss some key highlights of each of our businesses. Presently, we are in the midst of a broad-based platform shift driven by generative AI and foundation models that is set to revolutionize every industry. On August 31, we received the approval to deploy ERNIE Bot on a large scale and open ERNIE API to enterprise customers. Since then, we have witnessed a significant increase in queries handled by ERNIE Bot and through ERNIE API. Moreover, we have received valuable feedback from these users and customers enabling us to further refine our model’s performance. At Baidu World in October, we showcased our progress in ERNIE Bot and AI native products. During that event, we introduced ERNIE 4.0 or EB4, our most advanced foundation model. We believe that EB4 is the GPT-4 level model, displaying human level performance in understanding content generation, complex reasoning and memory retention. These capabilities are crucial for developing AI native applications and solutions. We are pleased to launch EB4 earlier than our expectations. It resulted from our unique end-to-end 4-layer AI infrastructure, which helped intense efficiencies in model training. The input and feedback from our users and customers also played a big role. In products, as I said in the past, we continue to use ERNIE to reinvent our entire portfolio and introduce an AI-native experience. On the customer front, the ERNIE Bot enables Baidu search by generating direct answers to search queries, complementing traditional search. In the quarter, we initiated tests on our new features that recommend news feed-like information together with the generated search results and enable multi-round conversations to encourage further user expression. Our initial tests have received promising feedback. We believe these features will help deepen user engagement and prolonged time spent unleashing new monetization opportunities. In particular, they benefit as verticals like healthcare, education, travel, legal and auto, in which advertisers are willing to invest heavily in customer acquisition and reengagement. ERNIE Bot, our new AI native product serves as a versatile multi-brand conversational AI assistant on both desktop and mobile. Given the exceptional performance of our large language model, we are confident in monetizing our services. Starting from November 1, EB4 was open to the public through ERNIE Bot at a subscription fee of about $8 per month. This marks us as the first company in China to implement user charges, distinguish us from other models in the market. Our primary focus is to encourage seamless collaboration between users and AI co-pilots, which we believe is a key trend in the new era. For example, with an AI co-pilot, Baidu Wenku has transformed into a one-stop shop for various document creation needs. We have already seen an increase in the paying user account, a trend that we expect to continue in the coming quarters. On the enterprise-facing product front, we recently introduced a GBI, generated business intelligence with ERNIE Bot. GBI simplifies data analysis using natural language interaction facilitating faster decision-making for business operation. The introduction of GBI was prompted by the recognition that customers across various industries have the need for AI co-pilots to help them analyze data more efficiently. During our last earnings call, we also discussed how we use ERNIE Bot to create Baidu Comate, our AI coding assistant and Infoflow, our enterprise communication and collaboration platform. These products focus on boosting productivity and efficiency gains and each of them present upsell opportunities for our cloud customers. In fact, an increasing number of our cloud customers in China’s traditional industry and public sector have used the trial version and showing interest in these products and features. Additionally, these products and features also allow us to acquire new customers across an even wider array of industries. In terms of ecosystem, we empower enterprises to leverage ERNIE through API to create their own AI native applications and solutions that will drive the development of generative AI and LLM. As more and more AI native applications built on top of ERNIE become successful, whether developed by us or by our customers, ERNIE will likewise be successful. Now, over 10,000 enterprises are actively using ERNIE through API on a monthly basis. This number has been growing quickly since we received the regulatory green light at the end of August. Currently, ERNIE is handling tens of millions of queries everyday. Right now, a large and rising number of these queries come from the Baidu family of products as we have been pioneers in building AI native products and have put a lot of effort into reinventing our offerings. In the first half of November, the number of daily external queries has increased by over 50% compared to the same period in October. As we are actively assisting our cloud customers in creating AI native applications, we believe there will be a continuous and significant rise in external credits in the future. We are also actively attracting developers to connect their information and services to ERNIE Bot through plug-ins. With plug-ins, ERNIE can help people with more-and-more tasks unlocking a wide range of possible use cases. As of today, [indiscernible] plug-ins have already been accessible to ERNIE. The initial batch of third-party plug-ins include ctrip.com, CITIC Press Group, China Justice Big Data Institute, New Oriental, Autohome and Tree Mind. In summary, during the quarter, we made significant progress in using Gen AI to revolutionize product usage and transform business operations for our users and customers. We believe that this is just the beginning. In the future, we will realign resources to invest in this growth opportunity and shift away from lower priority efforts and improve efficiency for existing businesses, thus balancing investment and margins. We are excited about the possibilities for Baidu for our users, customers, partners and the entire ecosystem. Now let me recap the key highlights of each of our businesses. Mobile ecosystem continued to exhibit steady growth for both user metrics and financial performance in the quarter. Baidu Apps MAUs increased by 5% year-over-year to RMB663 million in September. Search queries and content distributed by Baidu app remained resilient. In particular, videos distributed by search and feed within Baidu App both experienced a double-digit growth in third quarter. Baidu Core’s online marketing revenue increased by 5% year-over-year in the third quarter, consistently generating strong profit and cash flow for the group. This growth was driven by the continuous recovery in verticals such as health care and travel, among others. In the quarter, we continued to use Gen AI to help advertisers increase ROI and conversion on our platform. Starting from September, advertisers can engage with our new marketing platform. This platform supports natural language input and multi-round conversations which help advertisers, articulate their requirements more comprehensively, enabling us to formulate more effective campaign strategies for investment. Moreover, we made ongoing enhancements to our monetization system, focusing on improving targeting capabilities and the auction system. For example, Tarena Education and IT Professional Education Company achieved an increase of 23.3% in conversion rate and 22.7% boost in ROI after using this enhanced platform and capabilities. We are still in the early stages of using Gen AI to help advertisers achieve higher of conversions and ROIs on our platform. Our efforts will ultimately lead to significant improvement in marketization capabilities and will contribute to future revenue growth. In the quarter, we also used our AI capabilities to help merchants grow their sales on Baidu. One example is how we help SMEs with live stream shopping. With ERNIE Bot, we introduced a tool that allow them to easily create their own digital human, generate live scripts and more significantly lowering the barrier and cost for live streamers to sell merchandise on Baidu. Looking forward, we are optimistic that the growth of our online marketing revenue will continue to exceed China’s GDP growth. At the same time, we will continue to test AI native marketing products that could potentially open up more opportunities than traditional general search ads. This gives us confidence in Baidu’s long-term online marketing growth prospects. Turning to AI cloud, we continue to generate positive operating profit on a non-GAAP basis in the quarter as we remained focused on the healthiness of our business. Gen AI and LLM have brought us a lot of opportunities, which have strengthened our competitive advantages in cloud and increased our TAM. A growing number of enterprises are using ERNIE API to develop their own AI native applications and solutions. We are also helping customers build their own models efficiently by leveraging our unique 4-layer AI infrastructure and our years of experience in building and using foundation models. LLM training is very complicated. It requires a large number of GPUs working simultaneously. ERNIE GPU failures can impact the entire process. We have developed ways to identify and address GPU failures quickly leading to a significant reduction in training costs. Now about 98% of the training time on our platform is valid, setting an industry benchmark. We also have a set of different resources, including toolkits, data sets for enterprise customers to easily fine-tune their customized models. Gen AI has helped us grow our cloud customer base. A large number of cloud customers using ERNIE API are new customers. At the same time, some of our existing cloud customers have increased their spending with us because of generative AI. AI cloud revenues declined by 2% year-over-year in the third quarter, mainly due to the weak demand in smart transportation projects. We believe AI cloud revenue should rebound to positive growth in the fourth quarter, driven by the increasing momentum in generative AI-related businesses. Also, since smart transportation revenue started to slow down in Q4 of last year, we will have an easier year-over-year comp base in Q4 this year. Moving on to intelligent driving, our target remains unchanged, which is to achieve breakeven on the regional unit economics for robotaxi operation in a couple of years before turning operationally profitable. To this end, we are strategically concentrating our resources on pivotal regions. Wuhan remains our largest operational area and we believe it is also the largest region globally, providing autonomous drive aiding services currently covering a population of about 2.7 million. In the third quarter, the portion of fully driverless orders within the overall order portfolio in Wuhan exceeded 40%, that’s up from 35% in Q2. We are also particularly pleased to highlight that Apollo Go’s operation in Wuhan continue to expand. In late August, Apollo Go remains the first company in China to provide autonomous ride-hailing services to the general public at Wuhan Kinko International Airport, one of the busiest airports in Central China. The extended reach into the airport transfer involves longer travel distances, presenting an excellent opportunity for the future improvement of unit economics. All of these developments contributed to the UE improvement and we aim to reach regional UE breakeven in a couple of years. In Q3, Apollo Go provided 821,000 rides to the public, marking a 73% increase year-over-year and the cumulative order volume has surpassed 4.1 million by the end of Q3. As part of our executive reshuffle program, we have recently named Dr. Wang Yunpeng as Corporate VP of Baidu, who will lead the Intelligent Driving Group. Yunpeng has been with us since 2012 and has been responsible for autonomous driving business since 2018. I take great pride in seeing another business leader developed within Baidu. Zhenyu has taken a rotational position as CEO Assistant and the Chairman of the Technology Ethics Committee. Now let’s proceed with Rong’s financial performance review. Rong Luo: Thank you, Robin. Now let me walk through the details of our third quarter financial results. Total revenue was RMB34.4 billion, increasing 6% year-over-year. Revenue from Baidu Core was RMB26.6 billion, increasing 5% year-over-year. Baidu Core’s online marketing revenue was RMB19.7 billion, increasing 5% year-over-year. Baidu Core’s online marketing revenue was RMB6.9 billion, up 6% year-over-year. Revenue from IT was RMB8 billion, increasing 7% year-over-year. Cost of revenue was RMB16.3 billion, which remained essentially unchanged compared to the same period last year. Operating expenses were RMB11.9 billion, increasing 8% year-over-year primarily due to an increase in China spending, promotional marketing expenses, server depreciation expenses and the server custody fee, which support ERNIE Bot repurchasing costs. Baidu cost operating expenses were RMB10.5 billion, increasing 10% year-over-year. Baidu Core SG&A expenses were RMB4.8 billion, increasing 14% year-over-year. SG&A accounting for 18% of Baidu’s Core revenue in the quarter compared to 17%, in the same period last year. Baidu Core R&D expenses were RMB5.6 billion, increasing 7% year-over-year. R&D accounting for 21% of Baidu Core revenue in the quarter, which maintained unchanged from the same period last year. Operating income was RMB6.3 billion. Baidu Core operating income was RMB5.5 billion and Baidu Core operating margin was 21%. Non-GAAP operating income was RMB7.6 billion, non-GAAP Baidu core operating income was RMB6.7 billion, and non-GAAP Baidu Core operating margin was 25%. Total other income net was RMB1.9 billion compared to the total other loss net of RMB4.8 billion for the same period last year, mainly due to the first recognition of RMB338 million gain versus RMB3.1 billion loss for the same period last year from a fair value change in loan investments; and second, a decrease in impairment of long-term investments by RMB1.4 billion. Income tax expenses was RMB1.3 billion, increasing 41% year-over-year, primarily due to an increase in profit before tax. Net income attributable to Baidu was RMB6.7 billion, and diluted earnings per ADS were RMB18.22. Net income attributable to Baidu Core was RMB6.4 billion, and net margin for Baidu Core was 24%. Non-GAAP net income attributable to Baidu was RMB7.3 billion and non-GAAP diluted earnings per ADS were RMB20.40. Non-GAAP net income attributable to Baidu Core was RMB7 billion and Non-GAAP net margin for Baidu Core was 26%. As of September 30, 2023, cash, cash equivalents, restricted cash and short-term investments were RMB202.7 billion and cash, cash equivalent, restricted cash and shorting investments excluding IP was RMB197.4 billion. Free cash flow was RMB6 billion, and free cash flow, excluding IP, was RMB5.2 billion, Baidu Core had approximately 35,000 employees as of September 30, 2023. With that, operator, let’s now open the call to questions. Operator: [Operator Instructions] Your first question comes from Alicia with Citi. Please go ahead. Alicia Yap: Hello. Thank you. Good evening. Robin, Julius and management team. Thanks for taking my questions. My question is on advertising. So it seems like Baidu ad revenue growth is tracking slower than some of the Internet peers, so besides macro can management elaborate any other reasons that contributed to the softer ad revenue growth? And then looking into the fourth quarter, have you seen any demand picking up? What is the e-commerce sector contribution? And how will AI change the advertising outlook. Thank you. Robin Li: Hi, Alicia, this is Robin. In Q3, apart from the macro weakness, online marketing revenue from e-commerce platforms was also relatively weak. Revenue from e-commerce platforms is one of our top revenue contributors, accounted for about 10% of our total online marketing revenue. Like many other Internet platform companies, we are building our own native e-commerce business. Revenue growth from our native e-commerce business is tracking very strong as we continue to improve the shopping experience on Baidu. I would like to highlight the strides we have made in our ad business through Gen AI. We are basically restructuring the overall ad platform, including creative construction, ad targeting and the bidding investments. These efforts have started to pay off. And the incremental revenue from this kind of initiatives are expected to reach the level of hundreds of millions RMB in the current quarter, which is the Q4 of this year. And looking forward, we are optimistic that – the growth of our online marketing revenue will continue to exceed China’s GDP growth. Thank you. Operator: The next question comes from Alex Yao with JPMorgan. Please go ahead. Alex Yao: Thank you, management for taking my question. I have a few questions on cloud revenue. I believe Robin mentioned despite of moderate revenue decline in 4Q, the cloud revenue will – the growth rate will return to positive territory in Q4. And then from there, should we expect the cloud revenue to further accelerate into first half of 2024. With regard to the Smart City projects, are there any more projects that are still at risk? And then more importantly, as you guys start to monetize the AI capability, when will AI start contribute to the cloud revenue meaningfully. Lastly, any preliminary view on cloud revenue growth outlook for 2024? Thank you. Dou Shen: Hi, Alex, this is Doug. Thank you for your question. So actually, as we mentioned before, we have been focusing on improving the health of our business for sustainable development. And as a result, we have achieved non-GAAP operating profits in the past few quarters. As Robin already mentioned right due to the weak demand for intelligent transportation and the cloud revenue experienced a slight decline in Q3. So while excluding small transportation, the rest of our AI cloud business showed a pretty solid growth. And we believe AI cloud revenue will return to put growth in the fourth quarter and the trend will continue down the road. What is even more exciting side, we keep seeing new opportunities brought by Generative AI and large language models. Actually, last quarter, we already said that more and more customers across various sectors came to us for model training, application development and solution enhancement. Although the current revenue from Generative AI and LLM related business is still very small, but it’s growing very fast. We have seen more and more enterprises proactively adopting these new technologies for productivity and efficiency gain. Some of these customers, especially those from the internet education and the tech sectors, they have started to see efficiency gains through working with theirs. As a result, some of them have gradually increased their spending on our cloud services. Looking to Q4, we aim to leverage our leadership in generative AI and large language models to continuously attract new customers and encourage the existing customers to increase their spending on our Baidu AI cloud. And we believe this should not only lead to long-term revenue growth, but also continuous margin improvement. Thank you, Alex. Operator: The next question comes from Miranda Zhuang with Bank of America. Please go ahead. Miranda Zhuang: Thank you, good evening. Thanks, management for taking my question. And congratulations on the results. My question is about ERNIE’s. So can management share with us the recent feedback for ERNIE 4 since the rollout last month? And any color on the contract find on adopting ERNIE 4? And also for consumer and – and how is the feedback after ERNIE Bot started to charge end user subscription fee? And lastly, among the various opportunities you mentioned, which one do you think can become the biggest revenue driver. Thank you. Robin Li: Hi, Miranda, let me answer your questions. since the release of EB4 in mid-October, we’re receiving positive feedback from both users and customers. Many enterprises have reached out to test EB4 and have been impressed with it’s capabilities. EB4 has gained a reputation for advanced understanding and complex reasoning abilities. Comparing to EB3 5 and other LMs in the market, we have noted that EB4 generates more structured and clearer responses and excels in coding. From November 1, we started charging enterprises and users for using EB4. And we’ve seen a growing number of customers and users willing to pay for its us. We’re proud to be the first company to introduce GPT-4 level model in China. EB4 further widen our lead over other LMs in the market? And we are the first LM to charge end user fees that sets us apart from other peers. And regarding your question about monetization opportunity, we see significant opportunities in AI native applications, either devised by Baidu or by our customers, who leverage our AI capabilities. If you look at our own products, we see significant opportunities in the new search and the revamped ad platform. The new search complements traditional search. It can address complex questions that were previously unanswerable. It also enables users to conduct a more personalized and in-depth research on various topics and projects. We will soon enable users to have multi-round conversation with us. As our search will be able to talk with users in natural language and in multi-round, it will create more potential on the commercial side, too. We are experimenting with a chatbot type ad product for SMEs and brand. We believe this will not only help drive effective conversion, but also allow us to eventually transform from a CPC model to a CPS model. And at the same time, our capabilities – our capabilities will help our advertisers to better operate their business on Baidu. Our ongoing effort to revamp the ad platform have already shown positive results, and we will continue leveraging generative AI and to assist advertiser team achieving durable ROI growth on Baidu. In terms of empowering our customers with Gen AI, as Doug just mentioned, customer needs are different now. Some customers still prefer to train their own model, but the GPU export restrictions will put a break on that. It will eventually become clear that training LLM from scratch is very difficult, especially when trying to achieve emergent abilities. So we will turn to advanced LLMs available on the market like ERNIE for devising applications. As customers become more advanced in using LLM to create applications and more AI native applications powered by ERNIE become more widely used. We should be able to see continuous revenue growth through model inferencing. Over the long-term, inferencing should become a major source of revenue forward. Meanwhile, we will also help customers to fine-tune our existing model offerings to suit their customized needs in each scenario because our models are better, faster and more cost effective. So in summary, Gen AI and LLM will bring us massive business opportunities. We have already made good progress in commercialization so far, and this is just the beginning of a promising future. Thank you. Operator: The next question comes from Gary Yu with Morgan Stanley. Please go ahead. Gary Yu: Hi, thank you, management for the opportunity to ask questions. Can management share the latest advertiser feedback on the AI-powered ad system upgrade, and how do you think about the level of revenue boost to the core adds in 2024 as it gets rolled out to more even all advertisers? Thank you. Robin Li: Yes, we are very happy with the rapid AI transformation of our ad system and thrilled by the positive feedback from our advertisers. Overall, I think advertisers appreciate our efforts to help them improve their ROIs on our platform. Also they are fond of our new features, which help them to be more productive. As I mentioned in the prepared remarks, we’ve put a lot of effort into using Gen AI and our aims to reinvent our app system over the past few quarters. Now we have an integrated advertiser-facing marketing platform. Advertisers can use it to generate creative advertising materials. These materials have proved to deliver higher conversion rates than materials created by humans. And our platform also allows advertisers to engage in natural language by interacting with advertisers in multiple rounds of conversation, our upgraded platform is able to better understand their intentions. This allows us to create campaign strategies that deliver higher ROI. Moreover, it significantly reduces the time that ad managers need to spend creating campaigns, because even an experienced ad manager have to spend hours developing an advertising strategy. And now with an AI copilot, the process only takes like a few minutes. As of today, we have a few thousand of advertisers already migrated to our new platform. While this number is relatively small compared to our 0.5 million advertiser base, it is certainly growing very fast. In addition, we continue to use AI to improve our bidding system and ad targeting capabilities. Such initiatives happened at the back end of the system, so advertisers may not directly perceive them, but they have observed improvements in their ad conversion and ROI. So, on average advertisers using these capabilities probably achieved a high-single digit increase in conversions in Q3. All of our efforts should eventually attract advertisers to allocate more of their advertising budgets on Baidu. As I previously mentioned, online marketing revenue related to our upgraded ad platform has been growing rapidly and already became meaningful. And this is just the beginning, as I have said, we are experimenting with AI chatbot and chatbot could act as a replacement for landing page in the future. This is particularly useful in verticals where users typically research and engage in a long decision process before purchasing. Imagine searching for a training program and being directed to a bot instead of a web page, with our AI chatbots, users can quickly learn about brand-specific information, product details and other stuff. Although, I think that multi-round conversation is also very engaging. And for advertisers, it helps them to stay connected with potential customers and guide them at key decision-making points, leading to better conversion and even direct sales. We believe AI chatbot could work well with Gen AI powered new search and bring us more opportunities. I mentioned earlier that the incremental revenue from these kind of initiatives are expected to reach the level of hundreds of millions of RMB this current quarter, Q4, and this is certainly growing very fast. The trend should continue and further strengthen in the year of 2024. Thank you. Operator: The next question comes from Wei Xiong with UBS. Please go ahead. Wei Xiong: Good evening management and thank you for taking my question. I wanted to follow-up on your cloud business. So, could management share more color on how to think about the industry competitive landscape in China cloud market, especially among the Internet cloud vendors and as well as when competing with the telcos and also with the development in generative AI and the large language model, how do we assess our competitive advantage against peers? Do we expect the competition to intensify next year as other companies try to make efforts and catch up with us? Thank you. Dou Shen: Great question Wei Xiong. As you actually already noticed, right, the traditional cloud business is slowing down, while generative AI and large language models are sliding in and reshaping the competitive landscape of the cloud business industry. In the past, right, the focus in the cloud market was actually on house, which is like a commodity and people are competing on pricing. But now with the rise of generative AI and the large language models, things are changing. There is a growing interest among cloud customers coming to Baidu to utilize these sophisticated technologies to increase productivity and efficiency. They came to us not only because we have the most advanced AI technology, but also because we have experience and track record in using AI to help enterprises to solve problems. There are some of them who are still in the product experimental stages, but we have firm belief in the new technology to rebuild their products and services, because we have seen successful stories in overseas. That is why we are seeing the new technology is increasing our time and expanding our competitive edge. So, as Robin mentioned, EB4 is China’s first GPT-4 style model. We also shared the positive initial feedbacks we had garnered for EB4. So, currently our team are engaged in dialogues with our clients, assisting them in understanding the technology and utilizing ERNIE to redevelop their existing products and create new ones. So, I can say that ERNIE has already helped us attract new customers and additional IT spending from existing customers. So, here I would like to briefly bring up two points for our advantage compared to the players in the market. The first one is our unique four-layer AI infrastructure, which gives us the flexibility to make adjustments or innovations at every layer to be able to be compatible with other leaders to keep driving efficiency in both model training and inference. And the second one, more specifically, is our capability to develop GPU networks for clusters for large language model training. So, as Robin just said, 98% of the training time on our AI infrastructure is valid, as a result in our customers, including several leading Internet and tech companies for increasing their investments in our service. Furthermore, we will continue to leverage our unique advantage of AI architecture to drive efficiency gains. It will help us to greatly reduce costs in our model training and inference on our cloud, giving us the flexibility to offer more compelling prices to our customers and further strengthen our competitive edge in the market. Regarding the competition from telecom operators, I would like to highlight our focus is on different market segments since we differentiate ourselves with our AI capabilities, particularly earnings as we have mentioned. At least worth noting that we can cooperate and we are actually cooperating on many projects and as for other Internet companies in China, so our strong AI capabilities and ERNIE are well recognized by the market, which will set us apart from our peers. To sum up here, we believe that our strong AI capabilities and particularly in generative AI and large language models will allow us to eventually become the end market leader and gain share in the cloud market. Operator: The next question comes from Lincoln Kong with Goldman Sachs. Please go ahead. Lincoln Kong: Thank you, management for taking my question. So, my question is also about ERNIE, so given the successful upgrade of ERNIE 4.0, what would be the future strategy for model iteration to certify our tech leadership? So, do we foresee any competition in the foundation model in the industry, either to stabilize or intensify in the future? Thank you. Robin Li: Hi Lincoln, the AI chips we have in hand already allow us to launch EB4. We are ahead of the competition. To take our lead in LLMs to the next level, we will take an application-driven approach. We will let the AI native apps tell us what to improve in ERNIE Bot capabilities. Given that there are only a very limited number of AI native apps on the market right now, the majority of ERNIE API cost from internal apps, our internal apps like search apps, Wenku, etcetera. The rebuilding and restructuring of our existing products drive ERNIE innovation in the right direction. What is equally important is that we are helping enterprises use ERNIE to build their offerings. And we have seen that over 10,000 enterprises are using ERNIE through API costs on a monthly basis, which propels ERNIE’s improvement too. We also continue to improve the efficiency of our models. For example, compared to ERNIE Bot version in March, interest cost of the current version has been reduced by 98%, basically resulting in a 50x increase in QPS for the same amount of hardware activated power. We are also able to do this using our unique four-layer architecture and leveraging our ability to do end-to-end optimization. Continued inference cost reduction has further strengthened our model’s competitive advantage, and it gives us the flexibility to offer more and more compelling presence. From a long-term perspective, taking into account factors such as the scarcity of high-performance chips, high demand for data, AI talent and the huge upfront investments, the industry will soon translate into a consolidation stage. We believe there will only be a select few foundation models in the market, and Baidu will certainly be one of them. In this stage of industry development, more and more enterprises will begin to leverage advanced foundation models like ERNIE to create AI products rather than spending resources on building their own large language models. So, we expect that the number of native apps based on ERNIE will reach millions in the future. Lincoln Kong: Thank you. Operator: The next question comes from James Lee with Mizuho. Please go ahead. James Lee: Great. Thanks for taking my questions. Can you guys maybe quantify the investments related to AI and how that affects various cost items in your P&L, and should we expect these investments to accelerate over the next few quarters. I was thinking especially at the launch of ERNIE 4.0 and potentially higher inference costs as multiple using it. And then if we extrapolate that over a longer term, how should we think about Baidu core OPM over the next few years, given all the moving parts, including revenue shift, investment AI and also your continued improvement in cloud profitability. Thanks. Rong Luo: Hi James. Let me take your questions. This is Julius. Currently, the primary investments for generative AI and large language models is centered around the computing power, which is recorded as part of CapEx. I think in the past few quarters, we have put a lot of chips resources in training our new ERNIE models. And in the future, as more AI native applications, which is powered by our ERNIE can more widely used, which also more will put resources in small [indiscernible]. However, please note that all of this impact for the AI-related our investments all came out is quite manageable because all the hardware depreciation are spread on over a few years. And for example, all expenses linked to the coating power, we used in the training ERNIE are recorded through IND depreciations. And the model inferencing courses, which is highly related to the usage of the model either internally or externally, and it should be supporting the funding by the future developments. And moreover, we are happy to see that our investment in generative AI and large language models are beginning to bear fruit. As Robin has mentioned just earlier, since we are receiving the approval from regulatory and more additional revenue generated from earnings powered by 2C or 2B businesses has been growing quite fast. While we are using the generative AI and large language models to renovate our businesses, we are still keeping a close eye on making sure our Baidu cost earnings stay solid. In Q3, we can see that mobile ecosystem continues its high margin, ensuring a very strong generation of cash flow. And AI cloud business continued its healthy growth and achieved profitability one more time. And look ahead, we expect the traditional cloud business to remain quite profitable and the new opportunity arising from generative AI and language models are also expect to have favorable margin in the long-term. For intelligent driving businesses, our long-term growth opportunity will continue to invest with a mature pace. And all-in-all, we will concentrate our resources by reallocating them from non-core businesses to AI-related businesses. All of these were quite beneficial for our long-term growth. Thank you, James. Operator: The next question comes from Thomas Chong with Jefferies. Please go ahead. Thomas Chong: Hi. Good evening. Thanks management for taking my question and congratulations on a solid set of results. My question is on the chips side. Can management comment about the impact on AI development after the further restriction of the chip export from the U.S.? How does that affect our AI product offerings and user experience, if any? Thank you. Robin Li: Yes, the restrictions on the chip export to China actually have limited impact on Baidu in the near-term. We have successfully launched EB4 in mid-October, our most advanced foundation model in China. It is a milestone for us. And as I have just said earlier, we have a substantial reserve of AI chips, which can help us keep improving ERNIE Bot for the next year or 2 years. Also inference requires less powerful chips, and we believe our chip reserves as well as other alternatives will be sufficient to support a lot of AI native apps for the end users. And in the long run, having difficulties in acquiring the most advanced chips inevitably impacts the pace of AI divestment in China. So, we are proactively seeking alternatives. While these options are not as advanced as the best chips in the U.S., our unique four-layer AI architecture and strength in AI algorithm will continue to help us improve efficiency and mitigate some of these challenges. For example, we have made some innovations in [indiscernible], our deep learning framework and ERNIE Bot foundation model to allow them to be better compatible with different parts of AI chips, both model training and inference tasks. But given that all the other Chinese companies face the same challenge, we believe we are actually best positioned to service market. As you probably know, in the past, some of our peers, they tried to write on the Gen AI wave by investing in those startups to train foundation models. And they – basically we sell the computing power to those start-ups. We didn’t do that. We tried to optimize everything from the infrastructure layer to stream of [ph] layer and to model layer into apps. So, we have invested in this kind of end-to-end optimization approach. Therefore, we can – for the same amount of computing power, we can do training more efficiently, more cost effectively and we can do inferencing faster and cheaper. And as time pass by, I think more and more companies will realize that they don’t need to train their foundation models. They just need to develop AI native apps based on Baidu’s foundation model, which is the best on the market. So, I am really happy that we basically invested on this kind of end-to-end optimization front for many, many years. And it’s time for us to show that the investment is worth it. Thank you. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

Operator: Hello and thank you for standing by for Baidu's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections you may disconnect at this time. I would now like to turn the meeting over to host for today's conference, Juan Lin, Baidu's, Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's second quarter 2023 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 Li, our Co-Founder and CEO; Rong Luo, our CFO; Dou Shen, our EVP, in charge of Baidu, AI, cloud Group, ACG; Zhenyu Li, our SVP, in-charge of Baidu's Intelligent Driving. 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. Private Securities Litigation 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 the 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 includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. I'm pleased with our financial performance in the second quarter. Revenue from online marketing increased by 15% year-over-year, reflecting improvement in advertiser segment. In Q2, non-GAAP operating profit for mobile ecosystem continued to strengthen and AI cloud, once again, delivered positive operating profit. At the same time, we are facing tremendous opportunities in foundation models or more broadly AGI. Today, I would like to share an update on our ongoing business transformation by utilizing ERNIE and ERNIE Bot as well as our achievements in the field. After that, I'll briefly go over the operational highlights for each of our business. Over the past few months, foundation models have captured the imagination of people and businesses around the world. It is becoming increasingly clear that foundation models will fundamentally transform work across the industry, boosting overall productivity and accelerate the wider democratization of AI innovation. Right now, we are in the midst of the rolling period. This is due to the fact that the hard work we poured into generative AI over the years is now beginning to bear fruit. This pivotal and transformative opportunity is setting the stage for Baidu's future success and we couldn't be more excited about it. On product and service front, we're using ERNIE and ERNIE Bot to improve, review and create new offerings. On the product side, we are reinventing our products building AI native apps. Providing search, AI has played an important role for many years in driving innovation and improving user experience, resulting in a consistent increase in the percentage of third quarter satisfied by one-shot search results. It means the first search results displayed on the result page that can provide a satisfactory response to a search query. We're using ERNIE Bot to enhance search experience, making Baidu search capable of answering complex questions that were previously unanswerable. For example, please prompt a marketing campaign proposal for a smartphone launch event, or what kind of new energy vehicles would be suitable for a family six with a budget of RMB300,000. ERNIE Bot also enables Baidu's search to assist users with more personalized and in-depth research on a topic or project. The feedback from users who have tested these new features has been positive. Another example of product innovation is Baidu Wenku, where many users search for articles, papers, books or campaigns to create documents of wide range of topics in many formats. We're currently beta testing an AI assistant feature that can generate a customized content for users based on their request. User engagement and retention among Baidu Wenku’s testing users for such feature solve significant improvement. For example, users have doubled their time spent on Wenku after trying out the AI assistant feature, and they are more likely to become paying users. Currently, Wenku has over 100 million monthly active users, and we believe such an intelligent feature will help Wenku attract even more users and convert non-paying users to paying users once it is rolled-out on a larger scale. Generative AI offers right horizons for our online marketing business and we are actively using the technology to build and review our marketing products. Actually, our online marketing business has relied on AI for years to provide more value to advertisers. Last quarter, we shared on our progress on using the AIGC to automate ad creation in text format, which lead to an increase in conversion rate. This quarter, we further enable advertisers to use AIGC to generate image and video app with natural language. In Q2, we further improved our monetization system by yielding generative AI to broaden ad campaign keyword to user search queries, driving better monetization for advertisers. For example, an online professional education company's ad conversion increased by about 16% in August after using these new features. We are consistently enhancing our system are using generative AI and we expect to introduce more and more new features in the coming months. Additionally, we have been leveraging generative AI to enhance our auction system, so that it can better match ads to search queries and search intent. Such improvement help increase Baidu search ECPM in Q2 and contributed to the year-over-year growth in online marketing revenue in the quarter. We are also in active conversations with advertisers to get their input on how to further make our marketing products work best for them. Meanwhile, we will continue to leverage ERNIE and ERNIE Bot to help advertisers create sophisticated ad campaigns and improve ROI on Baidu. One other initiative, I'd like to mention here is that, internally, we introduced an AI assistant within inflow Baidu's self-developed enterprise communication and collaboration platform. The AI assistant automates various workflows such as summarizing meeting notes, chat history and workplace content, drafting documents, generating draft, facilitating knowledge Q&A and completing tasks such as creating meetings invite, applying for vacation days and conducting data analysis using natural language. This assistance helps our employees work more productively. We plan to open up the intelligent features of info flow to our customers in the future. Alongside our own products, we are empowering cloud customers to build their transformative products and services using ERNIE Bot. In Q2, the number of corporates connecting to ERNIE Bot continue to grow. Foundation models, large language models and generative AI are expanding our total addressable market, attracting new customers while also increasing sales to our existing customers. We are also using ERNIE and ERNIE Bot to help customers in various industries, address real-world challenges with unprecedented effectively and competence. This further strengthens the capabilities of ERNIE and ERNIE Bot, empowering them to take on more significant role in solving industry-specific issues. For example, in the software development industry, we launched Baidu Comet, an AI coding assistant to the public in June. By the Comet eight people in coding and can be used in multiple programming languages. It has now been widely adopted Baidu's own R&D team. Who have reported a meaningful improvement in their productivity after using Comet. As of today, more than 100 organizations have tested by the Comet, and some of them have already decided to purchase Baidu Comet to boost productivity and coding. In the health care industry, we are solidifying our presence by utilizing industry expertise and sales network developed through our collaboration with leading hospitals in China. Chongqing limited a traditional Chinese medicine clinic chain is using our early based model, developed for the health care industry to support doctors and their patient care. Our AI assistant helps doctors write notes for patients analyze medical images and make informed clinical decisions among other tasks. It also helps patients find the most suitable doctor and department and provide pre-consultation service online. Furthermore, we've developed tools for model training and fine-training, data processing, labeling and more. These tools help to lower the threshold and cost for enterprises to use foundation models on Baidu and support them to train and operate their purpose-built models efficiently. Additionally, Baidu AI cloud stands out as our AI optimized cloud infrastructure makes us a top performing platform for training and serving foundation models, including large lending model. This is why more and more enterprises are upping their digital spend on our cloud infrastructure to capture the new AI opportunities. This is particularly obvious among Internet and tech companies as they are early adopters of Gen AI and foundation models. Shifting our focus to technology, as Baidu we maintained an unwavering commitment to improve earnings. During Q2, we unveiled earning 3.5. Our latest state-of-the-art foundation model powered by PaddlePaddle. Notably, PaddlePaddle enhancements enabled our self-device four-layer AI architecture to operate more seamlessly than ever before. Significantly improve the frameworks compatibility with ERNIE and demonstrating engineering excellence. As a result, compared to ERNIE 3.0% in March, ERNIE 3.5 past triple training throughput and its quest per second or QPS for inference has increased by more than 30 times. Additionally, I'm proud to note that IDC recently reported that ERNIE 3.5 surpassed peers in many areas such as algorithm, industry coverage, developer tools and ecosystem. As compared to ERNIE 3.0, 3.5 is capable of producing safer, more responsible and more creative responses, making significant improvements in question answering, reasoning and coding. ERNIE 3.5 is now powering ERNIE Bot, with plugging to expand its functionality to cover real-time and precise information, long taxed summary, data analysis and virilization, text-to-video conversion and facilitate pilot dialogues that include images. We are committed to enriching our ecosystem by adding more high-quality plugging in particular from third-parties to contribute to the advancement of China's foundation model. On the ecosystem front, we are determined to make ERNIE the most popular foundation model in China. Importantly, we believe foundation models should be able to well support problem solving capabilities for various industries. As a result, we need to work collaboratively with our partners such as enterprises and AI developers to continually build industry models and solutions. Our 8 million developers on PaddlePaddle are the anchor that we can leverage to build a community for ERNIE. To foster a vibrant ecosystem, we hosted Baidu ERNIE Cup Innovation Challenge. It attracted almost 1,000 startups to submit their ideas and prototypes, covering various fields, encompassing productivity towards developers, sales and marketing companies, entertainment companies, social platform, middleware developers, as well as applications across different industries, including education, health care, finance, et cetera. We have also launched a venture fund of RMB1 billion to support start-ups in divesting all kinds of AI native applications, which will complement our organic growth. On regulation, Baidu have recently up -- Baidu was recently appointed as a leader of China's LLM Standardization Task Force at the World AI Conference. This position signifies national-level recognition and endorsement of our foundation models and AI capabilities. While we are still waiting for the green light for large scale rollout of ERNIE Bot, we have observed that Chinese government have been increasingly supportive of the development opportunity of AI and LLM. As a market leader, we believe Baidu is well capable of benefiting from the opportunity and contributing to this megatrend in China. Now let's have a quick look of the second quarter operating highlights for each business. Revenue from AI Cloud increased by 5% year-over-year to RMB4.5 billion in the quarter. And AI Cloud maintained positive non-GAAP operating profit. Our business has become healthier than ever laying a solid foundation for future growth. On intelligent driving, in Q2, the rights provided by Apollo Goal increased by about 150% year-over-year to around 714,000, resulting in accumulated rights exceeding RMB3.3 million, which is greater than our closest competitor by order of magnitude. This leadership in operation implies competitive advantages in data quantity and quality, that better model and greater safety ratings. In addition, Apollo Go has widened footprint in fully driverless ride-hailing services in more settings. In mid-June, Apollo Go received a permit from Shenzhen Pingshan government to offer 40 driverless ride-hailing services to the public. And in early July, in Shanghai, we were allowed to conduct fully driverless testing on open road as well. With the expansion of the area and fleet size for fully driverless operation along with the improvement of operational efficiency, we witnessed growth not only in the total average daily orders, but also in the portion of fully driverless orders within the overall order portfolio. This highlights a promising pathway for improving the unit economics of autonomous driving. In particular, in Wuhan, where we initiated fully driverless ride-hailing services one year ago, the UE continued to improve in the past few quarters. On the revenue side, the average daily order volume and revenue per order have surged propelling total revenue to grow. Meanwhile, the cost per kilometer per car is decreasing as well, thanks to improved operational efficiency. Finally, our mobile ecosystem, our users continue to grow with Baidu Apps, MAUs increasing by 8% year-over-year to RMB677 million in June. Also in June, videos distributed by Baidu App achieved double-digit growth year-over-year. Baidu remained a significant platform for users, who are seeking a wide range of content such as information, products and services. The revenue growth rate for online marketing accelerated in Q2 aided by strengths in wireless verticals with offline exposure, including healthcare, business services, local services and travel. At the same time, revenue from e-commerce demonstrated strength and outperformed in the quarter. Non-GAAP operating profit for mobile ecosystems grew steadily year-over-year in the quarter. Mobile ecosystem continued to generate robust cash flow to fund our investments in AI, particularly in foundation models and generated AI. We are confident that revenue, profit and cash flow generated from our mobile ecosystem will remain strong in the future. With that, let me turn the call over to Rong to go through our financial results. Rong Luo: Thank you, Robin. Now let me walk us through the details of our second quarter financial results. Total revenue was RMB34.1 billion, increasing 15%, one-five year-over-year, revenue from Baidu Core was RMB26.4 billion, increasing 14%, one-four year-over-year. Baidu Core's online marketing revenue was RMB19.6 billion, increasing 15%, one-five year-over-year. Baidu Core's non-online marketing revenue was RMB6.8 billion, up 12% year-over-year. In Q2, AI cloud revenue increased by 5% year-over-year to RMB4.5 billion. Revenue for IT was RMB7.8 billion, increasing 17%, one-seven year-over-year. Cost of revenue was RMB16.2 billion, increasing 7% year-over-year. Baidu Core's cost of revenue was RMB10.6 billion, increasing 4% year-over-year. Operating expenses were RMB12.7 billion, increasing 14% one-four year-over-year, primarily due to an increase in channel spending promotional marketing expenses, server depreciation expenses and cloud-related expenses, which supports ERNIE Bot research improves and partially offset by a decrease in personnel-related expenses. Baidu cost operating expenses were RMB11.3 billion, increasing 15%, one-five year-over-year. Baidu Core SG&A expenses were RMB5.3 billion, increasing 34% year-over-year. SG&A accounting for 20% helps Baidu Core revenue in the quarter compared to 17%, one-seven same period last year. Baidu Core R&D expenses was RMB5.9 billion, increasing 2% year-over-year R&D, accounting for 23% of Baidu Core revenue in the quarter and decreased from 25% the same period last year. Operating income was RMB5.2 billion, Baidu Core's operating incomes RMB4.6 billion and Baidu Core's operating margin was 17%, one-seven. Non-GAAP operating income was RMB7.3 billion, non-GAAP Baidu Core's operating income was RMB6.5 billion and non-GAAP Baidu Core operating margin was 25%. Total other income net towards RMB1.4 billion compared to RMB151 million in the same-period last year, primarily due to the increase in net foreign exchange gain and net interest income, partially offset by the increase of fair value loss from long-term investments. The income tax expenses was RMB1.3 billion, compared to RMB25 million in the same period last year. The lower level for income tax expenses in the second quarter of 2022 is primarily due to the reversal of certain tax expenses based on the 2021 tax return. Apart from the reversals, the net reason for the increase of income tax expenses is the increase in profit before-tax year-over-year. Net income attributable to Baidu was RMB5.2 billion and diluted earnings per ADS was RMB14.17. Net income attributable to Baidu Core was RMB5 billion and net margin for Baidu Core was 19%, one-nine. Non-GAAP net income attributable to Baidu was RMB8 billion, non-GAAP diluted earnings per ADS was RMB22.5. Non-GAAP net income attributable to Baidu Core was RMB7.7 billion. Non-GAAP net margin for Baidu Core was 29%. As of June 30, 2023, cash, cash equivalents, restricted cash and short-term investments were RMB201.5 billion in cash, cash equivalents, restricted cash and short-term investments excluding iQIYI, RMB196.9 billion. Free cash flow was RMB7.9 billion and free cash flow excluding iQIYI was RMB7.1 billion. Baidu Core had approximately 35 solid employees as of June 30, 2023. With that, operator let's now open the call to questions. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Alicia Yap with Citigroup. Please go ahead. Alicia Yap: Hi, thank you. Good evening, management, thanks for taking my questions. Congrats on the solid results. So can management provide update on the current state of the advertising industry, including how online and offline platforms are recovering? Can management also share about the pace of recovery for key industry and which one have stronger seasonality? And then in addition, can management also discuss the main drivers for the growth in this industry? And finally, what are the medium-term growth targets for at as we are now already behind the pandemic and with the current latest macro situation? Thank you. Robin Li: Hi, Alicia, this is Robin. Let me answer your question. Our online marketing revenue increased by 15% year-over-year last quarter. I think a number of travelers contributed to this growth. On the vertical side as we are coming out of the pandemic, many offline verticals like healthcare, business services, local services and travel continue to outperform. For example, healthcare, we saw solid year-over-year growth in both search queries and ECPM, which leads to revenue trends. We think this momentum continue. Offline sector contributes to a sizable amount of total online marketing revenue to Baidu. And in the meantime, e-commerce continue to grow in Q2 and remain top revenue contributors. For market like e-commerce, it's highly competitive. So more and more merchants, they come to realize the value of Baidu, and they come to us to acquire new users and buyers and also invite their existing buyers to come back and buy more. For the second-half of the year, we should continue to see a pretty clear recovery trend for our online marketing business. Also remember, search remains the most effective form of performance-based ad. This is because users approach search with a clear intent and search ads allows us to connect this intention directly with the most relevant product service offerings. In fact, the ECPM for our search outgrow other ad formats in the quarter, reflecting the effectiveness. Due to the relatively high comp base in Q3, the growth rate might not be as high as Q2, but it should well outperform China's GDP growth. Additionally, we have more immersive video features. More and more users are watching the short videos on Baidu. Short videos distributed through the Baidu App, again grew by double-digit in Q2. As a result, revenue from short videos continue to grow quite well, contributing meaningfully to the overall online marketing revenue growth. Looking into the mid- to long term, I believe both user traffic growth and monetization upgrades are important growth drivers for our online marketing business. And on the user side, I talked about our MAU, it grew by 8% year-over-year in Baidu App growth rate in June -- in the month of June. If we look at search, we are renovating the Baidu Search step-by-step using ERNIE Bot. We believe it will provide users with innovative and intuitive experience, which will help our mobile ecosystem gain traffic and increase user time spend. And on the monetization side, we've been leveraging AI to improve ad targeting capabilities and our bidding system for a number of years. And now with ERNIE and ERNIE Bot, we are further upgrading the game. I mentioned earlier that we have made some major improvement in advertising technology by using LLM and Generative AI. Along for more innovative and personalized ads, I believe there are lots of room for growth in this aspect, and I look forward to further breakthroughs. Such improvement in monetization technology have started to contribute to revenue and ECPM growth starting from this quarter in Q3. Thank you. Operator: The next question comes from Gary Yu with Morgan Stanley. Please go ahead. Gary Yu: Hi, thank you for the opportunity to ask question and congrats on the solid set of results. I have a couple of questions related to AI product and monetization. First is, can management share some insight on how users have responded to the integration of ERNIE Bot in multiple products? Any new development of features that have come up with the ERNIE Bot offerings [Technical Difficulty] help with market growth in China Internet and specifically in the mobile Internet sector? And also, lastly, I would like to know more about the monetization [Technical Difficulty] we play a role in your advertising business? And also [Technical Difficulty] update in key industries and use cases related to B side. Can you provide additional information on the business model and also potential revenue specifically, I would like to gain a better understanding on financial impact on cloud performance. Robin Li: Hi, Gary, let me answer the consumer-facing products part of your question, and I'll have Dou talk about the enterprise side, especially cloud business. I think it's clear we are in a paradigm shift in our business with our early commitment to AI, we saw this time coming. We are reinventing our consumer-facing products with an AI-native mindset. As I mentioned in my opening remarks, we are rebuilding our search experience. Users who are testing our ERNIE Bot enabled Baidu search and Baidu app tend to ask more questions that were not frequently searched in the past and we tend to have multi-round conversation and interaction. This is quite different from the user behavior for traditional search. Therefore, it's an incremental business for us. We are using generative AI to construct direct answers to user queries. This typically creates better and easier to understand answers than experts from existing web pages. We see increases in click-through rate and user retention rate for these kind of changes. We also launched the testing version of ERNIE Bot App, a step along app that is built upon our latest generative AI and LLM. And it aims to serve users as a personal assistant. We see ERNIE Bot a potential new traffic gateway that can connect users to various applications, including Baidu and other third-party applications, to address users' needs. We also launched ERNIE Bot plug-ins like search, like chat [Indiscernible] e-card, et cetera. Developers will soon be able to submit their application as ERNIE Bot plug-in. For Baidu Core is the AI assistant feature on average user time spend more than doubled and the seven-day retention rate has increased by almost 10%. With the AI assistant, I will not be surprised that we can convert more users into paying accounts and charge-off premium for the new AI function in the future. Overall, we are highly encouraged by user feedback. This is just the beginning for us to reconstruct all the products and businesses with LLM and Generative AI. Very importantly, we have also saying promising opportunities to lift the monetization capability by rebuilding our advertising system. As I mentioned in the prepared remarks, ERNIE and ERNIE Bot allow us to continue improving our targeting and a bidding system. All in all, I believe that generative AI will help us gain market share of many products and ultimately become a new growth driver for our online marketing business. Dou Shen: Gary, for your second part, right? So for the impact on our cloud business, I would first mention that the beauty of the foundation model and Generative AI is that it can help organizations in many industry to increase productivity and efficiency. We see more and more enterprises willing to adopt such latest AI technologies and that's why we will say the new technology is increasing our time. Specifically, ERNIE and ERNIE Bot has been helping our customers from different industries to handle their business challenges more effectively, ranging from like software, Internet health care, education, brand finance and even to the public sector. So they used ERNIE and ERNIE Bot to train models, to build applications and to improve solutions for efficiency gains, such as improving their customer service producing different kinds of content, ready coat, providing knowledge searches within their organizations as well as increasing their sales and marketing efforts. As to the business models you just asked, I think it's still at its very early stage, and it's evolving. Though we have our preference, but we are pretty open and would like to take any effort to speed up the growth of generative AI. So in addition to providing AI computing infrastructure to our customers, we also consider charging customers for the usage of ERNIE and ERNIE Bot or using our AI applications such as [Indiscernible], Robin just mentioned. And also, we can charge our customers for retraining or operating their own models on our platform or we can deploy the foundation models to our customers' private cloud on the project basis. So we expect the revenue generated from such new opportunity to be gradual, but we build the long-term potential is [Indiscernible]. So we'll continue to invest in ERNIE and ERNIE bot to serve our customers well for the long-term. That's it, Gary. Operator: The next question comes from Lincoln Kong with Goldman Sachs. Please go ahead. Lincoln Kong: Thank you, management for taking the question and congrats on the [Technical Difficulty] quarter. So my question is about the cloud business. So could management help us understand sort of the main reason for the revenue slowdown for cloud this quarter? And when do we expect the revenue to pick up accelerate again? When we're looking ahead into the second-half of our entire year of 2023. How is the revenue growth trajectory expected to play out? And what factors will be driving that? And also on the profitability side, I'm also curious whether this profit breakeven on a non-GAAP operating level is sustainable? And what's the current trend for the AI cloud profitability? Dou Shen: Okay. Thank you for the question. I'll take it. So cloud revenue grew up 5% year-over-year in Q2, and we continue to generate profit on the non-GAAP operating level. It means that our business is becoming healthier, you know, laying a solid foundation for sustainable growth in the future. The growth rate was mainly dragged by government-related projects, in which early took a longer time to recover after the pandemic. But many enterprise related products in the key verticals like manufacturing, utilities and internet service has demonstrated quite solid growth in Q2. As I just mentioned before, we see strong interest from existing and new customers in Generative AI, so while some of them directly leverage ERNIE or ERNIE Bot to enhance their products to improve their operational efficiency. So some of them actually choose our AI infrastructure as the foundation for their models and applications though it may take a little while to see significant revenue contribution, but this opens us a very new space for our cloud business where we're already in a leading position. So on the profit side, we believe we can keep generating operating profit from AI Cloud as we did in the previous quarters. So this indicates that actually our business is becoming increasingly healthy. But we are going to keep standardize our AI solutions, that can effectively address AI critical pinpoints and then replicate them from one project to another, which will further grow the margin and profit. Operator: The next question comes from Kenneth Fong with Credit Suisse. Please go ahead. Kenneth Fong: Hi, good evening management. Thank you for taking my questions and congrats on the solid quarter results. I have a question regarding the generative AI, regarding the recent introduced interim measures to regulate generative AI service by the government. Could you provide insight into whether this suggests an imminent authorization of the large language models. Additionally, do you have a projected time line for the rollout of the applications utilizing these models? Thank you. Robin Li: Thank you for your question, Ken. We're seeing the government continue to support for tech innovation, including AI and foundation models. I think a good sign of this is that the new guidelines and specifications that came out in mid-July about how to use generating AI technology and related services in China. This is new version, and this version went effective, I think, in August 15, compared to the previous version, this version you can probably tell, it's more of co-innovation than regulation. We are still waiting for the green light for large-scale rollout of ERNIE Bot. For its use in the consumer-facing acts. But as I said before, the government has increasingly recognized ERNIE and ERNIE Bot, which we believe provides a good foundation for the event release of ERNIE Bot on a large scale. Generative AI is pretty new and it's understandable that people might have concerns about things like user privacy, IP protection, AI ethics, so there should be certain regulatory requirements in place. And Baidu, we have accumulated extensive experience in providing appropriate information to the vast amount of Internet users. And we are a leader in not only AI technology for commercial purposes, but also using the AI for good. In fact, we are working closely with the regulators and other organizations to push the divestment and a proper usage of generative AI. So we believe we are well positioned to benefit from this opportunity and contribute to this mega trend of generative AI in China. So while we don't have an exact date for everything, but the trend is very promising, and we are quite optimistic of the future of a better regulatory environment. Operator: The next question comes from Wei Xiong with UBS. Please go ahead. Wei Xiong: Hey, good evening management. Thank you for taking my questions and congrats on the solid results. My question is also related to the foundation model. How can we assess Baidu's foundation model's performance comparing to other Chinese peers? And also related to that, when we think about industry-specific models versus foundation models, how the balance between these two will shape up the broader AI landscape in the future? And now we have more companies offering or focusing on models tailored to specific industries. So how does management perceive the landscape in terms of opportunities and competition. So what are our competitive edges? Thank you. Robin Li: These are very good questions. When it comes to foundation model in China, ERNIE 3.5 clearly stands out people have witnessed the fast iteration and improvement over the past five, six months. Our unique full-stack AI capabilities differentiate us from our competitors and give us an edge in the market. As mentioned in my prepared remarks, an IDC report recently published or named ERNIE 3.5 as a leader across various assets. Like many other technologies, foundation model, speed of innovation depends on the application that uses model. Baidu is an AI company with a strong portfolio of Internet products, these products are all being reviewed and reconstructed with ERNIE Bot, therefore, drive the innovation of ERNIE into the right direction. In our work, we know what kind of problem to solve. And I think many other peers don't really know they just open domain testing sets to evaluate the effectiveness of their models. We also have tens of thousands of cloud customers testing our ERNIE Bot. They provide valuable feedbacks that propel the improvement to. As for the industry-specific models you mentioned, they should be built upon the most powerful foundation model. I think that -- with time, foundation models are rapidly evolve given its strong capabilities to learn new subjects and gain industry insights. And the stand-alone industry-specific models will have a hard time to keep up with the pace of innovation. In fact, since ERNIE 3.5 became available, an increasing number of customers have told us that ERNIE 3.5 is visibly more advanced than ERNIE 3.0 and it has helped them solve a growing number of pain points. And as you can imagine, we are working towards ERNIE 4.0 and should launch it by the end of the year. I believe that ultimately, only a select few companies will reach this level of advancement for foundation models and Baidu will be one of them. During this transitional period, we are focused on multiple initiatives to drive the adoption of foundation model. We’re working hard to build early power applications and solutions for different industries and the scenarios Baidu Comet exception example. And with the upgrade to ERNIE 3.5, we are swiftly rolling out to empower enterprises to create industry-specific models and applications that tackle their own challenges. Also, we offer mass platform, which includes not only ERNIE, but also a variety of models. This allows businesses to easily view, fine tune and operate their own models using their own data. We provide a set of valuable tools on our platform, enabling our customers to easily enhance their model, training and application development. Of course, enterprises can directly access ERNIE's capabilities through API to enhance their businesses. Recognizing that in the early stages, enterprises prioritize security. So we do provide the flexibility of using our foundation model services on both public and private cloud. Our self-developed four-layer AI architecture is our core competitive advantage, because we deliver a better model performance when we serve our customers as shown in the testing phase over the past few months. Our strength is in model training efficiency and cost effectiveness in turn attract more enterprises to partner with us. So we gain more and more industry know-how and insight and building a reinforcing positive cycle to further improve ERNIE. Our ultimate goal is to cultivate an AI-native ecosystem centered around ERNIE. We believe that the true power of foundation model lies in driving a wide array of high-quality AI native applications, much like an operating system. Some of the applications are built by us, while others were built by, I would say, most will be built by our ecosystem partner to address industry-specific challenges. To enhance this ecosystem, we're happy to invest in other companies to complement our organic growth. Just as I mentioned in the prepared remarks, we hosted Baidu ERNIE Cup Innovation Challenge and large venture fund to support startups in developing all kind of AI native applications. To sum up, we will continue to improve ERNIE, means ERNIE easy to use and help enterprises in any industry to not only retain or fine tune models on top of ERNIE, but more importantly, leverage ERNIE and ERNIE Bot to develop their own application. We aim to make ERNIE the preferred choice among AI developers, so that more and more applications will be built upon ERNIE and making our ecosystem vibrant. Thank you. Operator: The next question comes from Miranda Zhuang with Bank of America. Please go ahead. Miranda Zhuang: Thank you. Good evening, management. Thanks for taking my question. So lately, open source AI models have attracting significant market attention. So can management provide your insights into Baidu's perspectives on this front and the strategy regarding the open source versus the closed AI models? Thanks. Dou Shen: Thank you, Miranda. This is a very interesting question. And I believe there are quite different views on this. I think both open source and closed source foundation models will coexist for a while. In fact, actually, we have already seen many models trained on top of the open-source foundation models and powering tons of applications even today on our cloud platform. But it's really tough actually for our open source foundation models to keep evolving and getting better due to the lack of effective feedback loops, which play a super important role in improving the foundation models. And additionally, building and upgrading foundation models can be very expensive. So it is really important to build a durable business model to fund the sustainable improvement of the foundation models, so that they can finally provide long-term value to the market. So for us it’s our priority that ERNIE keeps evolving quickly and remains the market leader, which can then attract more and more customers to use our platform to create innovative apps and improve their business. With their feedback from the real word scenario, we can further improve our foundation models. Looking ahead, I believe that there will be a limited supply of advanced foundation models, whether open source or closed source or even industry-specific available in the market. So like we just talked to me, as the industry progresses and enterprises will need advanced models to develop more sophisticated applications. But ERNIE, we will be one of the few foundation models that can satisfy those evolving demands in the long run. Operator: The next question comes from Alex Yao with JPMorgan. Please go ahead. Alex Yao: Thank you, management for taking the question and congrats on the strong quarter. I have a couple of questions on the margin outlook. Considering the opportunity of AIGC and the large language models. How should we think about the investment trajectory for the second-half this year? Additionally, more -- once we start large-scale rollouts, what direct cost will be incurred, how should we compare the margin of ERNIE Bot or large language model related to products -- related products than the existing business, I search, et cetera? More broadly, could management also provide directional color on the trend of Baidu Core margins when we look into the second-half of this year after the significant cost reduction, efficiency improvement incremented last year, what will be the key drivers of the profit moving forward? Thank you. Rong Luo: Thank you, Alex. Let me take your questions. This is Julius. I think previously, Rob has already talked about a large of our opportunities of the ERNIE and ERNIE Bot. So in the first place, I would like to reiterate that we are highly committed to the long-term investments in these promise areas. And to support the fast upgrade of [earnings] (ph), and we have invested in compensation infrastructures. If you look into our cash flow statement, you probably can see that the Baidu cost CapEx in Q2 have increased over last year. The increase is mainly due to the hardware purchase to support the training and iterations of all AI campaigns such as ERNIE and ERNIE Bot. But the impact on the income statement side, which is quite manageable, that's because of such hardware depreciations in general will spread over the next few years and the impact on the near-term profitability is not substantial. The investment is expected to continue and the magnitude of the future investments will be highly correlated to the pace of the actual business expansions rather than only supporting the model training. Which means that in the near future, the spending will be sponsored by the incremental revenue, which is generated from our ERNIE Bots and formulates our positive virtual circles. And regarding to the margin for the financial model and related products, I believe it's a little bit earlier to discuss at the current stage as the business model is still evolving. But as Rob has mentioned earlier, in part by the earnings, the search advertising could become more customized and which will result in increased ROI for advertisers. The additions for cloud services, as Dou has just talked about that, the [Indiscernible] and the financial models will import various industry and enhance the efficiencies across different industries. So from a long-term perspective, we believe that the customers will be increasingly motivated to leverage our services to enhance their efficiencies and increasing our pricing power and resulting in higher margins as compared to the current cloud business. If we go into the second-half of this year for mobile ecosystem, we will continue to serve as cash cost for the group in the long run. Our goal for mobile systems is to consistently achieve high margins. For the AI cloud side, we aim to achieve the profitability on a non-GAAP OP level and improve margins over time, for the intelligent driving, while we firmly believe that there's a huge long-term opportunities, we will continue to make sure we invest and measure pace. As a whole, our main focus is on developing a sustainable growth strategy for each businesses, which prioritize the long-term thinking. In addition, we plan to invest in ERNIE and ERNIE Bot to take advantage of the huge opportunities presented by the foundation models at [Indiscernible]. Thank you, Alex. Operator: The next question comes from Thomas Chong with Jefferies. Please go ahead. Thomas Chong: Good evening. Thanks management for taking my questions. And congratulations I have two questions. The first is about our Robo taxi business. Management mentioned that the unit economics in some cities are improving. Could management share the logic and the efforts taken behind it. What's your plan in terms of the city expansion and the volume market for fully drive operations in the upcoming quarters. In addition, when can we expect the Altice 6 vehicle to be launched, what's the projected size of the vehicle fit for this year? And how could it potentially impact the cost? My second question is on Auto Solutions, which vehicle models will hit the role in the later half of this year and next year? And how should we size up the financial impact on the books? Robin Li: Thanks for the attention. This is Jan. I will start from the low tax section. Our autonomous train service is rapidly gaining traction in major cities, providing valuable data that to the development of our drivers technology. This data is instrumenting in [Indiscernible] facility, efficiency and overall experience our operations. As a result, we have guided a strong part from both customers and regulators, enabling us to expand into new locations and significant increase of rates. This positive feedback to our large operations also drove the improvement our model and the improved model drove the expansion of our operations, providing us to the forefront of the global leading home autonomous driving technology. On the logic behind the improvement, here, I would like to take Wuhan's operation as example. We have continued to scale up service in Wuhan in the past year. If you compare with the situation 1 year ago, you may notice that firstly, our fully [Indiscernible] have expanded significantly growing from five week [Indiscernible] one year ago to almost 200 in August this year. Secondly, the operation area for free service has expanded by around fifteen-fold in Wuhan. Meanwhile, the operation also has been further expanded, covering both [Indiscernible] and morning and the evening, as well as later net operation. Certainly, [Indiscernible] is now selling more passengers to tear becoming one of the largest areas of providing fully travelling service in the world. And firstly, in terms of the order, the proportion of fee rate orders to all our operations has increased from 10% in last August to 55% in July this year. All the progress mentioned about contribute to the improvement of OUE. Looking ahead, we will continue to focus on the operation intensities and average regions like Beijing and Wuhan to further expand the fleet side and operation areas of driverless operations, and thus gladly improved the unit economically. Next year, we aim to enter into [Indiscernible] tool to conduct full [Indiscernible] ride hailing services and expanded the skill of fleet drives commercial operations. [Indiscernible] the time line for market production is proceeding as planned. It brings us a significant cost advantage with mass production costs lowered by 50, compared with the previous generation. Though it will be great to come the majority in our operation recovery, preparing the unit economics closer to profitability point. Last, on auto solutions business, currently providing assistant driving product to note [Indiscernible] standards in terms of generalization and safety, failing to testified consumer demand for convince and efficiency producing this the [Indiscernible] competition in China's EV market has led to a general decline in the profitability within the automotive sector. And OEMs have been showing softened demand for integrating drilling and leading more towards cost cutting measures to the cumulated sales. Which has affected and is also expected to our [Indiscernible] auto solutions in the short-term. However, we believe that our market opportunity ahead in the long run driven by the consumer demand for intelligent driving. We plan to launch our safety navigation pilot product, Apollo safety driving market at our place later this year. As we look ahead, we believe the change in the auto industry is hiding towards intelligent driving with exciting opportunities in the future, and we will capitalize on this change with cutting edge technologies and sensible business model. Thank you. Operator: This concludes our question-and-answer session and does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Hello and thank you for standing by for Baidu's First Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. After managements prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Please go ahead. Juan Lin: Hello, everyone. Welcome to Baidu's first quarter 2023 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 Li, our Co-founder and CEO; Rong Luo, our CFO; Dou Shen, our EVP in-charge of Baidu AI Cloud Group, ACG; and Zhenyu Li, our SVP in-charge of Baidu Intelligent Driving. 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. Private Securities Litigation 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 our 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 directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference [is being recorded] [ph]. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. 2023 is off to a good start with our business performing well across the board and driving strong growth. In Q1, Baidu Core's revenue growth reaccelerated year-on-year and supported an improvement in our operating margin. Our online marketing business has seen a positive impact from China's overall economic improvement. After the Chinese New Year, there was a quick recovery, which was especially beneficial for many of our advertisers in offline sectors such as travel, healthcare, bin services, and local services. Moreover, we've been working hard to enhance user experience for Baidu apps and this has led to good user metrics and increased online marketing revenue for the first quarter compared to the previous year. Our AI Cloud achieved profitability on a non-GAAP operating level this quarter. Starting in Q2 last year, we have focused on building sustainable growth for our cloud business by phasing out low quality projects and business. At the same time, we have been building standardized AI solutions for key used cases and replicating them from one project to another. This approach has led to an increase in AI Cloud margins over the past few quarters and we have seen profitability on the non-GAAP operating level this quarter. Today, all eyes are keenly focused on the transformative impact of generative AI. For today's call, I will first provide an update on this topic and then walk you through our operational highlights in AI Cloud, Intelligent Driving, and mobile ecosystem. Generative AI represents a tremendous opportunity for us. It can be compared to the introduction of the Internet and smartphones. To capture this opportunity, we leveraged our technology capabilities and our extensive experience in search, knowledge graph, and dialogue. We were able to quickly deploy early bots in mid-March, which became the first GPT model owned and operated by a public company. This launch demonstrated our significant investments and achievements in AI over the past 10 years and it will also highlights our position as the operator of China's largest search engine. With our search engine, we have gathered a vast amount of data, facts, and knowledge for natural language understanding, which has been critical in training our models. Baidu has established a robust range of AI capabilities powered by its four-layered AI architecture, which encompasses cloud infrastructure, the PaddlePaddle deep-learning framework, large language models, Ernie, and AI applications. We have this distinctive advantage that helps us optimize in higher process and reduce costs for model training and inference. One of our significant advantages is owning PaddlePaddle, which is the leading deep-learning framework in China. We have developed the PaddlePaddle in a way that aligns with ERNIE Bot. And this creates a strong synergy between these systems. Let me give you an example. Training and running large language models require a lot of data, which can be complex and overwhelming. And demand significant computing resources. To tackle this challenge, we use our proprietary full stack AI architecture. We are continuously looking for new techniques to make our four layers work seamlessly, which helps us achieve better performance and quicker throughput. Specifically, we have improved compatibility between PaddlePaddle, the large language model, and the Cloud Infrastructure. As a result, since launching ERNIE Bot in March, we normalized – our normalized queries per second have increased almost 10x, indicating significant efficiency gains. Baidu is rapidly integrating ERNIE Bot into all of our businesses for testing. The goal is to leverage its capabilities to enhance reviewed and create both our enterprise and consumer facing products and services, thereby revolutionizing [our business.] [ph] We are also working on building an ecosystem around ERNIE Bot to promote the adoption of generative AI in a wider range of used cases. This strategy should enable us to gain market share across all sectors and achieve sustainable long-term growth. As more people use ERNIE Bot, more products integrate ERNIE Bot in seamless ways, we will be able to gather large scale human feedback and iterate the model rapidly and tailored to real life market need. On the enterprise facing [fin] [ph] side, generative AI is expanding the total addressable market of the cloud industry. This is because the cloud service providers can use generative AI to add or enhance capabilities to their current offerings, develop new solutions and applications to address unfulfilled market demand and drive productivity and efficiency. As a result, since we introduced ERNIE Bot, we have observed more and more enterprises from various industries started their model training on our Cloud. Our powerful foundation models and our unique full stack AI capabilities differentiate us from our competitors, which gives us an edge in the market. In March, sales lead increased by more than 400% year-over-year, which is a significant achievement for us. We believe that our AI Cloud will continue to gain market share over time. I'll provide some examples of how ERNIE Bot is helping our customers to gain efficiency. In the financial services industry, we have partnered with a prominent domestic insurance company to help them enhance their digital experiences for employees and clients. To achieve this, we will utilize our AI capabilities, including PaddlePaddle and Ernie on their private cloud. Additionally, we will create customized tools and technologies to assist them in training and refining models on ERNIE Bot with their unique data. And we will continuously improve the system over time. These models will power various applications, including helping financial advisors, analyze large amount of research reports and public information. We believe that this project has the potential to establish a new industry standard for innovation and efficiency in China's financial services sector. In the software industry, we are collaborating with some productivity software developers to test the integration of ERNIE Bot into their applications with the goal of automating certain workloads and expanding the capabilities of their end users. Additionally, we are partnering with some ERP companies who are exploring the use of ERNIE Bot to assist their programmers in writing code. In the education industry, we opened ERNIE Bot to a leading online education company via model as a service, helping them fine tune their own model on Baidu AI Cloud. One of the features we're working on together is an enhanced sophisticated AI tutor enabling them to better serve their students. We've observed that industry is experiencing a surge in demand after the pandemic are interested in using ERNIE Bot to improve their business operations more efficiently. Online travel companies are a good example of this trend. As some of the biggest players are testing the use of ERNIE Bot to assist their customer service teams in managing customer queries, suggesting trips, and directing customers to relevant information. The feedback so far has been positive and customers are also beginning to switch their IT expenditures to our cloud. On consumer facing businesses, we are utilizing ERNIE Bot to enhance our product for the users. We're currently beta testing an upgraded version of Baidu search, which is powered by ERNIE Bot. This version provides natural conversational interactions for a more seamless search experience. We are also testing the integration of ERNIE Bot is Baidu Wenku, our online document sharing platform to enable ERNIE Bot to work alongside users and assist with searching, summarizing, and generating content using natural language. Additionally, we are incorporating ERNIE Bot into other consumer facing products such as Baidu Map, Baidu keyboard, Baidu Post, and Xiaodu. Furthermore, we are testing a standalone application for ERNIE Bot. So far, we have been encouraged by the positive user feedback at the current testing stage and look forward to bringing these experiences to more users in the coming months. In the new era, AI chatbots will become a traffic gateway for people to seek information and content. Therefore, we should continue to gain user traffic and mind share, which will drive monetization over time. We're also working to build an ecosystem around ERNIE Bot with our partners to fuel innovation and drive growth. On the regulatory front, as a leader in AI and an advocate for AI ethics, Baidu continues to promote the responsible use of AI. To comply with regulatory requirements, any new technology product or service must undergo government review and approval before large scale deployment. We have applied for review and approval of ERNIE Bot and will roll it out at a large scale to our customers and users once we get the green light. Baidu has been operating search in China for more than 20 years and has extensive experience with Chinese culture and regulatory environment, which we believe will help us navigate the regulatory landscape. In early April, the cyber space administration of China released a new draft regulation for comments on generative AI, which explicitly endorses the development of self-designed [AI algorithms] [ph] and deep learning frameworks. We believe that regulators active engagement in generative AI in the early stage will raise the bar to entry and we are well-positioned for that. Overall, we are thrilled about the prospects that lie ahead with Ernie Bot, and we will continue to invest in it to unlock the tremendous potential that we envision. Now, let's have a look on the first quarter operational highlights. In Q1, revenues from AI Cloud increased 8% year-on-year, which is an improvement from the 4% year-over-year growth in the fourth quarter last year. We're pleased to report that AI Cloud achieved profitability on the non-GAAP operating profit level during the quarter. The margin improvement [unrolled] [ph] two points of progress. One is our ability to optimize operations and drive sustainable and healthy revenue growth. Two is our efforts to standardize our AI solutions and applications and efficiently replicate them across different customers and sectors. Since Q2 of last year, we have phased out low margin businesses and projects for AI Cloud leading to a healthier business product portfolio and cost structure. At the same time, we continue to standardize AI solutions for key used cases for replication. In the water industry, for example, last year, we replicated AI solutions we developed for predicting water usage and controlling water pressure from Changzhou water company to Quanzhou Water company. And in Q1, we deployed the majority of our earlier standardized dissolutions to the Lintao County Water Company in Gansu Province. This example demonstrated the scalability and margin expansion of our standardized approach in creating AI Solutions for traditional industries. As I mentioned earlier, generative AI is creating a host of opportunities for the Cloud industry and expanding the Cloud market significantly. Therefore, we will continue to invest and actively explore ways to grow our cloud services. Moving into intelligent driving. We continue to make solid progress. In Q1, the number of rides provided to the public on [open road] [ph] increased over threefold, compared to the same period last year and reaching nearly 660,000. Thanks to the remarkable growth in rides and our strong track record of safe operation, we have received more permits from government to offer fully driverless ride hailing services in China. On March 17, Apollo Go was allowed to provide fully driverless ride-hailing services in Yizhuang region of Beijing,. As of today, we are providing the services in three cities, Beijing, Wuhan, and Chongqing. We are prioritizing fleet expansion and passenger adoption in regions where we can provide driverless commercial operation. Meaning it's fully driverless and we can charge. Our efforts are yielding good results. In Wuhan, where we first received the permit to provide such services on public growth last August, we now have more than 135 travel lease vehicles and more than one-third of the paid ride Apollo Go provided were in fully driverless vehicles. We are confident that the number of rides provided by 40 driverless vehicles will continue to increase leading to cost optimization and creating a profitable business model. We firmly believe the demand for autonomous driving services will continue to grow at a rapid pace and we will further dedicate our technology and operational capabilities to better provide safe and reliable services to the public. Moving to mobile ecosystem. I'm pleased to report that online marketing revenues returned to positive year-over-year growth in Q1, resulting in an increase in operating margin. One contributing factor to this growth was the overall improvement in China's economic recovery and commercial environment as a result of China's reopening. As I mentioned earlier, many offline related verticals, travel, healthcare, business services, and local services have substantially increased. We are at spending on our platform. Some of these verticals have already rebounded to above pre-pandemic levels, indicating [solid finds] [ph] of recovery. Our own initiatives aimed at improving the product experience such as incorporating short videos and product listing information within the Baidu app, also plays a significant role in the revenue increase. Additionally, revenues from retail and e-commerce continued to grow, mainly driven by merchant, direct spending on our platform. The quarterly GMV facilitated by Baidu Search, grew by 55% year-over-year in Q1, demonstrating our continuous traction in the e-commerce sector. Our users and traffic continued to grow in the quarter. The Baidu app MAU increased by 4% year-over-year in March and feed distributed through Baidu app and mobile search queries maintaining steady growth. This reflects the high value that users placed on Baidu Search as their primary source of information. During the quarter, we continued to focus on enhancing user experience and customer satisfaction. On the user side, Baidu app has a wonderful flow on the [Explore page] [ph], which is particularly attractive to young female, enabling an infinite browsing experience and catering to their diverse needs. We expanded our immersive video feature to more and more used cases on Baidu app, including incorporating it into search results. Additionally, we continuously improve our one-shop search result through AI to provide better search experience. These efforts have helped to increase user engagement and expand our user base. On the advertiser side, since launching our AIGC capabilities late last year, we've been working with advertisers to create more effective ads. By allowing advertisers to specify their requirements, our platform generates customized options for them to choose from. For instance, a local travel agency turn to our AIGC capabilities to create ads. Our AI generated ads outperformed those created by the advertiser. Delivering an average of about 20% higher sales leads. In Q1, advertisers adopting AIGC increased their ad spending year-over-year and quarter-over-quarter on our platform, demonstrating the effectiveness of our technology in driving business results. Earlier this year, we began using our AIGC capabilities to help advertisers respond to customer inquiries on our platform. By harnessing the power of AI, our advertisers can provide professional and timely answers to their customer inquiries, which in turn drives an increase in sales lead. For instance, a B2B advertiser witnessed a monthly increase of over 100% in sales leads in March after using our AIGC technology. We are expanding the service to increasing number of advertisers helping them better serve their customers and drive improved business results. These efforts have resulted in improved ROI for advertisers on our platform. Looking ahead, we remain committed to assisting our advertisers in reaching and converting their target audience by leveraging our cutting edge generated AI technology. With that, let me turn the call over to Rong to go through the financial results. Rong Luo: Thank you, Robin. Now let me walk you through the details of our first quarter financial results. Total revenue was RMB31.1 billion, increasing 10% year-over-year, Revenue from Baidu Core was RMB23 billion, increasing 8% year-over-year. Baidu Core’s online marketing revenue was RMB16.6 billion, increasing 6% year-over-year. Baidu Core's non-online marketing revenue was RMB6.4 billion, up 11% year-over-year. In Q1, AI Cloud increased by 8% year-over-year to RMB4.2 billion. Revenue for iQIYI was RMB8.3 billion, increasing 15% year-over-year. Cost of revenue was RMB15.2 billion, decreasing 3% year-over-year. Baidu cost of revenue was [RMB9.4 billion] [ph], decreasing 4% year-over-year. Operating expenses were RMB11 billion, increasing 7% year-over-year, primarily due to an increase in China spending and promotional market expenses. Baidu Core’s operating expenses were RMB9.5 billion, increasing 5% year-over-year. Baidu Core’s SG&A expenses were RMB4.5 billion, increasing 16% year-over-year. SG&A accounting for 20% of Baidu Core revenue in the quarter, compared to 18%, the same period last year. Baidu Core R&D expenses were RMB5 billion, decreasing 3% year-over-year, R&D accounting for 22% of Baidu Core revenues in the quarter and decreased from 24% in the same period last year. Operating income was RMB5 billion. Baidu Core's operating income was RMB4.1 billion and Baidu Core's operating margin was 18%, and non-GAAP operating income was RMB6.4 billion. Non-GAAP Baidu Core’s operating income was RMB5.4 billion, and non-GAAP Baidu Core operating margin was 23%. Total other income, net was RMB2.6 billion, which mainly including a fair value gain of under RMB1.5 billion from long-term investments. In the first quarter last year, we recognized a fair value loss of RMB3 billion. A significant portion of the long-term investments include, but not limited to, investments in equity securities of public and private companies and private equity funds. This is subject to quarterly fair value adjustment, which may contribute to net income volatility in future periods. Income tax expenses was RMB1.2 billion, increasing 205% year-over-year, primarily due to an increase in profit before tax. Our net income attributable to Baidu was RMB5.8 billion, and diluted earnings per ADS were RMB15.92. Net income attributable to Baidu Core was RMB5.5 billion. Non-GAAP net income attributable to Baidu was under RMB5.7 billion. Non-GAAP diluted earnings per ADS was RMB16.1, and non-GAAP net income attributable to Baidu Core was RMB5.3 billion, and non-GAAP net margin for Baidu Core was 23%. As of March 31, 2023, cash, cash equivalents, restricted cash and short-term investments were RMB194 billion, and cash, cash equivalents, restricted cash and short investments, excluding IT, were RMB188.8 billion. Free cash flow was RMB4.5 billion. And free cash flow, excluding IT, was RMB3.5 billion. Baidu Core had approximately 36,000 employees as of March 31, 2023. On [separate] [ph] notes in the quarter, [iQIYI] [ph] generated about RMB1 billion in non-GAAP operating income and above RMB1 billion in free cash flow. With that, operator, let's now open the call to questions. Operator: Thank you. [Operator Instructions] Your first question comes from Alex Yao with J.P. Morgan. Please go ahead. Alex Yao: Good evening management team. Congrats on a strong quarter and thank you for taking my question. I have a view on the advertising side of the business. What is the month-on-month trend for ad recovery since March? And how big is the vertical exposures to off-line-related verticals? How is the advertiser demand changing on your platform? And then lastly, how should we think about the full-year ad growth rate? So, what is the mid-to-longer-term growth potential for ads business beyond the COVID for normalization? Thank you. Robin Li: Hi, Alex. This is Robin. Thank you for your question. We're happy to see significant progress in our online marketing business. For Q1, revenue made a remarkable comeback and return to high single-digit-growth. Recall that last year, online marketing revenue declined year-over-year for all four quarters. I think it was a 4% decline in Q1, 10% in Q2, 4% in Q3, and 6% in Q4. Now, we are in a positive territory, and the momentum got further strengthened in the current quarter – in Q2. The Q1 growth was primarily driven by a number of verticals in the offline sector that I just mentioned during my prepared remarks. Offline sector contributes to a sizable amount of our online marketing revenue. Particularly, our largest revenue contributor, health care, has been improving and is back to the pre-pandemic level. So, travel is also improving, apparently, and we saw the Labor Day holiday was really, really hot. The growth in our online marketing revenue have also had a positive impact on the margins of our mobile ecosystem. So, the overall margin for Baidu Core got better. The success is due to our focused user and customer experience on our platform. And furthermore, we have observed a strong growth in user engagement and traffic. Despite the reopening of China and people spending more time offline, our MAU for Baidu App grew 4% year-on-year in March, and our feed content distributed to Baidu App also demonstrated robust growth. And looking ahead, we anticipate advertisers will continue to allocate more dollars to performance-based platforms. And we believe Baidu search is well-positioned to benefit from this trend. In addition, we see generative AI as a significant opportunity that complements our search capability and drive new avenues for users to access and create content. As we integrate ERNIE Bot into our apps, particularly in the search, we expect user traffic and engagement will go up, thereby further supporting the growth of our online marketing revenue. ERNIE Bot can also enhance our commercial products, presenting an exciting opportunity for us to strengthen our offering. With ERNIE Bot empowered commercial products, we can capture a larger market share and deliver even greater value to our advertisers. This additional dimension gives us further confidence in our online marketing business and its ability to drive sustained growth in revenue. So, based on this development and our strong fundamentals, we expect our online marketing revenue to outperform the growth of China's GDP. Alex Yao: Thank you. Operator: Thank you. Our next question comes from Alicia Yap with Citigroup. Please go ahead. Alicia Yap: Hi, thank you. Good evening, Robin and management team. Thanks for taking my questions. My questions is related to margins and spending. So what [will] [ph] we see the major margin driver this year after large scale of the cost-cutting effort last year, how should we think about core operating margin trend for the rest of – especially given there will be a few moving factors that will impact margins, such as, for example, the potential investment related to the large language model, the autonomous and others? Thank you. Rong Luo: Hello, Alicia. Let me address your questions. I think we have implemented a number of initiatives last year to show our operational efficiency, which you can see that in the past four or five quarters. And all of them have led to notable improvements in our overall margins. These measures have not only made the profit numbers better, but also transformed our organizations, making it leaner and more agile and which will adapt to drive the sustainable long-term growth. Purely number [indiscernible] as a result, consider our non-GAAP operating margin expanded from 17% in Q1 last year to 23% in Q1 this year, and free cash flow also grew by over 200% from a year ago. Notably, all of this growth was also accompanied by a synergy revenue in Q1. More specifically, as Robin has just mentioned, number one, our mobile ecosystem profit margins entry, which is also together with the revenue [form] [ph] of the online marketing businesses. Number 2 is we can see that for Baidu AI Cloud, by focusing on carbon low-margin projects and businesses, as well as our developing more standard AI solutions for key used cases, our Baidu AI Cloud has reached the profitability on the operating level. This is a more important and significant milestone for us. And looking forward, we aim to continue enhancing the margins across all of our major operations, while at the same time, we also will continue to invest in the promising new areas, in particularly the ERNIE Bot and intelligent driving. Our reconstructing investments are actually quite aligned with our long-term growth objectives, which also reflect two areas where we have identified a significant potential opportunities. By focusing on these areas, we aim to capture the large market shares and we try to drive sustainable growth, while we're delivering more values to our shareholders. And as for the near-term, I think incremental investment in the new opportunities is also quite manageable [indiscernible]. Overall, our focus on disciplined execution and operational efficiency and at the same time, we try to seize the long-term growth opportunities, all of these efforts has resulted in the improvement of the overall Baidu Core margins in Q1, and this will continue in the future quarters. We will prudently manage our P&L and leveraging our core business improvements and further drive the sustainable growth. Thank you so much, Alicia. Alicia Yap: Thank you. Operator: Thank you. Our next question comes from Gary Yu with Morgan Stanley. Please go ahead. Gary Yu: Hi, thank you and good evening. I have a question related to cloud. So on your AI Cloud revenue growth, what's the expectation for growth in 2Q and rest of 2023? And could you help us quantify any incremental cloud revenue in coming quarters coming from Ernie adoption? And a related question on cloud is on margin. With your improvement in revenue growth and margin, how should we look at the normalized revenue growth and margin for cloud going forward? Thank you. Dou Shen: Okay, this is Dou. Thanks for your question on the cloud. So, since the second quarter of last year, so we have made significant efforts in three ways trying to consistently improve our margins for the AI Cloud. Firstly, we are resolute in phasing out the low-quality products and businesses. And secondly, so we are committed to building standardized AI solutions for key used cases and then efficiently replicate them across different customers. Secondly, we are continuously investing in the technical capabilities of our standard cloud offerings to reinforce their competitiveness. So, as a result of the efforts, Baidu AI Cloud achieved a profitability on the non-GAAP operating level this quarter. In addition to that, after China is reopened, now we finally can meet our clients in person to execute products and present our proposals. And we believe AI Cloud's revenue growth since accelerated from quarter of last year, and it will continue in the coming quarters. Moreover, we believe ERNIE Bot could provide a messy opportunity for us to gain shares in the cloud industry. Since its launch in the mid of March, we have received hundreds of thousands of beta testing requests for the ERNIE Bot from enterprise customers across a range of sectors, such as finance software and education, online travel and so on. So, this overwhelming interest indicates a promising start for the ERNIE Bot's debut. So, our customers are so eager to explore and utilize ERNIE Bot for their businesses, and we are confident that it will improve their productivity and we enhance their competitive edge. Actually, now as Robin had mentioned, several customers has opted to develop their own large models on our cloud platform. We need to leverage the advantages of the four-layered AI architecture, as Robin just mentioned in the prepared remarks. So, as we look ahead, our focus will still remain on achieving healthy and sustainable revenue growth for the existing cloud business, while we are striving to improve the margins. And in the meanwhile, so we will capitalize on the long-term huge market opportunity of large language models. And for sure, so we are committed to the investment and the value creation of our ERNIE Bot. So overall, we believe we will continue outgrowing our peers in cloud revenue in the long run. That's it, Gary. Gary Yu : Thank you. Operator: Thank you. Our next question comes from Lincoln Kong with Goldman Sachs. Please go ahead. Lincoln Kong: Thank you management for taking my question. So, my question is related to ERNIE Bot. So basically, can management further elaborate a bit more on the growth and monetization opportunity for ERNIE Bot in a large enterprise model? So, how should we think about ERNIE bot will reshape our existing business and especially help us gain share in each of the business line in the markets? Thank you. Robin Li: Yes, ERNIE Bot has been making great progress since its launch in mid-March. For instance, we have already upgraded ERNIE Bot 4x, and we have managed to reduce the inference cost by nearly 90% since its release. While some of our competitors are still focusing on auto training, we've moved ahead with a significant reduction of our inference cost. This improvement a result of our self-device AI architecture is four layers, which sets us apart and enables us to swiftly reduce cost and enhance efficiency for model training and inference. This strong foundation will facilitate the widespread adoption of ERNIE Bot. We're using ERNIE Bot to upgrade almost all of our products and services, enhancing and rebuilding our existing offerings. This enables us to strengthen our position and gain market share in our target markets, including cloud services, online marketing, and smart devices. In AI Cloud, ERNIE Bot is being tested by more and more enterprises, as Dou just mentioned, and is proving to be beneficial to customers in all kinds of sectors, helping them solve problems and improve their productivity and efficiency. It truly demonstrates the power of generated AI and large language models. Since launch, we have witnessed increasing adoption of ERNIE Bot as hundreds of thousands of enterprise business and entities queuing for testing. This is an encouraging recognition of Baidu's AI capability, particularly our [Par Foundation] [ph] model. To assist customers to better use ERNIE Bot, we have developed tools and technologies that support training and refining models using our customers' unique data, which also leads to continuous system improvement over time. And customers are becoming more selective than before when choosing a cloud provider, they take into consideration the capabilities of generative AI and large language models. We see a growing number of new customers wanting to migrate to our AI cloud. So. we expect ERNIE Bot to enhance our competitiveness and our pricing power of AI Cloud. In March, we saw more than 400% year-over-year growth in the sales fleet, and we anticipate more opportunities in the future. Additionally, while the cloud industry presents significant opportunity for ERNIE Bot adoption, there are great opportunities in online marketing market, too. As I mentioned earlier, we're utilizing ERNIE Bot to upgrade popular consumer facing products, including Baidu App, Baidu Search and other applications within Baidu family. The initial user feedback we have received is very promising. Upon widespread implementation, we should quickly gain user traffic and engagement, therefore, reshape the competitive landscape in China's Internet and mobile sectors. So, in summary, ERNIE Bot's progress has been very encouraging, and we are excited about the future. We're pushing the boundaries of AI and exploring new avenues of growth. Lincoln Kong: Thank you. Operator: Thank you. Our next question comes from Miranda Zhuang with Bank of America Securities. Please go ahead. Miranda Zhuang: Thank you management for taking my questions. Congratulations on the good results. My question is about [competition] [ph]. With many other Internet peers launching or about to launch their large language model, how to think about Baidu's competitive advantage? And how does management think about the competitive landscape in China in the near-term and the long-term, especially for the enterprise facing business? Thank you. Robin Li: Yes, that's a good question. AI and LLM are still in the early stage of divestment, and we are very happy to see the entry of more players into this field as it will help the industry to develop rapidly. Moreover, we are actively constructing an ecosystem around ERNIE Bot to attract new participants and drive innovation in the emerging direction. In our view, generative AI and the large language model present a very high barrier to entry. And very few companies possess the necessary capabilities to establish a significant presence in this market. The requirements include substantial upfront investment, robust AI capability expertise and vast amount if data for model training. Also, extensive experience in delivering appropriate content to Chinese Internet and mobile users is crucial. Given such high requirements, we anticipate a highly concentrated market, probably two to three major players winning in the end. As mentioned earlier, as the first mover in China, we leveraged ERNIE Bot to upgrade and revitalize our entire product and service portfolio because we have a large product portfolio and large user base, we are able to get lots of user feedback about ERNIE Bot, which will help us further enhance our leading position in LLM. This approach allows us to convert cutting-edge technology into practical features, products, and solutions that address challenges and support sustainable growth. Baidu has a distinctive AI architecture consisting of four layers that we have developed ourselves. The architecture gives us a competitive advantage in terms of AI capability and played a crucial role in the successful early launch of ERNIE Bot. With this architecture, we are able to quickly decrease costs and improve efficiency in both training and inferencing. For example, we have optimized the performance of PaddlePaddle for inferencing, and this optimization enables us to more effectively work between the framework layer and the model layer, which leading to a substantial efficiency improvements and cost savings. Developing and training LLM require significant resources, including robust cloud infrastructure. To this end, we have our own AI Cloud business and have secured a substantial amount of computing power, including the most advanced GPUs to sustain the ongoing training and iteration of ERNIE Bot. Another critical point is that our experience in operating China's largest search engine for over two decades have allowed us to build an extensive database in Chinese language, including very valuable data, facts, and knowledge and enhancing our leadership position in [indiscernible] in China. We have extensive experience in reviewing the vast amount of content on search and in [setting] [ph] our mobile ecosystem. And for [indiscernible], we're able to offer our customers any combination of all different layers of our AI stack. If the customer only needs infrastructure, we can provide that. If the customer needs both infrastructure and framework layer, we can provide that. If the customer needs framework layer and model layer, we have to offer those two. And if the customer wants end-to-end solution, we have that ready. So, we are uniquely positioned and very flexible in serving our cloud customers. Based on this competitive advantage, I'm confident that we will be a winner in this market. Thank you. Miranda Zhuang: Thank you very much. Operator: Thank you. Our next question comes from Kenneth Fong with Credit Suisse. Please go ahead. Kenneth Fong: Hi, good evening management. Thank you for taking my question. It has been noted that the Cyberspace Administration of China recently released a draft regulation on the generative AI. So, what sort of additional investments are needed to beat the requirement? Thank you. Robin Li: Okay. During our testing of ERNIE Bot, we have engaged in close discussions with the regulators. Through effective communication, we have found that the principles of content review for generative AI are quite similar to those applied to search. Baidu has been operating China's largest search engine for over 20 years, and we have extensive experience in providing appropriate online content. We also put a lot of efforts into both technology and compliance development to ensure our products and services meet applicable regulatory requirements. For important and sensitive topics, we have to make sure AI will not hallucinate. Given that LLM is more or less a probabilistic model, this task is not trouble at all. The requirements are not final yet. So, we have to continue to update our strategy as it evolves. Furthermore, we maintain an ongoing dialogue with the relevant authorities and keep them informed about the latest technology tin. We actively share our insight supporting the responsible and beneficial growth of technology, particularly for generative AI. This proactive effort position us well to meet the requirements and offer industry-leading generated AI solution in China. Conversely, companies which do not have extensive experience in providing appropriate online content or lacking a track record of working closely with regulators will face significant challenges in offering scalable generated AI solutions in China. So here, I would like to emphasize that Baidu has been [leadering] [ph] AI for social good for a long time. We are one of the early adopters of AI for responsive use in China. We believe our new initiative ERNIE Bot is the best in its kind in China, and it has the potential to increase productivity and efficiency across various industries, which can contribute to China's economic growth and social investment. We expect ERNIE Bot to power agricultural enterprises to promote innovation and to optimize energy use, resource allocation, and waste reduction, and to improve disease diagnosis in health care industry, therefore, enhancing people's well-being and the quality of life. Also, we always attach great importance to AI ASIC. Back in 2018, I came up with the four principles of AI ASICs. That's like: One, AI should be safe and controllable. Two, AI should promote equal access to technologies for humanity. Three, AI should empower humanity to learn and grow instead of replacing them. And then four, AI should bring more freedom and possibilities to humanity. I want to make sure that within Baidu, everyone understands these principles once it comes to new AI technology and products, so as to enable the co-existence between AI and mankind. In addition, we also prioritize data privacy and data security in business operation and business strategy. We have a dedicated committee to oversee data management, and we are currently establishing another committee for AI ASICs. And all of these efforts are aimed at promoting AI for social good. Kenneth Fong: Thank you. Operator: Thank you. Our next question is from Wei Xiong with UBS. Please go ahead. Wei Xiong: Thank you management for taking my questions and congrats on the good quarter. My question is about Apollo Go. So, could management provide some updates on your robotaxi business in terms of your strategy and business plan for the year, especially for the fully driverless ride hailing operation? Is there any timeline you can share regarding the scale up or the breakeven of the business? And what are some catalysts or milestone event that we could expect for Apollo Go this year? Thank you. Rong Luo: Thanks Wei [indiscernible]. Our Apollo Go remains the largest for autonomous ride [indiscernible] hailing service provider in the [world] [ph]. And just as Robin mentioned, in the first quarter, we all hold almost 660,000 rides to public, and this number keeps growing. We aim to continue the expense of our autonomous driving technology by providing more rides to the topic. In addition, we will always carry in mind the goal of achieving breakeven, gaining skill and building a sustainable business model or TAM when we make our [operations] [ph]. To reach this objective, it's important to reduce operational costs and improve operational efficiency. On cost, we are focusing on lowering labor and hardware costs, and those are the major cost for robotaxi operation. So, we are working hard to find ways to cut down on those expenses. To reduce the labor cost, we continue to grow development of [fully crowded operation] [ph]. As Robin mentioned in his prepared remarks, we are doing really well in getting closer to our goal and adding mobile while we can provide fully [indiscernible]. In the Yizhuang region of Beijing, [indiscernible] after getting fully crowded for the testing [indiscernible]. We got the green light to offer purely having services to the public on the open roads in mid of March. This progress is because of solid [indiscernible] and reliable ride for the public in the past. So that we gain the trust from both users and the government since [process] [ph]. And in Wuhan, we started offering for a ride hailing services last August. Now, we are still adding vehicles and expanding operations. As Robin mentioned earlier, more than one-third of the rides provided by Apollo Go in Wuhan offer almost [indiscernible]. We think this number will keep going up in the future. We will provide safety and reality for the future fully driverless operation. Our hardware costs, we believe that after the release [indiscernible] and other new models of robotics in the future, it will continue to decrease. On [operating efficiency] [ph], we are housing a steady increase in the average daily ride nationwide. In the future, we will continue to automate our operational strategy to achieve long-term success in robotaxi. Thank you. Operator: Thank you. Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may all disconnect your lines.

Operator: Hello and thank you for standing by for Baidu's Fourth Quarter and 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After managements prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's fourth quarter and fiscal year 2022 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 Li, our Co-founder and CEO; Rong Luo, our CFO; Dou Shen, our EVP in-charge of Baidu AI Cloud Group, ACG; and Zhenyu Li, our SVP in-charge of Baidu Intelligent Driving. 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 US Private Securities Litigation 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 updated annual report and other documents filed with the 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 directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder: This conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. In Q4 2022, Baidu core revenues were impacted by a challenging environment caused by a rapid increase in COVID-19 cases and its impact on the broader economy. However, we managed to improve our operating profit and margin year-over-year in the quarter. Beyond that, Baidu demonstrated its value as a trusted platform for users seeking accurate and authoritative information during critical moments like the peak time of COVID-19 pandemic. As restrictions in China were relaxed and many people get infected, people were most keen to monitor the progress of the epidemic in their local areas. We quickly mobilized our resources and launched COVID-19 indices based on Baidu search queries, providing real-time updates and forecasts for better transparency. Also we partnered with reputable hospitals and medical experts to offer guidance and advice for public health. In Q4, health related search queries grew about 40% year-over-year, reaching a record-breaking high. And today, we are on the threshold of exciting, new developments in our industry. For this call, I will focus on three major themes. And then I'll provide quarterly reviews across our business lines. And finally, I'll talk about our outlook for 2023. Regarding the major themes. First, although our first -- our fourth quarter results were impacted by COVID-19, we are optimistic about our path to reaccelerate revenue growth in the coming quarters. So far in Q1, we have already seen a recovery of our online marketing revenue from the Cloud, in particular from verticals in healthcare, travel, business services and lifestyle. Assuming no significant new disruptions, we expect this recovery trend to continue and boost our online marketing revenue through increased demand and take advantage of pent-up consumption in China. We also anticipate resuming cloud project implementation as business operations return to normal, signing new contracts and accelerating AI cloud revenue growth. Second, we are riding high on the wave of AI, as our earlier investments make us well positioned to benefit. Now that the industry is about to experience significant growth and monetization. Over the past many years, we have doubled down on AI, recognizing its potential to drive market expansion and increase enterprise value. Today, AI has become a cornerstone of many of our products and services. For example, in search the early family of large models have been instrumental in delivering improved search results since March of 2019. These models enable improved ranking and multi-modal search capabilities. In cloud, we leverage our AI expertise to offer industry-specific AI solutions and applications for traditional industries such as transportation, manufacturing, energy and utilities. Our intelligent driving business built on the backbone of Baidu's computer vision and other machine learning algorithms is another testament to our commitment to this field. Recently, with users reading about ChatGPT, large language models using generated AI have created a megatrend that will revolutionize many businesses. And Baidu is well-positioned to capitalize on the imminent inflection point in AI, thanks to our extensive talent pool, well-developed infrastructure, a diverse array of businesses and leading technology. We are also excited about the upcoming launch of Ernie Bot, our new conversational AI bot powered by our latest in-house large language models. We plan to fully integrate Ernie Bot across all of our operations. For our consumer-facing products, we plan to embed Ernie Bot into Baidu Search, first. We believe this will reshape information generation and presentation and create a new entry point for the next-generation Internet, helping us attract more users and gain market share in a profitable manner. In the future, we will also integrate Ernie Bot into Xiaodu, which will allow Xiaodu to significantly upgrade all the smart devices and services. We believe AIGC will also provide notable potential for iQIYI on content generation and user acquisition. For our 2B businesses, we plan to make this technologies widely available to our customers, developers and ecosystem partners to help boost productivity across industries. By opening the platform to generated large language model to the public, we expect more and more business owners and entrepreneurs to build their own models and applications on our AI cloud. For intelligent driving, we plan to integrate Ernie Bot into our auto solutions, further enhancing user experience. We also believe generative pre-trained transformers will play an important role in driving the expansion of our operations. Clearly, we can benefit from the new AI inflection point, as we have timely prepared our overall business for this new megatrend. Turning to my third theme. We will continue to focus on the long-term sustainable development of our company. As you all know, 2022 was an incredibly challenging year. However, we have used the time wisely to lay a strong foundation for – by building a more efficient organization through cost optimization, organizational adjustments and management reshuffles. As a result, in the second half of 2022, Baidu Core's non-GAAP operating margin and profit both improved year-over-year. We believe a more streamlined operation will help us to achieve sustainable growth. Now let's review the fourth quarter operating highlights. AI cloud recorded 4% year-over-year growth in Q4. Revenue growth decelerated from the prior quarters due to the impact of COVID-19 operate at the end of the quarter. Nevertheless, the margins of AI cloud in Q4 improved year-over-year. Two major factors were at play. First, we continued to scale back low-margin business for both at and cloud solution projects. And second, we continued to standardize our AI solutions and applications for specific use cases in traditional industries. For example, our quality inspection and strong inspection solutions have been adopted by many leading companies in traditional industries like chemical fiber, electric power and renewable energy. We have seen margin improvement as we replicate our AI solutions and applications, which tackle industry-specific challenges. By working with the industry leader, we are enhancing our knowledge of industry-specific challenges and standardizing AI cloud solutions and applications for scale. As an example, thermal power, which is mainly coal fired, make up majority of the power supply in China, generating around 5.9 trillion kilowatt hour in 2022, according to National Bureau of Statistics of China. Recently, we developed an AI solution for a leading coal-fired power plant in Shanxi province to improve the efficiency of power generation through method such as automated cooling system. According to our internal estimates, this solution resulted in almost a 5-gram of coal consumption per kilowatt hour, well above our customer's expectation of 1-gram reduction. This also means a 12.5-gram reduction in carbon dioxide emissions per kilowatt hour. We aim to create more similar projects to gain scale. Turning to Intelligent Driving. We continued to make significant progress in the fourth quarter, further reinforcing our belief in our strategy and business model. Apollo Go remained the largest autonomous ride-hailing service provider in the world, measured by the number of rides completed. In Q4, Apollo Go provided 561,000 rides to the public on open roads. That's up 162% year-over-year. By the end of January, the cumulative number of rides exceeded 2 million. This demonstrates users' increasing acceptance of Apollo Go autonomous ride-hailing service. As we scale up our operations, we are able to continuously improve our technologies and refine our services. These accomplishments also build our safety record and bolster both users' and regulators' trust and including the development of the fully driverless ride-hailing market. In 2022, we made some notable breakthroughs in fully driverless operations on public roads. Since last August, we have begun to offer fully driverless ride-hailing services in Wuhan and Chongqing. In late December, we were granted permission to test drive vehicles with no safety operators in the car on public roads in the Yizhuang region of Beijing, a critical step before the capital city allows fully driverless ride-hailing operation. As I stated in the past, labor cost is a major cost component in ride-hailing operations. Removing safety operators from vehicles can significantly reduce this cost. In Q4, fully driverless rides provided to the public, increasing very fast, helping us to expand our operations and reduce cost per mile. In 2022, we also unveiled RT6, aiming to bring the cost of robotaxis to the price range of mass market EVs for the first time in China. This initiative will allow us to further reduce our costs in the future. Baidu Apollo's auto solutions made a breakthrough engagement with a multinational automaker. It intends to cooperate with us on AVP functionality for one of their popular car models in China. Moving into mobile ecosystem. Our traffic remained strong. Both total mobile search queries and feeds distributed through Baidu App continued to experience double-digit year-over-year growth in the quarter. In December, MAUs for the Baidu App increased 4.2% year-over-year. Despite revenue declining in Q4, our mobile ecosystem continued to generate high operating profit, operating margins and substantial cash flow, thanks to increased efficiency. Encouragingly, we have seen a recovery in our online marketing revenues after the Chinese New Year holiday. On another positive note, retail and e-commerce remained an outperforming vertical, with more than 20% year-over-year growth, accounting for over 10% of the total advertising revenue. Users not only come to Baidu to search for information and knowledge but also increasingly come to us to search for services and merchandise, driving up growth in merchandise search queries and transactions on Baidu. Quarterly GMV facilitated by Baidu Search grown by 84% year-over-year in Q4. Short videos contributed to year-over-year increase in feed revenue in Q4 despite macro challenges. Apart from feed, we believe short videos also benefit search in both user experience and monetization. And the growing prevalence of short videos within Baidu mobile ecosystem should drive long-term online marketing revenue growth. We continue to help content creators to generate content through AI, enriching our mobile ecosystem, in particular producing short videos. As we move forward into 2023, our priorities are clear and focused. First, we are committed to revenue growth, as we have seen a clear pathway for a successful business recovery. Second, we are poised to take advantage of the huge potential of AI to drive business growth. We aim to integrate generative AI into most of our products and services and make our cutting-edge large language models available to both consumers and businesses. Third, we will maintain healthy growth while also strengthening our foundation. Our mobile ecosystem should continue to generate strong margins and cash flow. We aim to continue expanding margins for AI cloud and outgrowing our Internet peers. We also will continue to make strategic and prudent investments in intelligent driving to capture the long-term market opportunity. With that, let me turn the call over to Rong to go through financial results. Rong Luo: Thank you, Robin. Now let me walk you through the details of our fourth quarter and full year 2022 financial results. We closed the year 2022 with solid financial results. Baidu Core's total revenue was RMB 25.7 billion, decreasing 1% year-over-year. In 2022, Baidu Core generated RMB 95.4 billion or US$13.8 billion in revenue, basically flat from last year. Now online marketing business continued to grow very fast and reached 30% of Baidu Core revenue in the fourth quarter, up from 26% a year ago, demonstrating by cloud and other AI-powered businesses have fueled our business model and will continue to do so in mid or long-term. For the full year 2022, our online marketing business accounting for 27% of Baidu Core revenues, up from 22% in 2021. Within the non-online marketing business, revenue from Baidu AI Cloud increased by 4% year-over-year to RMB 5.1 billion in Q4 on an apples-to-apple comparison and were up by 23% year-over-year to RMB 17.7 billion in 2022 on an apple-to-apple comparison. Xiaodu is another revenue contributors to the non-online marketing business. Xiaodu continued to achieve solid revenue growth in both Q4 and the year 2022. Baidu Core online marketing revenue decreased by 6% year-over-year and 4% sequentially in Q4 due to the weak demand from advertisers in the challenging macro environment caused by COVID. Baidu Core online marketing revenue was down by 6% year-over-year in the year 2022. iQIYI revenue was RMB 7.6 billion in Q4, increasing 3% year-over-year. iQIYI revenue was RMB 29 billion in the year 2022, decreasing 5% year-over-year. Cost of revenue was RMB 16.9 billion in Q4, decreasing 2% year-over-year primarily due to the reduction in content costs, cost of goods sold and other costs related to new AI business, partially offset by the increase in traffic acquisition costs. Cost of revenue was RMB 63.9 billion in 2022, decreasing 1% year-over-year primarily due to an increase in traffic acquisition costs, bandwidth costs, cost of goods sold and other costs related to new AI business, offset by the decrease in content costs. Operating expenses were RMB 11.5 billion in Q4, a decrease of 17%, 1-7, year-over-year, which was primarily due to a reduction in staff-related expenses. Operating expenses were RMB 43.8 billion in 2022, decreasing by 12% year-over-year, which is primarily due to a reduction in channel spending, promotional marketing and personnel-related expenses. Non-GAAP operating income was RMB 6.5 billion in Q4 and non-GAAP operating margin was 20%. Non-GAAP operating income was RMB 23.2 billion in 2022, and non-GAAP operating margin was 19%, 1-9, in 2022. For Baidu Core, non-GAAP operating income was RMB 5.5 billion and operating margin was 21% in Q4. Non-GAAP operating income was RMB 20.9 billion and non-GAAP Baidu Core operating margin was 22% in the year 2022. Regarding the non-operating items, in Q4, total other income net was RMB 1.8 billion, mainly resulting from fair value gain of RMB 1.6 billion from long-term investments. Income tax expenses was RMB 1.3 billion. In 2022, total other loss net was RMB 5.8 billion, mainly resulting from a fair value loss of RMB 3.9 billion and an impairment loss of RMB 3 billion from long-term investments. Income tax expenses was RMB 2.6 billion. In Q4, net income attributable to Baidu was RMB 5 billion, and diluted earnings per ADS was RMB 13.59. Net income attributable to Baidu Core was RMB 4.8 billion, and net margin for Baidu Core was 19%, 1-9. Non-GAAP net income attributable to Baidu was RMB 5.4 billion. Non-GAAP diluted earnings per ADS was RMB 15.25. Non-GAAP net income attributable to Baidu Core was RMB 4.9 billion. And non-GAAP net margin for Baidu Core was 19%, 1-9. In year 2022, net income attributable to Baidu was RMB 7.6 billion, and diluted earnings per ADS was RMB19.85. Net income attributable to Baidu Core was RMB7.6 billion, and net margin for Baidu Core was 8%. Non-GAAP net income attributable to Baidu was RMB20.7 billion and non-GAAP diluted earnings per ADS amounting for RMB58.93. Non-GAAP net income attributable to Baidu Core was RMB19.9 billion, and non-GAAP net margin for Baidu Core was 21%. Cash and short-term investments for Baidu Core as of December 31, 2022, were RMB177.4 billion or US$25.7 billion. Free cash flow for Baidu Core excluding iQIYI was RMB18.1 billion, or US$2.6 billion in 2022. Baidu Core had approximately 36,300 employees as of December 31, 2022. On a separate note, we are excited about iQIYI's continuous efforts to improve operating efficiency. In the quarter, iQIYI once again generated positive non-GAAP operating profit and free cash flow. On the user side, iQIYI's average daily number of total subscribing members increased to 111.6 million in Q4, a net addition of 10.6 million from the previous quarter. iQIYI maintained its largest market share for the drama category in terms of effective video reels, according to Enlighten Data. In addition, in the past 12 months, iQIYI raised around US$1.3 billion. Post these fund raisings, Baidu continue to hold controlling voting power in iQIYI and consolidated iQIYI's financial results. Operator, with that, let's now open the call to questions. Operator, please. Operator: Sure. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes Alex Yao from JPMorgan. Please ask your question. Alex Yao: Thank you management for taking my question. Congrats on a strong quarter. I have a couple of questions for the online advertising business. Can you share with us the trends you are seeing in February, post the Chinese New Year holidays? From a industry perspective, what are the stronger-recovery industry? And what are the relatively weaker-recovery industry? And particularly, I'm interested in the off-line verticals such as travel, local services, franchising and health care. Can you comment on your revenue exposure to these off-line verticals? And how are they recovering since the Chinese New Year holiday? And then secondly, can you share with us your preliminary thoughts on the advertising recovery trend in the coming months? Particularly, I think second quarter will be a little bit special, because of consumption has already been normalized. And you are comping against a low-base on year-over-year basis. How should we think about the advertising growth trend in the next couple of months, particularly second quarter? Thank you. Robin Li: Hi Alex, this is Robin. Our ad business is highly correlated with Core. As you know, when we entered the first quarter, the number of COVID infections had passed its peak. And it's now on a downward trend. People's daily lives are gradually back-to-normal and the operations of many companies are recovering as well. As the economy continues to recover, our ad revenue is gradually improving from the cost. When we look into our ad verticals, we have seen substantial improvements in our largest verticals, including health care, travel, lifestyle and franchises. These are all pretty much offline businesses. And online businesses, -- especially, online games is relatively weaker. And regarding to the recovery by region, I think the COVID infection number has passed its peak, in all of China. The regions passing the peak earlier, started to recover earlier. And the -- post-Chinese New Year holiday, Tier 2 and Tier 3 cities recovered faster than Tier 1 cities. That's because a lot of people took longer breaks from their families before going back to Tier 1 cities for work. And again, the magnitude of the recovery correlates heavily with the recovery of our top verticals. As we look beyond the first quarter and into the latter part of 2023, we're confident that our ad business will benefit from China's reopening and macro recovery. And with that, we look forward to demand recovery from advertisers, which should provide significant boost to our ad revenue. I also want to highlight that advertisers prefer to spend on performance-based ads, rather than pure brand promotions during the process of economic and business recovery. And search has proven to be the most effective form of performance-based advertising, because users have a clear intent when using search. Search ads connect the users' intentions with the most relevant product and service offerings. That's why we expect to gain more marketing dollars from our advertisers. Over the long-term, we will continue to benefit from the sustained growth of China's macro economy improvement. Also, e-commerce and short videos will continue to drive long-term growth of our ad business. Overall, we believe our ad revenue should outgrow China's GDP in the long run. Beyond that, we are very excited about the opportunities around generative AI. We believe, by incorporating Ernie Bot, Baidu App and particularly Baidu Search, we will have an enhanced user experience. The new features powered by Ernie Bot should help us to attract new users and drive user engagement and also drive advertiser interest in Baidu too, so this will power our long-term revenue growth. Thank you. Juan Lin: Operator, next question, please. Operator: Thank you. Your next question comes from Alicia Yap from Citigroup. Please ask your question. Alicia Yap: Hi. Yes, thank you. Good evening, Robin, Rong Luo and management team. Thanks for taking my question. My questions is related to ChatGPT. So there's been a lot of expectation on Baidu progress in ChatGPT and also the AI-generated content. Can management share with us what could be the new opportunities that you are seeing in this field? And how is Baidu positioned in this trend? Any color that management can share would be appreciated. Robin Li : Thank you for your questions, Alicia. We are obviously excited about ChatGPT and AIGC. It represents a megatrend that could change a lot of things. We are working on Ernie Bot, a new version of conversational AI bot that uses our latest technology in large language models. We will embed Ernie Bot into Baidu Search, first; and we'll open it to the public in March. Baidu is the leader in China's technology innovation. Remember, we launched Ernie in March 2019 and have scaled it up with well over 100 billion parameters. It is trained by serving billions of user search requests and other applications every day, so in terms of MLP capabilities, Ernie is considered as the state-of-the-art Chinese language model. And it is not only about language, but also about understanding Chinese culture. Ernie 3.0 is already a very localized AI foundation model for China market, which means the generative large language model we are working on right now will be more suitable in Chinese language and to the China market than models developed overseas. In addition, our deep learning framework PaddlePaddle, on which Ernie is based, has gained strong momentum. Millions of developers use Paddle for their AI works. This is -- there is a strong synergy between the framework layer and the model layer. AI pre-training, as you know, is very expensive. We believe our full-stack AI capabilities will allow us to build the most efficient large language model and support all kinds of applications, from search to content generation or -- and in vertical areas that could improve productivity significantly. For Baidu Search, I just mentioned that we are working on -- we're working hard on a revolutionary version of Baidu Search built upon Ernie Bot that incorporates generative AI into our search algorithm as well as content creation. And we are adding interactive features too. Users will soon be able to interact directly with the new generative large language model. It would be complementary or even upgrading the traditional search experience and attract more users. ChatGPT types of features could potentially become a new traffic entry point for Internet users and therefore, expand the market size of search. Meanwhile, it will also help our advertisers, our content creators and merchants, et cetera. With our strong AI capabilities, we should be able to keep iterating and upgrading the model. Search is just one example. There are -- many other applications, we believe, will also benefit from it. And for AI Cloud. Our AI Cloud provides full-stack offerings of four layers from the cloud infrastructure layer, to deep learning open-source framework layer and to the large foundation model layer and ultimately to application. So these are the four layers. And by opening the generative large language model to the public, a.k.a. model as a service, we should help many business owners and entrepreneurs build their own models and applications on our cloud; bring about significant positive change and improvement in a number of areas, including increased efficiency, better decision-making and improved customer experiences. So to recap, Baidu's strong AI capabilities build our moat in large language models and AI foundation models. In addition to expand the market size for search, we are able to help many, many industries to build their own models, develop their own applications and significantly improve their productivity. We believe it will be a game changer for cloud computing. AI is transforming many industries in a big way and we are super excited about what's to come. We are building an AI ecosystem around Ernie Bot. As of today, a number of organizations have already decided to integrate Ernie Bot into their products and services. And remember, this is just the beginning of the journey. Thank you. Alicia Yap: Thank you, Robin. Operator: Thank you. Your next question comes from Gary Yu with Morgan Stanley. Please ask your question. Gary Yu: Hi. Thank you management and Congratulations on a decent set of results. So I have a couple of questions regarding the AI cloud business. First one is, for the revenue growth. Will the disruption in revenue collection that we saw in fourth quarter push out the benefit first quarter? And have you seen the reopening kicked off in projects of cloud, so far? What are the overall cloud revenue growth for 2023 that management expects to see? And what product offering -- what kind of product offering we can see from the cloud service as the major growth driver for 2023. And how do we expect the company growth rate and the cloud market in the coming years to be? And I think a second question, related to that, is can you also comment on overall IT spending budget by enterprises in the public sector versus the -- so the private sector versus the public sector. And also do you expect to win a decent number of new cloud projects this year? And do you think that the uptick will be gradual given the overall macro remains weak? And just lastly, any comment on breakeven time line? And what is the key bottleneck, so far, reaching breakeven? Thank you. Dou Shen: Hi, Gary, thanks for your questions. This is Dou. I will answer the first two questions and then let Rong take care of the last one. So we do have seen a gradual recovery of cloud revenues as our R&D team has begun to work on the ongoing projects post reopening. However, the cycle for -- from sales lead to revenue recognition varies from a few months to a few quarters. Now considering that, our AI cloud revenue growth should be backloaded this year, but in meanwhile, we will keep out low-margin businesses for both ACE [ph] and cloud solution projects as we focus on margin improvement for the cloud. This initiative will have an impact on our ad revenue growth going forward, but still we aim to continue outgrowing our Internet peers in 2023. If we look into the long term, the big trend for traditional industries to move business onto cloud and use AI to improve their efficiency remains unchanged. I believe the digital and the intelligent transformation will be the key driver for the GDP growth in the near future. And for sure, we will benefit the most from this transformation because we think Baidu is uniquely positioned. Actually, compared to our -- to others, our AI cloud provides full-stack offerings on four layers, as Robin just mentioned, from cloud infrastructure, to deep learning platform, that's PaddlePaddle, as you know; to large foundation models; and new applications. And all the four layers can work seamlessly together in each offered end-to-end solutions to achieve optimal outcomes for our, even at lower costs, versus other solutions which is built from different providers for the cloud platform and models. In addition, end-to-end solutions can actually upgrade in much shorter time once we have improvement on any of these layers, which will further benefited the plans. So if you were in the sectors of transportation, manufacturing, energy and utilities or other industries so I believe Baidu's cloud service should be the most efficient one because, in addition to the technical advantage I just explained, we already know the industry and we know the pain points. And we have accumulated a solid experience by successfully delivering high-quality products already in the industries. Most importantly, as Robin just mentioned, we plan to integrate Ernie Bot into our cloud and AI products, so this should help many business owners and entrepreneurs build their innovative applications, explore new business or improve their operations. So we believe this will be a significant step for our AI cloud and potentially reshape the whole China's cloud industry. So we will help more business owners and entrepreneurs to leap from digital era to AI era, where AI technologies will play a vital role in productivities in all industries. And with that, I will turn to Rong for your last part. Rong Luo: Thanks, Dou. Yes, I'm going to address your question regarding to our AI cloud margins. We continually to improve margins for cloud by cutting the low-margin businesses and continue to building AI applications which can scale up, which is a consistent strategy for years. I think, as we have mentioned before is our AI cloud actually including two parts. The first one will be the personal cloud which continue to generate a decent operating profit margin, while the enterprise cloud is still loss making, while the margins is improving both in the gross margin and operating margin perspective. In fact, if you look at the new projects we've signed, we projected margins continue to improving in the past quarters. Robin has talked a lot about how we can achieve the margin improvement in his prepared remarks. And this will help us continue improving our margins in future. Note that it takes time to build a sizable AI application portfolio which can be used by mid companies in industries, but I'm confident that Baidu's full stack of AI capability can help us to [Technical Difficulty]. And lastly, we are pretty much on track to make the AI cloud a profitable and healthy business in the coming few years. Gary Yu: Thank you. Operator: Thank you. Your next question comes from Eddie Leung with Bank of America. Please ask your question. Eddie Leung: .: Rong Luo: Yes, Eddie. And thanks so much for your questions, and let me try to address your questions. If we still remember, actually we start to cut costs and expenses since the end of the year 2021, which was ahead of our counterparts in the same industry in China. And we've carefully reviewed and restructured our business last few quarters. For mobile ecosystem, we've sized down and even phased out some businesses where Baidu has -- obviously we have no competitor advantages or we cannot be profitable for long term. By doing so, the mobile -- the MEG -- mobile ecosystem growth today, is more healthy than one year ago and having much leaner operations than before. And during the past years, the total head count of Baidu Core actually reduced by 8%. And we are not -- we are focusing on areas where we are in best in class or we are first in class. And at the same time, for AI cloud, we start to gradually eliminate the low-margin businesses. We're also tightening our controls over robot costs. You probably can see that, as a result, in 2022, Baidu Core's operating expenses decreased by 9% year-over-year. And if we separate them out, SG&A was down by 15%, one-five, year-over-year. And R&D was down by 3% year-over-year. In the second half of the year 2022, Baidu Core's non-GAAP operating profit margin is increasing year-over-year. And now we have a healthier cost structure, a stronger organization than one year ago. So looking forward to the year 2023, we will remain very disciplined in spending. And we will continue to balance the revenue growth and margin as we are building a long-term sustainable development for the whole organization. If we look into each line items we will continue to monitor ROI for all promotional activities, particularly Baidu's acquisition costs. And we will carefully manage all the other variable costs. For R&D, you have asked just now, we are working very hard to improve the efficiency of our team. The R&D team today are required to focus on building the technologies, products or services which can create more values for users and customers. We believe, over the long term, we should be able to see the operating leverage from R&D design. At the same time, we will continue to invest for growth and new opportunities and closely monitor the returns. For CapEx, we will keep investing in cutting-edge technologies like large language models or generative AI, because we believe, it will transform many businesses and provide huge opportunities for Baidu. While we are able to further improve our efficiencies of reallocate some resources to supporting the new initiatives such as the Ernie Bot. In short, we will not hesitate to invest in our new, promising business. So as a summary: We will look into each business. Mobile ecosystems should continue to generate high profits and cash flow in the future, which is our foundation. And for AI cloud, we aim to continue to expand our margins. Within AI cloud, for enterprise cloud, we will continue to cut down on low-margin businesses and focus on key industry. And as Robin and Dou has just say, we will continue to standardize our AI solutions and applications. For personal cloud, we will continue to earn decent profits and margins in the future. For Apollo Go, we will continue to invest for the future, but meanwhile, we will carefully monitor its operational and financial metrics to evaluate our performance and investment returns. Over the long run, we believe we still have room to optimize our cost and expenses, but during this process, we will dynamically allocate resources and balance the growth with margins and cash flow. Thank you so much for your questions, Eddie. Operator: Thank you. Your next question comes from Wei Xiong with UBS. Please ask your question. Wei Xiong: Hi. Good evening, management. Congratulations on a strong quarter and thank you for taking my question. I want to ask about your robotaxi business. I'm wondering. What is the current unit economics for this business? And how should we think about the breakeven time line for the robotaxi? And also if management can share any color on your technology road map, that would be appreciated as well? Zhenyu Li: Thanks for your questions. This is Zhen. For the questions regarding unit economics, as you know, the major cost for robotaxi are labor cost and vehicle costs. So firstly, labor cost. As you know, fully driverless operation means no safety officers in the car, which helps to lower labor costs. In 2022, we made big progress in providing fully driverless service on the open roads. Now we are providing fully driverless ride hailing service in Wuhan and Chongqing. For example, in Wuhan, we kept expanding operations by covering a wide area and longer daily operations -- operating hours and also by growing our fleet of vehicles. In December, we were allowed to test drive fully driverless cars on the open roads in Beijing. This is important step towards fully driverless operation in the capital city. In 2023, we plan to further expand our fleet and drive for fully driverless operations. We will continue to reduce labor costs by allowing more vehicles to remove in-car safety operator. More and more cities in China are supportive to autonomous ride hailing operation. As a market leader, Baidu is benefiting from this change. Also, as we said before, scaling up operation helped us to refine our core technology and further improve our safety performance. As we scale up, we will further improve in our core technology and gaining trust from regulators. Apollo Go remained as the largest autonomous ride hailing service provider globally. Last year, we provided more than 1.5 million rides to the public. Now, on average, each vehicle in top cities like Beijing provides more than 15 rides a day. This number is already close to what a taxi can do. We believe, by continuously improving our technology, more and more cities will give green lights to our fully driverless ride hailing service in the future. Secondly, reducing vehicle cost with Apollo RT6, which is designed to offer large-scale fully driverless ride-hailing services. We are bringing the cost of robotaxi to the price range of mass-market electric vehicles for the first time. We believe vehicle costs will continue to decline in the future, as China's EV market is developing very fast and the entire supply chain is highly localized. The cost of auto parts still has a lot of room to decrease. Combining those two factors, we believe that the unique economics of Apollo Go will continue to improve. As Robin said, once we scale up, we can leverage large language model to improve technology. And this will help us to further improve safety performance. Thank you. Wei Xiong: Thank you. Operator: Thank you. Your next question comes from Kenneth Fong with Credit Suisse. Please ask your question. Kenneth Fong: Hi. Thank you management for taking my questions, and congrats on the very strong set of results. I have a question on user traffic and user time spent. Have you seen any impact or changes in these two parameters as China reopened, especially in the big cities? Thank you. Robin Li: Hi Kenneth, this is Robin. People started to spend more time outdoors post the reopening, but actually user time spent for our major apps, as a whole, increased 6.6% year-over-year, I think, in January. And that outperformed the overall mobile market. We have a wide variety of apps that cater to various needs of users. Baidu App is one of the very few super apps in China, and Baidu Search has a unique value proposition. We help people quickly find the most relevant and authoritative information online through technology. So whenever users want to search for information and knowledge, they come to Baidu. When they come back to work, this becomes more apparent. Even if they want to check for epidemic development in their regions or check entrance exam scores, this kind of needs can be very better and better matched by the Baidu Search and other Baidu Apps. Over the past years, we continued to use technology to enrich content and services so we can provide our users with better experiences in search, in feed and in many other products. Today, people not only come to us to search for information but also to find products and services. These efforts have strengthened Baidu's leading position in China's mobile Internet space. And another highlight is, of course, Ernie Bot, as I mentioned before. It has the potential to become a new traffic entry point for people online. Also, using AI to generate short video content is a typical application for Generative AI. We believe AIGC will help us accumulate more short videos on our platform over time, and the direct benefit will be increasing video viewership and ad revenue. Thank you. Kenneth Fong: Thank you, management. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Please ask your question. Lincoln Kong: Thank you, management for the opportunity. I have a follow-up in terms of ChatGPT and our Ernie Bot. So it seems that many domestic company are -- recently keep announcing they're partnering with us or use Baidu's -- the Ernie Bot technology. So can management elaborate a bit more on the format of this partnership? And what could be the monetization opportunity here? And how big or -- should we think about this revenue potential? And also in terms of competition: So how should we think about other Internet companies coming offering a similar service or do challenges and limit our monetization opportunity here? Thank you. Robin Li: Sure. We're glad to see that, after we announced the plan to launch Ernie Bot, many organizations reached out to us and expressed their strong interest to work with Ernie Bot. Some already announced their plan to partner with us to integrate Ernie Bot capabilities into their products or services or operations. More and more enterprises realize that generative large language models are going to change their industries, and they would like to capture this opportunity. The fact Ernie Bot has attracted so much interest also shows that Baidu is well recognized for our leading AI capabilities and the age of AI has finally come. And regarding to monetization opportunities, Ernie Bot will be integrated into Baidu Search to enhance the user experience. And users will be much more dependent on us for all kinds of tasks and needs, therefore significantly expand the market size of search. We are using AIGC to expand our content like text, images or videos; and this will create a great opportunity for us to attract new users, increase user time spend and user stickiness; help us gain share in the online ad market over the long run. And for cloud customers, they will be able to leverage our full-stack AI capabilities, not just the basic stuff, storage or bandwidth or database, this kind of things. They can develop their apps based on our AI framework PaddlePaddle and the foundation model Ernie. It will be much easier, much more efficient, much more powerful, so this will propel our cloud revenue too. And our full stack of AI capabilities is quite unique. It contains cloud infrastructure, deep learning platform like PaddlePaddle and large language models and widely used applications. We have a strong presence in all four layers, and these four layers work together efficiently. Our large language model Ernie 3.0 has been trained with billions of daily user search requests and other popular Baidu family of apps. Baidu's Ernie Bot will be using this kind of hugely well-tagged data pool to help improve and adapt quickly over time. The barrier to entry for this is very high. It requires multiple years of significant investment, and we have the first-mover advantage. The technology behind Ernie Bot is called, Reinforcement Learning with human feedback. So here, the human feedback part is critical. As the first mover, we get more-and-more human feedback and further improve our capabilities way ahead of anyone else. And right now we are focused on preparing the launch of Ernie Bot and make continuous improvement after the launch. And we are also focusing on areas that we believe, Ernie Bot will create immediate value, so stay tuned. Thank you. Lincoln Kong: Thank you. Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.

Operator: Thank you for standing by, and welcome to the Baidu Incorporated Third Quarter 2022 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your host for today, Juan Lin, Baidu's Director of Investor Relations. Please, go ahead. Juan Lin: Hello, everyone, and welcome to Baidu's third quarter 2022 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 Li, our Co-Founder and CEO; Rong Luo, our CFO; Dou Shen, our EVP in charge of Baidu AI Cloud Group; and Zhenyu Li, our SVP in charge of Baidu Intelligent Driving. 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 US Private Securities Litigation 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 the 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 directly comparable GAAP measures and is available on our IR site at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn over to our CEO, Robin. Robin Li: Hello, everyone. Recapping the third quarter in broad terms, we delivered improved bottom line results despite a challenging macro environment, especially for the mobile ecosystem, operating profit resumed positive year-over-year growth. And for AI Cloud, operating loss and margin improved meaningfully, both on a year-over-year and a quarter-over-quarter basis. Businesses across the line from mobile ecosystem to AI Cloud to Intelligent Driving have been negatively affected by the resurgence of COVID. Throughout Baidu's history, however, we have experienced many challenging environments. Periods of challenges have enabled us to emerge stronger, given our relentless effort on building long-term growth. We're using this period to ready ourselves for current business conditions to improve. Our key short-term tasks remain unchanged, which are efficiency, optimization and continuous investments in the new AI businesses. Our new AI business such AI Cloud and Intelligent Driving are well aligned with China's tech innovation and national initiatives. By doing so, we will further strengthen our leadership in the new AI business and reaccelerate business growth. In Q3, Baidu Core ad revenue was down 4% year-over-year, but improved from the second quarter's 10% year-over-year decline, as macro has improved gradually since June. Encouragingly, revenues from healthcare and retail recorded positive year-over-year growth in the quarter. Going forward, when COVID situation alleviates in major cities ad revenues across different verticals such as travel, franchising and local services should rebound. For our new AI business, I am proud to report some highlights. Revenues from AI Cloud increased by 24% year-on-year to RMB 4.5 billion in the quarter. AI Cloud has been a major growth driver for Baidu Core non-advertising revenue. In Q3, non-advertising accounted for 26% of Baidu Core total revenue, that's up from 21% a year ago. Baidu Apollo auto solutions continued to gain traction among leading automakers and the total projected accumulated sales reached RMB 11.4 billion recently, growing more than 50% year-over-year. Apollo Go completed 474,000 rides in the quarter, up 311% year-over-year. By the end of Q3, Apollo Go has completed 1.4 million rides on public sales [ph]. We believe we remain the largest autonomous ride-hailing service provider globally. Now let's review the third quarter operational highlights. Revenues from AI Cloud increased by 24% year-over-year to RMB 4.5 billion in the quarter. In Q3, the operating loss margin for AI Cloud improved notably both year-over-year and quarter-over-quarter. Over the past quarters, we have made shifts away from some lower-margin businesses to build sustainable growth for AI Cloud. Meanwhile, we continue to take measures to standardize our solution to cut down deployment costs as we scale up. Our efforts have allowed us to gradually improve operating profit and margin. I'll take ACE smart transportation as an example. In the past quarter, we continued to grow revenue and improve operating margin for smart transportation as we gain scale. Leveraging our strong AI capabilities and our insights into the industry, we have divested the solutions for typical use cases, such as, traffic management and V2X for urban road and highway. Previously, we talked about how our projects help improve traffic efficiency, city roads in Beijing, Guangzhou, Changsha, Chongqing and other cities. Recently, Tuju [ph] an important transportation hub in Hunan province, adopted our smart traffic management solutions. Our solutions covered more than 70% of the major intersections in the business district of Tuju. After adopting our solutions, delays have been reduced by 22% during rush hour in the current region. By the end of the quarter, Baidu ACE Smart Transportation solutions has been adopted by 63 cities, up from 24 cities a year ago, and 51 cities a quarter ago based on contract amount of over RMB10 billion -- RMB10 million per city. As we demonstrated, our capability to use AI to improve transportation efficiency in more cities, ACE Smart Transportation will further expand its market share. We're trying to repeat our success in smart transportation in other key verticals, such as manufacturing, energy and utilities and the public sector. We will empower our customers with AI capabilities to help them increase productivity and cost control. With AI Cloud, our customers will be better positioned to take advantage of digital intelligent transformation. We believe we remain well positioned in the early-stage, fast-growing market due to number one, our capabilities to establish end-to-end solutions based on our full stack AI capabilities ranging from chip design to deep learning frameworks, to large language models, to application-level software; and on number two, our insight about customers' pain points and our growing know-how and capabilities to solve their profits. While COVID caused delays in project implementation and complicated our sales team's efforts, hampering new contract wins, we believe the long-term trend of digital and intelligent transformation remains unchanged. Looking ahead, we will continue to focus on quality growth and aim to improve margins to achieve profitability for AI Cloud. In intelligent driving, we marked several key highlights in the third quarter and our years of investing in intelligent driving and begun bearing fruit. Baidu Apollo auto solutions, our total projected accumulative sales exceeded RMB11.4 billion recently. Based on our current pipeline, some of the major car models equipped with ANP and AVP are expected to be launched in the second half of next year. We expect meaningful revenue contribution from this business to begin in 2024, and profit to expand once material revenue kicks in. Such growth demonstrates the increasing demand for our auto solution. In Q3, we extended our partnership with one of China's largest automotive and technology companies ANP, AVP and HD Maps for one of their popular models. As of today, we have announced a collaboration with many OEM partners. Serving various automakers has helped us standardize our auto solutions, making them compatible with more popular car model. As more cars equipped with our auto solutions get into consumer plans, we will continue to refine and update our solutions. Considering the sizable development cost for high-level autonomous driving technology, many automakers seek partnerships with reliable suppliers, who have strong brand and technology capabilities. We have differentiated ourselves with world-leading Level 4 autonomous driving, which has been established through years of investments. Now, we are proactively building high-quality partnerships with an increasing number of auto OEMs to accelerate our partners' progress in autonomous driving. A few months ago, we integrated Baidu Map into our intelligent driving group to create synergies between the Baidu Map, also -- Baidu Map mobile app and the mass solutions for auto and transportation industries. Since our map have already been widely adopted, we have obtained more insights in the transportation industry, allowing us to strengthen our solutions for the mobility sector. On Apollo Go, we continue to scale up our operations, and we believe we remain the largest autonomous drive-hailing service provider worldwide. In the third quarter, the ride provided by Apollo Go reached 474,000, increasing 311% year-over-year and 65% quarter-over-quarter. A vast majority of the rides were for serving passengers during rush hours, covering places like subway stations, office buildings and shopping malls. As our operation continues to expand, Apollo Go keeps learning and improving from scenarios that do not occur during the testing phase. Leveraging large-scale operations, we're making Apollo Go, a professional AI driver, while offering a safe and comfortable autonomous ride-hailing service. Today, with an Apollo Go vehicle enters dense intersection, it is able to easily take a guess between pedestrians, bicycles and other moving objects, safety driving school while providing a comfortable experience to the passengers. Apollo Go continues to improve autonomous ride-hailing services under extreme weather. Scalable operations have indeed reinforced our Level 4 autonomous driving capabilities, setting a strong foundation for further operation expansion. We believe this virtuous cycle will make Apollo Go, the most experienced AI driver to handle various situations on the road, on a large scale. We're facing the expansion of Apollo Go based on a comprehensive financial model. In previous earnings calls, we talked about Apollo Go's achievement in the Yizhuang region of Beijing. In fact, Apollo Go has achieved significant progress in other Tier 1 cities as well. In Q3, on average, each vehicle in Beijing, Shanghai and Guangzhou completed more than 15 rides per day. According to our knowledge, this number is quite close to the average daily rides for traditional ride-hailing services. We believe that our strong and improving safety track record on public roads provide a strong endorsement for more cities to issue permits for full driverless ride-hailing. We believe fully driverless ride-hailing will create more affordable urban transport and attract more consumers to the ride-hailing market. Baidu will continue to invest to capture this massive market opportunity. Moving to the mobile ecosystem. Our operating profit improved on a year-over-year basis and we continue to generate strong cash flow in the quarter. Our mobile ecosystem continued to expand. In September, Baidu App's MAUs increased by 5% year-over-year to 634 million. In Q3, total mobile search queries increased by double-digits year-over-year and feeds distributed through Baidu App increased by 23% year-over-year. We continue to introduce short videos in feeds and search results. In September, short video distribution and time spend within Baidu Feed grew double-digits year-over-year. For Baidu Search, in September, 23% of the clicks on search result pages were short videos. And we expect the prevalence of video in search results to continue progressing rapidly. We're using AI to produce more short videos for our mobile ecosystem. While it is still in a very early stage, we believe AI will allow us to generate short video much faster and more cost effectively than human-generated content. In e-commerce, users are coming to Baidu App for product search, which resulted in a continuous increase in product-related sector. Quarterly GMV facilitated by Baidu Search grow by about 52% year-over-year in Q3. Today, users come to Baidu App not only to search for information and knowledge, but increasingly to look for services and merchandise. As we are able to make purchases and book services without leaving Baidu App, we have been deepening our understanding of user needs. Meanwhile, more customers are leveraging our ecosystem infrastructure to build their marketing campaigns and even operate their businesses on our mobile ecosystem. This has allowed us to accumulate more customer insights and better serve the customers. The improving insights into our users and customers have, in turn, allowed us to improve user experience and app conversion. In the future, we believe our mobile ecosystem will continue to generate strong profit and cash flow. To close, during this uncertain time, we focused on making the long-term investments that will position us to be stronger coming out of this challenging period, including Baidu AI Cloud and intelligent driving. While the advertising industry has been impacted by COVID-19, some of our verticals could recover faster when there is an upturn in the economy, which will drive our ad revenue to resume growth. Before I turn the call to Rong, I want to thank Baidu's employees for their diligent work in a challenging environment and the time and effort they put into making our company story a success in the long-term. With that, let me turn the call over to Rong to go through the financial highlights. Rong Luo: Thank you, Robin. Now, let me walk through the details of our third quarter financial results. Total revenue was RMB32.5 billion, increasing 2% year-over-year. Revenue from Baidu Core was RMB25.2 billion, increasing 2% year-over-year. Baidu Core online marketing revenue was RMB18.7 billion, decreasing 4% year-over-year, but improved 10% from the second quarter as macro has improved gradually since June. Baidu Core, non-online marketing revenue was RMB6.5 billion, up 25% year-over-year, driven by cloud and other AI power businesses. In Q3, Baidu AI Cloud increased by 24% year-over-year to RMB4.5 billion. Revenue from ACE was RMB7.5 billion, decreasing 2% year-over-year. Cost of the revenues was RMB16.3 billion, increasing 1% year-over-year. Baidu Core, cost of revenue was RMB10.7 billion, increasing 15%, 1-5, year-over-year, which was in line with the growth in sales of AI Cloud and other AI power businesses. Operating expenses was RMB11 billion, decreasing 19%, 1-9, year-over-year, primarily due to a decrease in channel spending, promotional marketing expenses, and staff-related expenses. Baidu Core selling, general, and administrative expenses were RMB4.2 billion, decreasing 31%, 3-1, year-over-year. SG&A accounting for 17%, 1-7, of Baidu Core revenue in the quarter and decreased from 25% in the same period last year. Baidu Core research and development expenses was RMB5.3 billion, decreasing 4% year-over-year. R&D, accounting for 21% of Baidu Core revenues in the quarter and decreased from 22% in the same period last year. Operating income was RMB5.3 billion. Baidu Core operating income was RMB5 billion and Baidu Core operating margin was 20%. Non-GAAP operating income was RMB7.2 billion. Non-GAAP Baidu Core operating income was RMB6. 7 billion and non-GAAP Baidu Core operating margin was 26%. Q3 present the first year-over-year growth in non-GAAP operating profit and margin perspective since Q2 2021. Total other loss net was RMB4.8 billion, decreasing 78% year-over-year, which mainly including a fair value loss of RMB3.1 billion and impairment of long-term investments of RMB1.4 billion. In the third quarter last year, we recognized a fair value loss of RMB18.9 billion. A significant portion of long-term investments, including but not limited to, investments in equity securities of public and private companies, private equity funds, and digital access. This is subject to quarterly fair value adjustments, which may contribute to net income volatility in future periods. Income tax expenses was RMB908 million compared to an income tax benefit of RMB1.8 billion in Q3 2021, primarily due to an increase in deferred tax benefit recognized on fair value loss of long-term investments and deduction of certain expenses that were previously considered non-deductible in the third quarter of 2021. Net loss attributable to Baidu was RMB146 million, and diluted loss per ADS was RMB0.87 Net income attributable to Baidu Core was RMB25 million. Non-GAAP net income attributable to Baidu was RMB5.9 billion. Non-GAAP diluted earnings per ADS was RMB16.87, non-GAAP net income attributable to Baidu Core was RMB5.8 billion, and non-GAAP net margin for Baidu Core was 23%. Adjusted EBITDA was RMB8.9 billion and adjusted EBITDA margin was 27%. Adjusted EBITDA for Baidu Core was RMB8.2 billion and adjusted EBITDA margin for Baidu Core was 33%. As of September 30, 2022, cash, cash equivalents, restricted cash and short-term investments were RMB184.5 billion and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB179.5 billion. Free cash flow was RMB6.6 billion and free cash flow excluding iQIYI was RMB6.4 billion. Baidu Core had approximately 36,500 employees as of September 30, 2022. On a separate note, ACE generate positive operating profits on both GAAP and non-GAAP basis in this quarter. The acquisition of ACE also generated positive free cash flow in this quarter. With that, operator, let's now open the call to questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Alicia Yap with Citigroup. Please go ahead. Alicia Yap: Thank you. Good evening, management. Thanks for taking my questions. I have two questions. First, can management comment how should we look at the advertising demand recovery in the near-term and it's also in the next quarters? And then secondly, can management comment on, how you think about the competitive landscape in the China advertising market will evolve going forward? And what would Baidu long-term market share be? Thank you. Robin Li: Hi Alicia. This is Robin. Let me answer your questions. Yes, our revenues are very sensitive to COVID control measures. Baidu Core's ad revenues returned to positive year-over-year growth in August. But in September, it decreased again, because of new roundup COVID resurgence. Overall, Q3 was much better than Q2, because there were a recovery from the second quarter in which there were a lot of disruptions caused by COVID. When we entered the fourth quarter, the situation improved in October, but since early November, it got a bit cloudy because another round of COVID impacted some regions, like Guangzhou and Beijing. We're closely watching how the situation will develop. I think the short-term will probably still be quite volatile, but the economy should improve in the mid-term and beyond. China has been fighting against this COVID for almost three years and the country has been gaining experience. Well, we're certainly going to see some ongoing disruptions and uncertainties. The overall situation should improve -- should move in a positive direction over the next few quarters. As you know, many of our ad verticals were affected by COVID and macro. So once COVID and macro situations improve, our ad revenues from different verticals such as travel, franchising or local services should rebound. Again, we will closely watch how COVID situation develops, and we will work very hard to bring our ad revenue back to a positive year-over-year growth as soon as possible. In addition, AI Cloud and intelligent driving, our new business also negatively impacted by the COVID disruption. So if COVID impact the supplies, these non-advertising businesses should also see improvement. And regarding to your question on competition in the online advertising market, first of all, I think Baidu App is one of the very few super apps in China's mobile internet industry, well-recognized and well-established. Search ads enjoying the best ROI among various types of performance ad because users explicitly express their intent in our search box. And search ads connect users' intentions with the most relevant product and service offerings. This is why a lot of advertisers consider Baidu Search as the most important and most efficient channel to reach their targeted audience. And secondly, China's mobile internet is maturing. User growth is gradually slowing down and the competitive landscape is much less volatile than before. With this backdrop, Baidu App still managed to grow its user base nicely over the past many quarters. On top of that, with the unique positioning of search, we believe we should be able to sustain our market share in the online advertising market over the long run. And thirdly, unlike our peers, most of our advertisers are SMEs, being in the real economy. Many of them run businesses in the service sector such as local services, business services and travel. This business is work hurt the most by the pandemic. So when COVID impact subside, and revenue should rebound quickly. And Baidu stand to gain share in the overall advertising industry. . Alicia Yap: Thanks, Robin. Operator: The next question comes from Eddie Leung with Bank of America. Please go ahead. Eddie Leung: Hi, good evening, guys. Pretty solid quarter despite all the macro headwinds. I have a couple of questions on cloud services. So we have seen -- it seems like a slowdown in the industry. So could you talk a little bit about the reasons behind the slowdown -- and how you guys are thinking about the growth rates in the upcoming lessor quarters on the medium term? And then secondly, could you also talk a little bit about the competitive landscape -- we have seen a media reporting market share gains by cloud companies all tie the Internet set in the past one or two years, right? So any color on the competitive landscape will be useful. And then finally, I remember, Robin, you mentioned about the margin improvement of cloud. So could you also talk about your thoughts on the role to profitability? Any time line would be helpful. Thank you. A – Dou Shen: Hello, Eddie. Thanks a lot for your questions. This is Dou. I'll try to answer your questions. So for the revenue growth part, right, I think it's slowing down mainly due to the COVID-19 impact. for example, because of the travel restrictions, we could not even implement our projects on time, and the bidding for the new contracts was also affected. Apart from that, I also want to highlight that we are focused on healthier and more sustainable growth by cutting some low-margin businesses. So we believe this approach is crucial for the long-term development. Actually, looking beyond the current quarter, as Robin has just mentioned, the train for China's traditional industries and the public sector to use AI and move their business onto the cloud remains unchanged. So I think post pandemic, the companies should gain more confidence in their future growth so that they are more willing to spend more money on digital and intelligent upgrades. Baidu has already demonstrated that we are very capable of using AI to improve the efficiency in transportation. As you can already see, our ACE Smart Transportation revenues have been growing rapidly, and we continue to gain market share accordingly. So in the meanwhile, we are reducing the operating loss for small transportation because we continue to expand scale and continue to increase operating leverage. So in our next steps, so we are excited about repeating our success in transportation in other traditional industries like manufacturing and utilities. So actually, in the -- just the past quarter – the quarter, so our cloud revenues from the manufacturing and utilities industries both grow solidly. And it's largely because of our continuous efforts in improving the end-to-end AI capabilities and our understanding of the fundamental needs in these industries. So to answer your questions, we believe this or our sustainable competitive advantages to compete against other players. In addition, the market is expanding in their alternative opportunities for us and our peer companies to grow over the long-term. So talking about the profitability, so Baidu AI Cloud reduced operating loss and continue to improve operating loss margin this quarter. To expand on that, our personal cloud kept generating decent operating profit and margin. And our enterprise part grow faster than personal cloud, and we're very happy to see the trend of loss reduction because of the efforts I just mentioned earlier. So our strategy to standardize solutions in the user -- in the use cases for our key industries started to bear fruit. So we have worked very hard to replicate more solutions from one user case to another to grow business scale and improve margins. So it's already proven in Smart Transportation as we have mentioned. And in the future, we look forward to expanding this approach at large scale in more key industries. So AI Cloud is very important new business for Baidu, and we will continue to grow the business and improve margins going forward. Eddie Leung: Thank you. Operator: The next question comes from Alex Yao with JPMorgan. Please go ahead. Alex Yao: Thank you management for taking my question. I have a couple of questions on Baidu Core margins. In the past several quarters, you guys did very good job in terms of cost control and the margin improvement. As large-scale BU and headcount streamlining has been already down, how much more room should we think about for further cost cutting in Baidu Core in the coming quarters and 2023? And the related question is how should we think about the Baidu Core operating margin going forward? Lastly, would Baidu slow down the cloud and autonomous driving investments if the macro situation further deteriorates? Thank you. Rong Luo: Thank you, Alex, for your questions. Let me try to figure your questions. This is Julius. I think as Robin has said in the every beginning of the prepared remarks, I think for Baidu Core, we continue to optimize the cost expenses and we continue to improve our operational efficiency, which is one of our key short-term tasks. At the same time, we kept investing in the new AI businesses for future growth. This strategy actually has not changed in the past few quarters. And this strategy allow us to weather through the challenging market environment, and we believe that it will prepare us for accelerated growth again once the macro downturn is over. In Q3, let me recast some of the numbers. Baidu costs non-GAAP operating profit margin expanding to 26% from 24% in the same period last year. I think it has represented the first year-over-year growth in non-GAAP operating profit and margin perspective since Q2 2021. And we made a lot of efforts to achieve such results. You'll probably see from our early release, our SG&A has decreased once again in Q3, this quarter from the same quarter last year. We have been very disciplined with the channel spending and promotional activities. And just to add that, it was already less consecutive quarter that SG&A achieved a year-over-year decline. And going forward, we will continue to control the variable costs and expenses as same as what we did in the past. If you look into our each part of our business, for mobile ecosystem, our operating profit actually is going up on a year-over-year basis, even though we know the revenue was negatively impacted by COVID-19. And we have also already mentioned earlier and which is just repeated by Dou, we made a lot of efforts for the healthy growth of AI Cloud. This quarter, the operating loss margins for AI Cloud improved significantly, both on a year-over-year basis and quarter-over-quarter basis. If we're separate, two part. For enterprise and public status, we're allocating our resources to high-margin business and reduce the low-margin business. Also, we continue to standardize our end-to-end solutions, including the IaaS, PaaS, SaaS for key user cases and as much expectations started one of the examples, we continue to grow fast and at the same time, improve the margins quite notably. And the personal cloud, same as well in the past, we continue to generate a decent profit this quarter. For our robotaxi business, Apollo Go, we also chose to grow Apollo Go at well measured pace. We have very comprehensive financial models to optimize and forecast the cost and expenses in this business, especially the labor costs and the very -- hardware costs. We have been very careful to measure and estimate the cash flow for this business. Our strategy is to strengthen our leading position in robotaxi all over the world, acquire sizable market shares in the ride-hailing sector, especially in the key cities in China and in the future, and ultimately try to generate more profits in these key areas. We are not expanding our operations without thinking about building a sustainable and profitable business models for Apollo Go. For auto solutions, Zhenyu Li mentioned just now, we already have a projected cumulative sales of around RMB11.4 billion, while revenue contribution is still very small at this stage, and we expect it to see more revenue keying from the second half of next year or maybe early in 2024, as small cars with our solutions can become available in the market. And once the meaningful revenue kicks in, this business should start to generate profit. I would like to also make it clear in the RMB11.4 billion is our estimate including the contract side and nomination letters we received from OEMs. In auto industry, our nomination letter means a supplier is affected for certain projects, and then the OEMs will sign up contracts with us first. Our estimate is based on our assumptions of the timing of launch, the pricing, the future volumes. I hope this gives you a better understanding of how we have made these calculations. Looking forward, we will continue to be very disciplined with the cost and expenses. And at the same time, we'll continue to invest in the AI Cloud and intelligent driving for our long-term growth, despite of the challenging environment in the short term. And in the future, we believe our mobile ecosystem will continue to generate different profits and cash flow to support our investments in the new AI business. And we'll also continue to work very hard to narrow our loss in AI Cloud. Thank you so much for your question. Operator: The next question comes from Gary Yu with Morgan Stanley. Please go ahead. Gary Yu: Hi. Thank you for the opportunity and congrats on the expanded partner network and growing backlogs for ADS business. I have a question on your auto solutions. Just wondering, when should we expect meaningful revenue to start gains? And how do you differentiate the Apollo's auto solution from your peers? And could you help us understand the underlying market space for Baidu Apollo's auto solutions? And a related question to that is, have you noticed a significant change in the attitude of the OEMs towards self-developing for intelligent driving solutions? Thank you. Robin Li: Hi, Gary, this is Robin. We've seen huge opportunities in the auto solutions market. In the first 10 months of this year, EV sales increased by more than 100% in China. We're now the largest EV market in the world, accounting for more than half of the global EV sales. A clear trend for the auto industry is vehicle intelligence. Baidu is benefiting from this trend. Our years of investments in autonomous driving have begun to bear fruit. Baidu Apollo's auto solutions derived from our core technologies. A lot of AI models we build for robotaxi can be used for ASD. Another point to note is that as the market leader, we have been investing in autonomous driving for about 10 years. And thanks to this investment, we not only have completed tens of millions of testing miles on the public roads, but also accumulated a very valuable experience by running the largest robotaxi fleet on urban roads on a daily basis. This has provided us great insight, and we have used these insights to develop auto solutions that best meet our customers' needs. So for example, ANP 3.0. We believe it is the most advanced intelligent driving solution for city roads on the market. Because ANP 3.0 is derived from our four autonomous driving technology, we were able to use a very limited amount of R&D personnel to make this advance solution available to the market within a short time. Jidu's first car Robo 01 will be the first one to use ANP 3.0. We believe that with more and more automakers adopting our auto solutions, we will become more experienced in making our solutions compatible with more popular car models. On the other hand, with more and more cars with our auto solutions are on the go, we will be able to grow experience from everyday uses and we'll continue to improve our auto solutions. As I mentioned earlier, our total projected cumulative sales for Apollo's auto solutions reached RMB11.4 billion, which is more than 50% from last year. Based on our current pipeline, some of the major car models that are equipped with ANP, AVP should be launched starting in the second half of next year. So, meaningful revenue contribution for this business should begin in 2024 and profit will follow. On the differentiation, if you look at the cost side, as we mentioned many times before, developing advanced intelligent solutions require massive investment in technology and talent. Frankly speaking, most companies cannot afford this kind of investment. Automakers trust our brand and technology. So, a lot of them have chosen to partner with Baidu intelligent solutions. For them, we are a trustworthy and reliable supplier because we have made years of investment in intelligent driving technology and we have a strong cash position and our advertising business continue generate strong cash flow to support our investments. Going forward, this will continue to support the operation with many automakers at large scale. That's why more and more leading automaker have recognized us and have broadened partnership with Baidu. For example, in the quarter, we expanded our partnership with one of China's largest auto companies, and we plan to use our ASD solutions for yet another of their popular car model. And the ASD solution used into ANP, AVP, and HD Maps. Going forward, we are looking forward to more partnerships with OEMs, both domestically and internationally. Thank you, Gary. Operator: The next question comes from Kenneth Fong with Credit Suisse. Please go ahead. Kenneth Fong: Hi, good evening management. Congrats for the solid quarter and thanks for taking my question. I have a follow-up question about Apollo Go. On a fully autonomous driving, what kind of progress will be seen in the near-term? Could management also talk about a key milestone that Apollo Go will achieve in 2023 and even in the longer term? And to achieve this milestone, how should we think about the impact on your P&L, as well as cash flow? And when should we expect Apollo Go business to achieve breakeven? Thank you. Zhenyu Li: Thanks for your question. This is Zhenyu. We are making very good progress and package of providing fully drive ride-hailing for the public. We believe Apollo Go is the largest autonomous ride-hailing service provider in the world, because, number one, when we look at the numbers back on coverage rate. Apollo Go has provided 1.4 million drive for the public. In Beijing, Shanghai and Guangzhou each half complete 15 drive per day. We are also providing fully driverless AI ride-hailing solution to public in Wuhan and Chongqing and the number of ride providers by fully driverless AI is growing very fast. And number two, Apollo Go is already in more than 10 cites in China. It is also cities have a population of more than 10 million, as Rong Luo mentioned in his script, building up operation of us to improve technology and safety. He give examples about technical improvement – share [ph] about the operation help us to improve user experience. In operations, we got a lot of feedback from passengers. For example, passengers, one half, a operated customer to moderate, b, to citizen up faster and improve plan or rules can be formed [ph]. We then refined and improve or open for quality. Our efforts help us gain more recognition from passengers. Today, in Chongqing, Beijing, Apollo Go is already importantly for computing. After trying Apollo Go, people come to realize that it is a reliable and fixed service. It drove just like a professional driver. Some people may wonder why is Apollo Go 25% human drivers? This operation is always be in compliance with traffic regulation and our AI driver never get tired or distracted like human drivers, all of those allow Apollo Go provide worry-free to drive for the public. While strong takeaway product 150 have helped us to us entrust, both from auditor and also from our regulators. We mentioned before, set in Wuhan and Chongqing. We will allow to provide fully driverless cadence service this August. The operation in both cities is well on track. Going forward, we plan to continue to expand this operation – and this operation -- also and as more fully driverless vehicles. In 2023 and beyond, we will continue to skills our operation. In particular, fully driverless ride-hailing operation in more region and reduce hardware and vehicle cost. We believe while we are testing we will eventually be profitable and cheaper than the current ride-hailing service. We will continue to invest in robotaxi to capture a huge market opportunity. Rong Luo: Hi, Kenneth, this is Julius. Regarding your question about the impact on our P&L and cash flow. We believe the overall impact is actually manageable. As Robin said in the script, actually, our team today has built a very comprehensive financial model for Apollo Go. This model actually helped us to understand what should we do, where we should improve and adjust to generate profit in these models in the future. For example, today, we are working very hard towards two goals. Number one is, we aim to remove safety officers in the cars, as labor cost is where we should reduce and make a kind of new ways. And number two, we continue to reduce the hardware costs. During the past quarters, we continued to improve our AI for autonomous driving technology and just now, both Zhenyu and Robin have given some examples of how we do that, how we leverage the large-scale operation to improve technology. These efforts help us to earn trust and build track records. Today, we are providing fully driverless ride-hailing services in Wuhan and Chongqing, meaning no safety officers in the cars at all. In Beijing, we're also making good progress as the safety officers today are now allowed to -- not to see behind the steering wheel and maybe even the front seats, which will help us to remove the safety officers in more cities and reduce the labor costs in the future. And on the other hand, for the hardware perspective, most of the newly added car in the coming 12 months will be RT5, the model of Apollo Go. This means there will be some investments in hardware next year. Once a sizable amount of RT6 which has just launched a few months ago, pulling operation in the year 2024, our unit economy will significantly improve because RT6 has much lower production costs than any previous generations of robotaxis. The unit economy in our operations in key cities is also improving, because we continue to scale out and improve the order cost -- the cost efficiencies. Robin has mentioned, our rides continue to grow in the past few quarters and also each car now provide 15 rides every day in some Tier 1 cities. Apollo Go today is becoming -- recognized as a reliable and efficient way for daily commute. Overall, Apollo Go our measures be, we aim to achieve the unit economy in key cities before we expand to more cities. I think, just a summary, all of this impact to our cash flow and the P&L is manageable, and we have the patience. Thank you. Kenneth Fong: Thank you. It's very clear. Operator: The next question comes from Lincoln Kong with Goldman Sachs. Please go ahead. Lincoln Kong: Thank you, gentlemen. I want to ask about our sales of advanced chips to China, because we have seen recently a lot of press report around US chip restriction against China. So we wonder how you are seeing these restrictions impacting your ability to grow the business by AI Cloud, the autonomous driving and lastly, wider our AI business? So, could you also remind us, our business that's the most is depending on the advanced large AI chips and if there's any way, we'll be able to manage this with the master chip capability? Thank you. Robin Li: Thank you, Lincoln. You're right. This is a hard topic to reason to actually. So, the short answer to your question is that, we think the impact is quite limited in the near future, and here are the reasons. So first of all, as of today, a large portion of our AI Cloud business and even whether AI business does not rely to much on the high advanced chips. And secondly, for the part of our business is that need advanced chips, we have already started enough in hand actually to support our business in the near term. Thirdly, there were some alternative to the restricted chips and we have the technologies to use these alternatives to achieve almost the same effectiveness and efficiency in our AI Cloud and the weather AI businesses. Last, but not least, automotive chips are not on the prohibited list. So this means that in the near future, in-vehicle computing is not affected. So when we look at the mid to longer term, we actually have our own developed AI chip, so named Kunlun. Actually, we already started to use Kunlun chip to support some large-scale AI computing tasks internally. We also use Kunlun to serve external customers already. So because we have full stack AI capabilities from chips to AI frameworks to foundation models and then to application software, so we can achieve much higher efficiency as we optimize AI tasks from end to end. So let me give you some examples. By using our Kunlun chips [indiscernible] and large language models, the efficiency chip to perform text and image recognition talks on our AI platform has been improved by 40% and the total cost has been reduced by 22% -- 30%. There are more cases like this in a quality inspection in our smart manufacturing projects and image recognition in the smart city products and so forth. So as our business grows, we believe our end-to-end capabilities will gain us even stronger competitive advantages. For the core chips, so we expect to see more auto force, including core chips to be manufactured in China in the future. So as China's intelligent driving market continues to develop rapidly. So this means that supply chain in auto industry may become more and more independent unless we’re in the imports. So once again, I want to emphasize that Baidu has built a very strong R&D team. We keep introducing cutting-edge technologies to the market, and we help users and customers to use these technologies to improve efficiency. So that's why we believe, we can leverage our strong AI capabilities and AI algorithms to support the top level computing, even though we face some turbulence in the semiconductor supply chain. So to sum up, chip sales restriction should have a limited impact on our business operation in the near term. Instead, we think it increased some good market opportunities for the Chinese chip companies and our equipment AI chips and our AI business will eventually benefit from these opportunities. Lincoln Kong: Great. Thank you. Operator: The last question today comes from James Lee with Mizuho. Please go ahead. James Lee: Great. Thanks for taking my questions. I have two here. First, can you guys provide some more color on your progress of e-commerce search and short video opportunities? Can you guys talk about maybe from a consumer, merchants' and creators' point of view, what kind of pinpoint are you trying to resolve here? And second, can you talk about the traction that you have made in open mobile ecosystem and potential monetization opportunities here? Thanks. Robin Li: Yes, this is Robin. I mentioned earlier that we have been building closed-loop experience for our users and advertisers in our mobile ecosystem especially in Baidu app. For e-commerce, because of the efforts we made in the past, users now come to Baidu not only for information and knowledge, but also for services and merchandise. Since the beginning of this year, merchandise-related search queries on Baidu have grown much faster than last year. You may be wondering why? It is because users increasingly find out that on our platform they can now find detailed product information, product reviews and even buy the product without leaving our app. Now, we have a huge number of SKUs available for search on our platform. We have also deepened the partnership with leading e-commerce platform, so that users can easily buy products they need here on Baidu App. Just like I said in my prepared remarks, in Q3, GMV facilitated by the search continue to grow very fast. I also mentioned earlier that retail has been an outperforming vertical for our online ad business for quite a few quarters. Even very recently, revenues from the retail vertical during the Double Eleven, e-commerce promotional season, grow by double-digits from last year. And this all prove that our efforts gradually bearing fruit. As for our short video, we're making short videos increasingly available in our feed and search services. For feed, short video distribution and time spend continue to grow steadily. Right now, about 85% of the feed distributed by Baidu App are short videos. And for search, more than 20% of the clicks on the search pages were short video. This number increased by more than 80% year-on-year during the month of September. So we believe the popularity and the adoption of video in our search results will ramp up quickly. When we talk about monetization, short videos, especially for videos that provide fully immersive video experience, can be much better monetized than text and images. For example, in feed, ECM -- ECPM for fully immersive video apps are much higher than text and images. This is one key reason for feed revenue to show positive growth year-over-year in this quarter, even though the macro was unfavorable. This progress in feed has made us quite confident that short videos will also benefit search revenue later on. Now we're also trying to use AI-generated content to enrich our short video portfolio. We still have a very early stage for them. We believe with AI, we will generate a large number of short videos in a faster and more cost-effective way. To sum up, e-commerce and short videos are two areas that could drive incremental revenue growth for us, and we will continue to work hard on that. Meanwhile, we would like to stress that profit growth remains a top priority for our mobile ecosystem. As for interoperability, we believe it is a long-term trend. As we talked about it before, being a search engine, we benefit from more content becoming searchable on the Internet. Looking into the longer-term, we believe the government's willingness to build an open mobile Internet industry remains unchanged because benefit the users and the SMEs. And for us, by the way, is getting ourselves ready for that trend. Thank you. Operator: This concludes our question-and-answer session, and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.

Operator: Thank you for standing by, and welcome to the Baidu Second Quarter 2022 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Juan Lin, Head of Investor Relations for Baidu. Please go ahead. Juan Lin: Hello, everyone, and welcome to Baidu's second quarter 2022 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 Li, our Co-Founder and CEO; Rong Luo, our CFO; Dou Shen, our EVP in charge of Baidu AI Cloud Group; and Zhenyu Li, our SVP in charge of Baidu Intelligent Driving. 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 provision of the U.S. Private Securities Litigation 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 the SEC and Hong Kong 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 another non-GAAP financial measures. Our press release a reconciliation of the note non-GAAP measures to the analysis most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. Baidu Core earned RMB23.2 billion in revenues and 5.1 billion in non-GAAP operating profit in the second quarter. The resurgence of COVID-19 led to an unfavorable macro environment in the quarter. However, Baidu AI Cloud and Intelligent Driving business maintained their rapid growth momentum as we aligned well with the government's repeated cost for technology innovation. Especially Q2 revenues from Baidu AI Cloud increased by 31% year-over-year outgrowing many of our peers, contributing 18% of Baidu Core's revenues in the quarter. That's up from up from 14% in the same period last year. Further, the operating margin for Baidu AI Cloud improved on both a year-over-year and quarter-over-quarter basis. Apollo Go completed 287,000 lines in Q2, increasing by almost 500% year-over-year. On July 20, Apollo Go's accumulative price reached 1 million. And in July, we unveiled Apollo RT6, the sixth generation Apollo robotaxi vehicle, bringing the cost of robotaxi to the price range of mass-market electric vehicles for the first time in China and globally. We aim to put a sizable amount of RT6 vehicles into operation in the year 2024. While Baidu Core ad revenue decreased by 10% over the year, in second quarter due to a challenging macro environment, our mobile ecosystem continued to generate strong cash flow as we focused on operational excellence and efficiency. Since early June, we have seen signs of recovery as the control measures were gradually lifted. For example, the year-over-year decline of our ad revenues narrowed in June and July. In particular, ad revenues from retail customers resumed year-over-year growth during the 618 Shopping Festival. Project implementation for Baidu AI Cloud has also been improving, thanks to the gradual removal of some major travel restrictions. While the recovery is likely to be at a gradual pace, and there are still be some uncertainties about the development of COVID-19, our long-term goals, strategies and capabilities for shareholder value creation remain intact. As a group, we have built a discipline of long-term thinking, which we believe is a strong asset in this fast-evolving innovative and highly competitive wins environment. Cost optimization and operational efficiencies are always top of mind for us. Our mobile ecosystem business should continue to generate strong cash flow to fuel and fund our investments in Baidu AI Cloud and Intelligent Driving over the long term. Now let's review the second quarter operational highlights. Revenues from Baidu AI Cloud grew by 31% year-over-year in the quarter, once again, offsetting our peers despite the macro challenges brought by COVID-19 resurgence. Our growth was driven by the strong performance in cloud business within enterprise business and the public sector. Not only, we managed to improve our operating margin both on a year-over-year and quarter-over-quarter basis in Q2, as we focused on healthier and more sustainable cloud revenue growth. We aim to achieve profitability as we scale up further. Baidu AI Cloud continues to benefit from the growth opportunity in China, digital and intelligent transformation. We believe this transformation is due at the early stage, and organizations are eager to leverage technologies to improve efficiency and productivity. Over the past years, we have made tremendous advances in AI technologies, made our AI capabilities widely available to enterprises and developers through our open platform, gained valuable for industry expertise, saw significant improvements in productivity in areas like manufacturing, transportation, energy and utilities and the public sector. Baidu AI Cloud's differentiating strengths are our AI capabilities and deep understanding of industry-specific pain points to help our customers to accelerate their transformation. In short, our competitiveness enables us to take full advantage of the tailwind offered by these new secular trends. Revenues from ACE Smart Transportation increased by about 40% in Q2. During the second quarter, we won several new projects for highway and in urban roads, both from our new and existing customers. By the end of second quarter, Baidu ACE Smart Transportation has been adopted by 51 cities up from 20 cities a year ago and 41 cities a quarter ago based on the contract amount over RMB20 million. Going forward, we will continue to focus on key industries and enable cross-industry replications for similar use cases by utilizing AI innovation. By doing so, we believe we will be able to reduce the operating losses and achieve profitability over time. In the meanwhile, we will continue to focus on quality and sustainable revenue growth and aim to continue outgrowing our peers. Moving to Intelligent Driving, Apollo Go continues to take a big step towards building up operations, strengthening its lead position as the world's fifth autonomous ride-hailing service provider. In Q2, Apollo Go provided 287,000 rides to the public, up from almost 500% year-over-year and 50% quarter-over-quarter. On July 20, 2022, Apollo Go accumulated rides reached 1 million. In the Yizhuang region of Beijing, according to our estimate, Apollo Go has obtained a 10% market share for ride-hailing services with pickup and drop-off both in Yizhuang. Apollo Go already becomes an important supplement for daily commuting app we launched the services less than two years ago. Now more than 100 Apollo Go vehicles are serving the Yizhuang resident on a daily basis, and each vehicle on average, completes more than 20 rides per day. In July, Apollo Go branched out to Hefei and Chengdu and is now operating in more than 10 cities charging fees in seven cities across China. We believe large-scale operation allows us to improve our level for autonomous driving technologies further. With data generated from everyday operation, we can identify problems that are not visible during the testing phase. The number of corona cases incurred during operations has far exceeded the ones found by vehicles and testing. In addition, Apollo Go has made some exciting progress since our last earnings call, marked by receiving the green light to provide fully driverless ride-hailing service systems and launching of the sixth-generation robotaxi vehicle, RT6. Earlier this month, we obtained the regulatory permits in Chongqing and Wuhan to provide fully driverless lighting services on open roads. We were also authorized to collect fees on those services. We are proud to be the first and only company in China now to offer fully driverless ride-hailing services to the public on open roads, entirely without human drivers in the car. Such achievements validate our superior Level 4 autonomous driving technology and endorse our strategy of utilizing large-scale operations to boost further technological advancements. On July 21 at Baidu World, we unrolled Apollo RT6, the sixth-generation Apollo global taxi vehicle with a targeted mass production cost of RMB250,000. This is significantly lower than the mass production cost of the fifth-generation vehicle and is in the price range of mass market electric vehicles. RT6 is designed to offer large-scale fully driverless ride-hailing services and launched at a time that both our technological and operational capabilities are ready. We believe that China's smart EV value chain has already been well established. Some of the auto parts and components for Level 4 autonomous driving solutions are already being produced in China at a much lower price than a few years ago. Moreover, RT6 is a passenger-centric vehicle, so we have removed some components, especially designed for drivers. For example, RT6 has a detachable steering wheel, which could unlock space for extra seat, luggages, desks and even some entertainment equipment in reaching the in-car experience for the passengers. Such achievements have set a strong foundation for Apollo Go to significantly reduce the two largest cost items for its operations, labor cost and the robotaxi vehicle cost. This is a critical step for Apollo Go to build a revolutionary business model and accelerate its expansion. Over the long term, we aim to make Apollo Go an alternative mobility option for millions of people, creating tremendous economic and social values. Baidu's Apollo auto solutions, including ASD and DuerOS for auto continues to gain popularity among automakers. As an increasing number of auto OEMs have publicly committed their brands to autonomous and connected vehicles, we're pleased to say that many have chosen to form alliances with Baidu to expedite their time line and plan. Recently, the total projected accumulated sales of our auto solutions have grown to RMB10.3 billion per our internal estimate. Moving to the mobile ecosystem, the user base of our mobile ecosystem continued to grow steadily. We once again delivered strong margins in the second quarter despite the negative impact on our absence caused by macro weakness. On the user side, Baidu app's MAU increased by 8% year-over-year to 628 million in June. Data search queries and the content is distributed through Baidu app grew double digits year-over-year in Q2. Our innovations and efforts in delivering a closed-loop experience has made Baidu app increasingly valuable to users. In addition to searching for information and knowledge, people come to Baidu app to look for ways to fulfill their needs. We have enabled them to order services, purchase products and interacted with industry experts and others without leaving Baidu app. Here are some metrics to share. 84% of our DAU in June were locking users, that's up from 76% a year ago. People have discovered that their user experience within Baidu app continues to improve once they are locked in. Quarterly GMV facilitated by Baidu search, [indiscernible] [LotSmart] grow by about 127% year-over-year. In particular, during the 618 Shopping Festival, GMV increased by about 260% year-over-year. In June, while 130,000 industry experts actively signed up for our instant replies future, up from about 100,000 in March. Total daily instant replies increased by about 190% year-over-year, up about 30% from March. Another highlight is our progress in short videos. Currently, about 85% of the content distributed within Baidu app feed are short video. During the quarter, we expanded the fully immersive video experience in the service home page to all the users. This feature is now available on both search and feed, helping by short video consumption on Baidu app. In Q2, short videos distributed through certain feed increased by double digits year-over-year. In addition, we are also using AI to expand our content portfolio. We give content creator AI tools, which they can use to produce video content more efficiently. AI generated content work particularly well for long and short content and breaking mils. While using our closed-loop experience, more and more users leading their footprint within our mobile ecosystem, increasing our capability to understand user needs and enabling strong conversion optimization at each step of their journey. Together with our continuous effort to optimize the advertising technologies, this has helped us to significantly improve the app conversion rate for our customers. Looking ahead, here are some key takeaways I'd like to give you. First, operationally, we have built strong new growth engines for Baidu Core, which we believe will boost Baidu Core's revenue growth in the coming years. Baidu AI Cloud uniqueness in AI capabilities continues to outgrow most of our peers. Apollo Go continues to solidify its position as the largest autonomous ride-hailing service provider in the world. Apollo Go has entered a new chapter with fully driverless ride-hailing onopen roads. While the launch of our purpose-built RT6 robotaxi vehicles for ride-hailing at really low cost, Apollo Go is set to accelerate its operation, further differentiating from our peers in both technology and operation. And the second takeaway financially is -- the mobile ecosystem will continue to generate strong cash flow to fund our investments in cloud and intelligent driving. On a separate note, we are also excited about iQIYI's continuous efforts in improving operational efficiency. iQIYI once again generated operating profit in Q2, the second consecutive quarter to report positive operating profit on both GAAP and non-GAAP financial measure. Furthermore, iQIYI generated positive net operating cash flow in the quarter for the first time. Before I turn the call to Rong, I'd like to highlight that we will be added to the Hang Seng Index from September 5. We believe with the inclusion of Hang Seng Index, one of the best known indices in Asia, the Hong Kong shares of Baidu will receive more front flow. Overall, I'm very proud of the team's strong execution in the quarter and remain excited about our future. With that, let me turn the call over to Rong to go through our financial highlights. Rong Luo: Thank you, Robin. Now let me walk you through the details of our second quarter financial results. Total revenue was RMB29.6 billion, decreasing 5% year-over-year. Revenue from Baidu Core was RMB23.2 billion, decreasing 4% year-over-year. Baidu Core, online marketing revenue was RMB17.1 billion, decreasing 10% year-over-year. Baidu Core non-online marketing revenue was RMB6.1 billion, up 22% year-over-year, driven by cloud and other AI power businesses. In Q2, Baidu AI Cloud increased by 31% year-over-year to RMB4.3 billion. Revenue from iQIYI was RMB6.7 billion, decreasing 13% one- year-over-year. Cost of revenues was RMB15.2 billion, decreasing 5% year-over-year, primarily due to a decrease in content cases, partially offset by the increase in personnel-related expenses and other courses related to new AI businesses. Operating expenses were RMB11.1 billion, decreasing 8% year-over-year, primarily due to an increase in channel spending and promotional marketing expenses. Operating income was RMB3.4 billion. Baidu Core operating income was RMB3.2 billion, and Baidu Core operating margin was 14%. Non-GAAP operating income was RMB5.5 billion. Non-GAAP Baidu Core operating income was RMB5.1 billion, and non-GAAP Baidu Core operating margin was 22%. Total other income net was RMB151 million compared to a total other loss of RMB2.4 billion last year, which included a fair value loss of RMB3.1 billion from long-term investments. In the second quarter of 2022, we recognized a favorable gain of RMB536 million, a significant portion of long-term investments including, but not limited to, investments in equity securities of public and private companies, private equity funds and digital assets is subject to quarterly fair value adjustments which may contribute to a net income volatility in future periods. Income tax expenses was RMB125 million, decreasing 99% year-over-year, primarily due to the reversal of certain tax expenses accrued for 2021 based on the 2021 tax return filed in the second quarter of 2022 and an increase in deduction on certain expenses that were considered not deductible in the second quarter of 2021. Net income attributable to Baidu was RMB3.6 billion and diluted earnings per ADS was RMB9.97. Net income attributable to Baidu Core was RMB3.7 billion. Non-GAAP net income attributable to Baidu was RMB5.5 billion. Non-GAAP diluted earnings per ADS were RMB15.79%. Non-GAAP net income attributable to Baidu Core was RMB5.4 billion and non-GAAP net margin for Baidu Core was 24%. Adjusted EBITDA was RMB7.1 billion, and adjusted EBITDA margin was 24%. Adjusted EBITDA for Baidu Core was RMB6.6 billion, and adjusted EBITDA margin for Baidu Core was 28%. As of June 30, 2022, cash, cash cadence restricted cash and shopping investments were RMB189.4 billion and cash, cash equivalents, restricted cash and short-term investments, excluding IT were RMB184.5 billion. Free cash flow was RMB5.5 billion and free cash flow, excluding iQIYI was RMB5.5 billion. Baidu Core had approximately 36,000 employees as of June 30, 2022. With that, operator, let's now open the call to questions. Operator: [Operator Instructions] Your first question will come from Alex You of JPMorgan. Please go ahead. Alex Yao: Hi, management, good evening. Thank you for taking my question. I note you guys mentioned that you are seeing a sign of recovery in your advertising business since June. Could you management just share more color on the recovery in terms of advertising categories? Looking into the second half of 2022, how do you expect the advertising to develop? And in the medium to longer term, if we look beyond the near-term impact on COVID, how do you foresee the advertising business to develop in the medium to longer term? Robin Li: Alex, this is Robin. As you know, Baidu Core ad revenues decreased about 10% year-over-year last quarter because of the challenging macro environment. In April and May, our ad revenues experienced a significant year-over-year decrease because COVID-19 impacted some of China's major cities, especially Shanghai and to a lesser extent, Beijing. In June, our ad revenue started to recover, when the situation gradually improved, and July was better than June. In terms of ad verticals, some of ad verticals got hit really hard in April and May. That includes the retail sector, travel, local services and health care. Ad spending from these verticals has been picking up quickly since June. Looking into the second half of the year, we're still facing macro uncertainties. It is hard for us to predict the divestment of COVID at this stage. For example, the resurgence in some of the hot travel destinations like Sanya, caused by the early ending of the summer travel peak season. Our search app is highly correlated with China's GDP growth and the performance of China's SMEs. So, we believe our ad revenue should recover when macro improves. We have also seen some opportunities for our mobile ecosystem around e-commerce and short videos. For example, integrating e-commerce and short videos with our search and feed, in fact, more and more short videos are available in our search results. This should help us to improve the user experience. I think in the mid- to long term, our -- in which the content in key verticals and our capabilities in facilitating transactions within Baidu App as well as our closed-loop experience for users, will help us to create more user insights for our customers. These insights will help us drive ad conversion and generate advertiser value, supporting the long-term growth of our online advertising business. Operator: The next question comes from Kenneth Fong of Credit Suisse. Please go ahead. Kenneth Fong: Hi, good evening. Thank you for taking my questions. Congratulations on another quarter with a strong cloud revenue growth. Can you help us understand the underlying drivers that help Baidu AI Cloud to outperform your peers? What's your outlook for the cloud business for the second half of the year? And I'm wondering if you can also help us understand your strategy as well as time line for the cloud business to reach breakeven? Dou Shen: Thank you, Ken, for your question. This is Dou. I will address the revenue part and leave the second part to Rong. As Robin just mentioned, right, Baidu AI Cloud continues to grow pretty well in Q2 despite the challenging macro environment. And the revenue was up 31% year-over-year, and the AI Cloud now contributed to almost 20% of the total Baidu revenue. We believe what differentiates by Cloud from our peers is that we have been dedicated to integrate cloud computing with AI so that our AI capabilities can help our customers to improve efficiency. To be more specific, as a cloud vendor, we have strong AI capabilities. While on the other side, as an AI solution provider, we have strong cloud computing capabilities. So, also as we mentioned, right, so the enterprises in the public sector were the main growth driver for cloud computing for. So, we believe that in China, the traditional enterprises in the public sector are still at the early stage of digital and intelligent transformation. So clearly, this transformation means organization is no matter big or small, they want to use AI to improve their efficiency and their competitiveness, so which will further drive the demand for high-performance computing. So as a result, right, the combined revenues for -- from manufacturing, energy, utilities and the public sector almost doubled in Q2. In the smart transportation, we continue to leverage our leading AI technologies and the deep understanding of autonomous driving to grow our business. So, we see small transportation has already become one of the largest verticals for our Baidu AI Cloud. So with that, we are confident that revenues from enterprises in the public sector will continue to drive the growth of Baidu AI Cloud in the future. Also since early June, we have seen some gradual improvement in project implementation. But for sure, there are still some uncertainties around COVID-19 in the near term. But however, we believe the strong need and the trend for in China remain unchanged. And with that, we aim to continue growing faster than our peers. Rong Luo: Yes. Hi, Kenneth. So, I will answer the question about margins. As the AI Cloud continue to generate positive gross margins in the second quarter, same as we in the first quarter. On top of that, we managed to improve our operating margin, thanks to our strategy to focus on quality and sustainable revenue growth. So we have two parts in our AI Cloud, the first part is the personal cloud. The personal cloud contributes a small portion of the overall cloud revenue. It should continue to generate big operating profit, and its revenue is growing a little bit slower than overall cloud. And the second part which is the majority part is enterprise and public service cloud, which continue to generate positive gross profit in the second quarter. We improved operating margin growth on a year-over-year and quarter-over-quarter basis. This was because we practically focus on high-quality revenue growth and gradually will reduce the unhealthy projects. I think in the future, we will work very hard to narrow the loss margins. Within enterprise and public sector cloud, the ACE Smart Transportation, which just as mentioned by Dou just now already enjoys a very healthy gross margin because of the higher portion of the software and AI components. We think ACE's Smart transportations may achieve breakeven earlier than any other verticals in the coming quarters. and because we have focused on to provide mortalized solutions and products to for the key use cases, for example, urban roads, highways and power. Secondly, I think we are also working very hard to replicate the similar scenarios in use cases across different industries. Cross-industry replication required AI technology to find our connections across many different scenarios. We believe that our AI technology, such as the large models will help us to achieve that goal. Overall, we will continue to focus on quality and sustainable revenue growth to improve margins and reach profitability in the next few years. Operator: The next question comes from Lincoln Kong of Goldman Sachs. Please go ahead. Lincoln Kong: My question is about robotaxi. So, we're quite impressed that RT6 is targeting a cost of RMB250,000 per car and that's significantly lower than the generation of the taxi models. So can management help us understand, what's the main driver for this cost reduction? And what's our outlook for the future cost trend? And how should we think about robotaxi's economic mechanism on this cost? And any time line, I think when to expect major commercial contribution from the robotaxi business? Robin Li: Lincoln, this is Robin. I think there are three drivers for the cost reduction. First, it's our deep knowledge in the autonomous driving technology and operations. Over the past nine years, Baidu has viewed strong Level 4 technology and gained industrial industry know-how on the auto industry and how to operate L4 ride-hailing services. Also, we have become the largest autonomous ride-hailing service provider in the world. So, we fully understand the autonomous ride-hailing market and understand our passengers' needs. We know where we can simply find our in-car features and where we should allocate more resources. For example, RT6 is a passenger-centric vehicle not a driver-centric vehicle. So on one hand, we have reduced some in-car features designed for the driver to reduce the cost like I mentioned during the prepared remarks. RT6 can remove the steering well and exclude some other accessories such as wide screen, wide display screen for drivers. On the other hand, we put more efforts on safety performance and the passenger experience to make RT6 passenger centric. For example, we have used safety redundancy in seven parts of RT6, setting an industry standard. This includes redundancy for computing unit, sensors, steering systems, braking systems, communication system, power supply and auto architecture. Also RT6 is designed for more in-car space and better in-car experience. I also want to highlight that about 60% of our RT6 BOMs for intelligent features like L4 and automating capabilities. The second driver is scale. We plan to leverage third-party automakers to produce RT6 for us. So RT6 will not retrofit on a passenger vehicle. This is a key differentiator of RT6. We will pay for the BOM of RT6 instead of the retail price like what we did in the past. Once Baidu's able to move away from retrofitting vehicles to use third-party automakers to produce RT6, that's because we have the capability to offer large scale will protect the operation, supported by our leading autonomous driving technology and operational capabilities. And I think the third driver is the divestment of the value chain for China's intelligent EV industry. RT6 was launched at the time when China's intelligent EV industry is well built up with many new EV companies and auto part producers in the market. In particular, many autonomous driving-related auto parts are now being produced locally. So intelligent EVs are becoming more affordable than before and for the automotive-related auto parts, its cost is also much lower than before. For example, LiDAR. LiDAR is the most important component for autonomous driving solutions. It was charged hundreds of thousands of U.S. dollars in the beginning, but now it only costs like $1,000. So in the future, we believe the BOM for our robotaxi will continue to decrease because China's intelligent EV industry will continue to develop, and Apollo Go will continue to scale. Our approach is a gradual approach. We will continue to roll out regions in different cities. So therefore, scale up our robotaxi service, as we gain scale, as we improve continuously on technology, I think that the cost for operating such service will continue to drop. And we certainly have the first-mover advantage and the barrier to entry for this will become higher and higher. Operator: The next question comes from Alicia Yap of Citigroup. Please go ahead. Alicia Yap: Thank you. Good evening, management. Thank you for taking my question. I have a follow-up question on Apollo Go. So congratulations on some of the solid achievements recently. Can management provide some update on regulatory environment for autonomous driving and robotaxi in China? And how Baidu will capture this trend? And then, can management also provide updates on Baidu's goal and strategy for this fully driverless operation? Zhenyu Li: Thank you. This is Zhen. Just as Robin said, Ergo is already the largest automotive service provider in world. In quarter two, Ergo has completed 287,000 rides and were clearly ridesharing surpassed $1 million. This number is much higher than option -- our strategy is to leverage a large operation to improve level technology and growing faster and larger. This is very important in China because of the road and traffic conditions are very communicated here, and the data generated from larger steel operations will help us to improve our lower hall technology and open the problem. Today, our goal is already available in more than 10 cities including all the Tier 1 cities in China. Our operating areas are many places, including visions, office buildings and the hospitals cities. On the upside, we're also expanding of off-rate industry. With the launch of RT6 as a target market production cost or RMB250,000, we will be able to purchase grow off-rate at a faster pace. In the future, we will continue to improve our Level 4 technology, and grow our operation. Also, we will try to push and make our influence on China's regulation or autonomous drive. For technology, we started up to offer autonomous ride-hailing services on open growth in Wuhan on May 10. In less than three months, we will allow us to provide fully driverless ride-hailing services on the open road. The great progress is for our leading technologies and capability. Robin Li: For operation in the Yizhuang region in as Robin mentioned, we have already acquired about 10% back share for ride-hailing services in the region. [indiscernible] our average each of activity will commit more than 25%. As a pioneer in the industry, Baidu worked closely with the regulator to set up regulations and industry standards. Recently, the Chinese Ministry for Transport issued a draft of deadline for the driving record transportation safety services. The guidelines aim to push the commercial operations for autonomous ride-hailing services in China. This is the first regulation on autonomous ride-hailing services at a central government level globally. It matched efforts in promoting high-level autonomous driving. We are proud to be the first and only company in China to offer fully driverless ride-hailing. In early August, Baidu was allowed to provide fully driverless ride-hailing services in Hefei, in Chongqing and Wuhan who owned China's major cities in the Middle East. In the future, we will continue to scale up our region and try to push fully driverless ride-hailing to [markets]. Operator: The next question comes from Eddie Leung of Bank of America Merrill Lynch. Please go ahead. Eddie Leung: Thank you for taking my question. I have a question about your autonomous driving solution for OEMs. So you mentioned that the contract value after the end quarter was just over $10 billion. It doesn't seem to be increased -- increasing much from the last quarterly result, could you tell a little bit about the reason behind that? And then could you also remind us some of the automakers that have been working with you guys in using your autonomous driving solutions? Rong Luo: Ed, let me answer your questions. I think as Robin mentioned in the remarks, yes, the total projected cumulative sales of our ad solutions has been RMB10.3 billion as per our own estimates. I think later talk about the numbers we need to keep in mind. The smart EV is a trend that is irreversible. For cars, we believe that over the long term, electrification is just a part of the play and intelligence in the game changer. So in the future, EV without intelligent driving capabilities will not be competitive. And many automakers like some leading domestic or even international automakers, they are interested in using our solutions for their car models to capture this kind of new market opportunity. Based on our conversations with them, we understand the automakers like our AI capabilities, our insights of the autonomous driving and our strong brand. And we are talking with many of the automakers, both locally and globally, and some are very large names in the industry. I want to emphasize that each automaker has its own schedule for setting up the countries with the suppliers. This could result in a different pace of our backlog. This is absolutely normal in auto industry. As of today, we have partnered with many automakers, including some leading like [indiscernible] car model and so on. And in addition to our in-car infotainment solutions, more and more customers now are adopting our Apollo self-driving products, including the ANP products Apollo Navigation Pilot for highways or urban roads. The automatic AVP products and HD Maps products, I think in the future, we will continue to expand our partnership to work with more automakers. And as more and more models equate our auto solutions are set to be launched into the market in the coming three years, the auto solution should start generating many revenues. Operator: The next question comes from Gary Yu of Morgan Stanley. Please go ahead. Gary Yu: Thank you for the opportunity to ask question. Congratulations on the solid results. My question is about margin and cost control and optimization. We saw that you achieved another strong quarter results with margin better than expected. Could you please elaborate the efforts to talk for such encouraging results? And what is the margin outlook for the second half of the year? Rong Luo: Yes, thanks so much, Gary, and I'll answer this question. I think despite of the very challenging macro environment in Q2, Baidu cost, non-GAAP operating margin is 22%, which is up five percentage points quarter-over-quarter. Over the past few months, I think we have made a lot of efforts to improve our operational efficiencies. And for example, the Baidu cost, SG&A was down by 12% year-over-year in the second quarter. I think our businesses are at a different stage of development. So we have different strategies of investment for each business. For the mobile ecosystem, which is relatively mature business, our goal is to keep its profits and margins solid so that our remote ecosystem can continue to generate a very strong cash flow to support our investments in the new AI initiatives. I think for our new AI initiatives, we will be focused on AI Cloud and intelligent driving. Both of them grew very fast in the past few quarters, which you can see there. So, we will continue to make necessary investments as needed. [indiscernible] AI now will remain focused on here and sustainable revenue growth, and we aim to continue improving our operating margins in the future. Operator: The next question comes from James Lee of Mizuho. Please go ahead. James Lee: My question is regarding Jidum and congratulations, by the way, on your launch in June. And at the same time, you guys also launched RT6. I'm just curious about maybe the positioning of Jidu and RT6. Can you guys talk about the customer segmentation strategy of the two autonomous driving vehicles? Just curious, how much overlap in demand between the two? Robin Li: Yes. This is Robin. The position for Jidu and RT6 are very different. Before I talk about Jidu, let me first talk about our strategy for intelligent driving. Our goal is to provide large-scale fully driverless ride-hailing services on open road. This is powered by our L4 autonomous driving technology. And at the same time, we use some of our L4 capabilities to put them into assisted driving features to support automakers' intelligent driving needs. And Jidu is just a perfect example of such automakers. So, if you look at our business portfolio for intelligent driving, we have RT6. RT6 represents Baidu's best autonomous driving technology. RT6 is for large-scale fully driverless ride-hailing services on open road. That is not a consumer-facing vehicle. I mean it's not selling to the consumer. Jidu's Robo-01 is a consumer facing product. We put on our Level 4 technology into Level 3 or Level 2+, if you will. Jidu Robo-01 will be equipped with AMP 3.0, our most advanced autonomous driving solution. AMP 3.0 can handle end-to-end intelligent driving and parking, urban roads and highways. Also, our smart cabin will be installed in the car. It allows Jidu to provide voice interaction, insights and outside the car. We believe these new features will help us to expand our business. For the timeline, we could see everything is well on track. We could see the first mass-produced Robo-01 finished very soon. The time line demonstrates Jidu's capability from design to mass production. Jidu plans to take orders for Robo-01 later this year and deliver the vehicles starting 2023. And Jidu has the second model. Jidu plans to launch at the end of this year, then start taking orders in 2023 and deliver in 2024 for our second model. Operator: Our last question will come from Wei Xiong of UBS. Please go ahead. Wei Xiong: First, I'm wondering if management can share some updates on your capital allocation. Could management talk a bit more on the implementation of your share buyback program? And how do you balance the investments into new businesses versus doing more buybacks or dividend? And second, as we recently saw the development between the U.S. and Chinese regulators regarding the audit inspections of ADRs, could management also share your thoughts on this progress? And given some of your peers have started the process to convert into dual primary listing, I was wondering would Baidu also consider such a U.S. Hong Kong due primary listing status? Robin Li: Yes. Thank you for your questions. Let me to your questions. I think as of today, we have returned about $2.9 billion to shareholders under the 2020 share repurchase program. The program authorized $4.5 billion cap which means we still have around $1.6 billion left in the program. Baidu will continue to buy back our shares from open markets since, we quite strongly believing our long-term developments. If you're looking to our balance sheet, as of Q2, our cash equivalents, restricted cash and short-term investments were $28.3 billion, and we also have the other $11.1 billion in our loan term investments. And if you look into our business today, some of that was mentioned in our previous remarks. I think for mobile system, it continues to generate wide healthy profits and margins. For Baidu AI Cloud, the revenue has been growing very fast, faster than our peers in this industry. For Apollo Go, it's already the largest outside heading service provided in the world. So everything is pretty much on track. So we believe that we are on the right direction, and we will continue to invest in other steps. And about the second question about the delisting and the primary in Hong Kong, I think the most recent statement of the protocol site between the PCOB and the Chinese authorities marks the very important first step towards opening access for the PCOB to investigate complete to the rest public accounting fund in China, I think which is a very important milestone for both countries and China-based issue with the ADR trading in the U.S. Also, we can feel that the two governments are practically seeking solutions. For Baidu, we already have the Hong Kong secondary listing, and we have some major shareholders who converted their Baidu ADR into ordinary shares in Hong Kong. Also, we are also very glad to be included in the Hang Seng Index. It will take effect on September 5. We believe with the inclusion to the Hang Seng Index, our Hong Kong shares will receive more front flow. For the primary listing, as far as what we understand, the process of switching from the secondary to primary listing in Hong Kong should be straightforward. We don't see any kind of hurdles for us to achieve that. But I think what's more important for us is to remain focused on business fundamentals and drive long-term shareholder values. Also, Baidu will continue to comply with applicable loss in both China and the United States and try to maintain listing both in NASDAQ and Hong Kong exchange. Thank you so much. Operator: That will conclude today's question-and-answer session. That does conclude our conference for today. We thank you for participating, and you may now disconnect.

Operator: Hello and thank you for standing by for Baidu First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's First Quarter 2022 earnings conference call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website as well as our newswire services. On the call today, we have Robin Li, our Co-Founder and CEO; Rong Luo, our CFO; Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG; and Zhenyu Li, our SVP in charge of Baidu Intelligent Driving. 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 provision of the U.S. Private Securities Ligation 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 reports and other documents filed with the SEC and Hong Kong 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 and non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. We delivered solid first quarter results, driven by the continued strength of our new AI business, more specifically, revenues from Baidu AI Cloud increased by 45% year-over-year. We achieved new wins for Apollo Self Driving, or ASD, from automakers during the quarter, validating our confidence in the auto solution monetization roadmap. Apollo Go made ground-breaking headway. We won the first permit in China for driverless ride-hailing services on open roads in April, further fortifying our unquestionable leadership in the robotaxi market. Like many other companies in China, since mid-March, our business has been negatively impacted by measures to stem the spread of COVID-19. Specifically, the recovery of our ad business and the implementation of some cloud projects have been delayed. In the near term, the challenges related to the virus continue to cause uncertainties to the macro environment, and pressure on our business operation. Looking beyond the near-term turbulence, we believe both China's economy and Baidu's business will remain promising for the medium-to-long term. We expect our ad business to recuperate once overall economic buoyancy returns. In the meantime, to enable our long-term growth, we will continue to invest proactively and prudently in our new AI businesses, including Baidu AI Cloud, Apollo Go and ASD. Most notably, our new AI businesses are well aligned with China's priorities in tech innovation, green transition and digital economy. These themes have been repeatedly emphasized by top officials at national events, including the recent meeting convened by Chinese People's Political Consultative Conference, boosting the applications of AI in China and, with that, the long-term growth prospects of Baidu. We see great opportunities to use technology to accelerate the development of the real economy. Organizations in various sectors, such as energy and utilities, manufacturing, finance and the public sector have come to realize that not only they need digitize what they do, they can also use all kinds of AI technologies to enhance their competitiveness through cost reduction and efficiency improvement. So the demand for digitization and AI come at the same time. That presents an unique opportunity for us to deliver Baidu AI Cloud solutions in a seamless way. In addition, Baidu ACE smart transportation supports our contributions to the green economy. According to China Academy of Transportation Science of the Ministry of Transport, Baidu ACE projects have helped Baoding city reduce its carbon dioxide output by 24.4 thousand tons annually, which is equivalent to planting more than 240 thousand trees. As more and more cities adopt Baidu ACE smart transportation, we believe we will make increasing contribution to reduce carbon emissions with AI technologies, and fulfill our commitments to the environment and society. Now, let's review the first quarter operational highlights. Baidu AI Cloud maintained its fast growth momentum, benefiting from the digital and intelligent transformation of China's traditional industries and the public service sector as well as our cutting-edge AI technologies. Over the past quarters, we have achieved rapid revenue growth with an emphasis on the quality of growth. With the integration of AI and Cloud, we have built a wide range of AI-powered applications and tools that can generate more replicable and scalable AI solutions in industries such as the public service sector, energy and utilities, healthcare as well as transportation. By doing so, we are working hard to shorten our project implementation time, and we believe we will be able to also improve our margins over the long term. One example is how we bring AI to the public service sector. Last year, we talked about how we used AI to build a smart city, together with the Lijiang municipality, helping improve the city's safety, efficiency, convenience, and environmental quality. By serving larger cities such as Lijiang, Baidu AI Cloud has standardized a set of AI solutions that many other cities or districts can adopt and adapt. This year, Guandu, one of the seven districts of Kunming city, began adopting our AI solutions to keep the region safe and clean. Compared to the Lijiang project, we managed to reduce the deployment time of our smart city project by 50%. Another example is in the energy and utilities sector, we empowered Quanzhou Water company to deploy our AI solutions for predicting water consumption and automatically adjusting water supply. By serving Quanzhou, we have established a set of AI solutions for the water industry, quickly driving our business scaling. In March, we won a project from the water company of the Baiyun district of Guangzhou, one of the largest cities in China. On top of offering similar solutions to Quanzhou, we will also build additional AI solutions to help the customer improve wastewater treatment and flood control in the region. Given the expanded work scope in Baiyun district of Guangzhou, this contract amount will be multiple the size of the Quanzhou project. Turning to ACE Smart Transportation, by the end of the first quarter, Baidu ACE has been adopted by 41 cities, up from 16 cities a year ago and 35 cities a quarter ago, based on the contract amount of over RMB10 million. Leveraging our AI capabilities to synergize a vast amount of real-time data from multiple sources, Baidu ACE has helped increase traffic management efficiency. According to a senior official from the Beijing High-level Automated Driving Demonstration Area, the traffic flow at the intersections has improved by 28%, thanks to our ACE smart transportation solutions in the Yizhuang region. Going forward, we continue to aim at above-industry growth for our AI Cloud business and target long-term quality revenue and sustainable growth, despite the near-term headwinds caused by the COVID-19 control measures. Moving to Intelligent Driving, we continued to grow our deals pipeline with auto OEMs for the provision of our ASD solutions, in particular, for Apollo Navigation Pilot, or ANP. According to our internal estimates, recently, the total projected cumulative sales of auto solution, including ASD and DuerOS for Auto, surpassed RMB10 billion. After winning a partnership with BYD at the beginning of the year, in April, we received a nomination letter from Dongfeng Motor, which is a Top 3 domestic automaker. Dongfeng intends to adopt our ANP, AVP and HD Maps in one of its popular auto models. With smart driving and smart connectivity gaining popularity and considering in-house development is costly and time consuming, automakers are increasingly interested in adopting our intelligent driving solutions to capture this new trend. As a result, we expect our ASD pipeline to keep growing in the future. Apollo Go achieved a major new milestone with the award of the first driverless ride-hailing permits in China on public roads. On April 28, 2022, the Beijing High-level Automated Driving Demonstration Area took the lead nationally when it specified the criteria and granted permits for providing driverless ride hailing services on open roads in the Yizhuang region of Beijing. Apollo Go became the first company to receive the permits. We believe this approval indicates a regulatory openness to taking a further step toward a fully driverless mobility future, allowing Apollo Go to further scale up its operation. In 2018, we became the first company to launch road testing for autonomous driving in Yizhuang. In the fourth quarter of 2020, we won the project to build ACE smart transportation and introduced our autonomous ride-hailing services in this designated area of Beijing. By doing so, we have taken a more holistic approach to intelligent mobility, which synergized our ACE smart transportation solutions, autonomous vehicles, maps, and cloud services. This approach has allowed us to better overcome the complexity and high density of urban traffic in Beijing. Last year, Apollo Go was authorized to conduct driverless testing on open roads and provide paid autonomous ride-hailing services. This April, we were allowed to provide driverless ride-hailing services on open roads to passengers, without a safety driver behind the steering wheel. These rapid developments reflect the government's recognition of our proprietary technologies and operational capabilities. In the future, we plan to replicate the Yizhuang case to other cities. Most recently, we were authorized to conduct driverless testing on open roads in Chongqing, following the permit for Apollo Go to charge passengers on open roads three months ago. We are happy to note that Apollo Go continues to hold a leading position in the global autonomous ride-hailing market. During the first quarter, we provided 196,000 rides, up over 11 times from a year ago. The number of rides dropped by 8% quarter over quarter, mainly due to the COVID-19 control measures since the beginning of this year and weak seasonality. In terms of geographic coverage, Apollo Go further advanced into ten cities in China. While expanding our services, Baidu has worked hard to meet the technical challenges of China's complex traffic environment. It is important to note that, by serving passengers on a daily basis and on a much wider scale, we have detected problems that had been unnoticeable during the testing phase, further speeding up the development of our autonomous driving technology. Looking ahead, we are confident in maintaining our absolute market leadership in intelligent driving, as demonstrated by the ongoing growth of ASD deals pipeline and scaling of the Apollo Go operation. Now, briefly updating you on DuerOS, Xiaodu retains the top rankings in smart display and smart speaker shipments that we have cited in previous quarters and revenues continue to grow rapidly. Moving to Mobile Ecosystem, Baidu App's users and traffic growth remained solid. In March, MAU increased by 13% year-over-year to 632 million, and daily logged-in users continue to trend up, reaching 83%. Both in-app search queries and daily content distributed by feed achieved double-digit year-over-year growth. Baidu Smart Mini Program MAUs reached the 500 million mark, up 22% from a year ago. While our mobile ecosystem continued to thrive, we persist in our efforts to innovate and improve user experience. In videos, daily short videos distributed by Baidu App, including both search and feed, enjoyed accelerated year-over-year growth to over 25% in March, enabled by the fully immersive video experience we introduced at the end of last year. In services, over 100,000 industry participants signed up for our instant replies feature in March, up from about 44,000 in December. Total daily instant replies increased by almost six times year over year in March, up about 20% from last December. Daily instant refi increased by almost 6x year-over-year in March, up about 20% from last December. As China's mobile internet matures, apps and mobile platforms are eager to acquire traffic at affordable cost. We have observed that many vertical leaders, in particular, local service providers, such as MeituanWaimai and Maoyan, chose to deepen their collaborations with Baidu App, by tailor-making their offers to our users. This has resulted in notable increases in user engagement and transactions for their smart mini programs on Baidu. In e-Commerce, GMV facilitated by Baidu search, though still small, grew by about 14 times year over year in the quarter. The abovementioned innovations and steps forward are the latest in our transformation from information search to delivering closed-loop user experiences, which enables us to strengthen our mobile ecosystem around search. Going forward, we will continue to work hard on maintaining stable margins for the mobile ecosystem, and fund our investments in the new AI businesses, despite the near-term headwinds. With that, let me turn the call over to Rong to go through the financial highlights. Rong Luo: Thank you, Robin. Now, let me walk you through the details of our first-quarter financial results. Baidu's Q1 revenue was RMB28.4 billion or $4.5 billion, up 1% year-over-year. Baidu Core's Q1 revenue reached RMB21.4 billion or $3.4 billion, up 4% year-over-year. Non-advertising for Baidu Core reached RMB5.7 billion, up 35% year-over-year and accounted for 27% of Baidu Core's revenue, up from 21% a year ago. AI Cloud revenue was RMB3.9 billion, up 45% year over year. Cloud contributed almost 70% of the non-ad revenues, and remained a key revenue growth engine. Our IaaS business benefited from multi-cloud strategies adopted by many of our customers, in particular, customers in the Internet industry. Our business for enterprises and the public sector is the driving force for cloud revenue, again achieving rapid revenue growth in key sectors, such as energy and utilities, the public service sector and transportation. Revenues from Xiaodu remained solid in the quarter. Baidu Core ad revenue was RMB15.7 billion, decreasing 4% year over year. The performance of our ad business is highly correlated with macro, having been impacted by the COVID-19 related control measures. In fact, many of our top industries, such as travel, franchising, real estate, and healthcare, have suffered from reduced offline activities. On the flip side, when people are staying at home due to the COVID-19 resurgence, they tend to spend more time on our platform. In particular, they come to Baidu App and check reliable information about the COVID-19 situation, which has positively contributed to our user and traffic growth. As Robin said, we expect our ad business to recover once the macro environment improves thanks to our widely diversified customer base that covers many industries in the Chinese economy. iQIYI revenue was RMB7.3 billion, decreasing 9% year over year. iQIYI average daily number of total subscribing members reached 101 million for the quarter, and membership revenue was up 4% YoY, mainly due to a refined membership strategy and improved monetization capabilities. Cost of revenues was RMB15.5 billion, up 4% year over year, primarily due to an increase in cost of goods sold, traffic acquisition costs, bandwidth costs and other costs related to new AI business, offset by a decrease in content costs. Operating expenses were RMB10.3 billion, decreasing 1% YOY, primarily due to a decrease in channel spending, promotional marketing and bad debt expenses. Non-GAAP operating income was RMB4.0 billion, or $630 million, and non-GAAP operating margin was 14%. Non-GAAP operating income for Baidu Core was RMB3.7 billion, or $581 million, and non-GAAP operating margin for Baidu Core was 17%. Adjusted EBITDA was RMB5.5 billion, or $867 million, and adjusted EBITDA margin was 19%. Adjusted EBITDA for Baidu Core was RMB5.1 billion, or $805 million, and adjusted EBITDA margin for Baidu Core was 24%. Cash and short-term investments for Baidu Core, as of March 31, 2022, was RMB185.8 billion, or $29.3 billion. Free cash flow for Baidu excluding iQIYI was RMB1.1 billion, or $175 million. Baidu Core had approximately 38,000 employees, as of March 31, 2022. Operator, with that, let's now open the call to questions. Operator: [Operator Instructions] Our first question comes from the line of Alicia Yap, Citigroup. Please ask the question. Alicia Yap: Thank you, management. Thanks for taking my questions. Congratulations on a solid set of results in the tough environment. My question is on the outlook. Can management give us some color? What should we expect for your revenue trend in the second quarter and also the rest of the year? So, in particular, when do you expect the inflection point for your advertising business to happen, given most of the offline spending is correlated with macro? And then secondly, I noticed that your first quarter operating margin came in stronger and better than the market expected, could you also give us some color how we should think about the margin outlook for the second quarter and the also the rest of the second half ? And lastly, if I may in light of the latest macro environment wondering if there is any change of Baidu long-term strategy and the growth outlook? Rong Luo: Thank you, Alicia. This is Julius. Let me take your first question about near term business. I think as Robin mentioned in his prepared remarks, starting from mid-March, our ad and cloud businesses have been negatively impacted by the rapid development of Omicron. I think which is, let's say, different from any previous variant, Omicron has spread faster and affected many cities, including top cities like Shanghai and Beijing. Such impact has already lasted over two months and is still ongoing in China. And this is lasting much longer than any previous round of resurgence. So, the COVID situation is more severe than early March. For many of our customers, the business activities have been significantly disrupted and our ad business has been negatively impacted. Also, we had to reduce business travel because of the COVID-19 restrictions. This caused a negative impact to our 2B and 2G businesses, especially AI Cloud servicing enterprises and the public sector, because we had to postpone some of the deployment of AI cloud projects. So taking into consideration all of these factors, we think compared to the first quarter, the second quarter will be more challenging for us as well as for the industry. On the one hand, we have relatively limited visibility for the second half of this year at this stage, which should largely depend on how the pandemic develops. On the other hand, we are also happy to see that recently, the Chinese government has released clear signals to support the economic development and the digital economy at the top level. So, we will continue to closely monitor the development of the virus and the macro condition. Here, I would like to emphasize that Baidu's online advertising is widely diversified and covers many industries in the Chinese economy. We believe once there's a rebound of the Chinese economy, our advertising business will definitely benefit from such recovery. And given the current macroeconomic uncertainties, we will be more disciplined with our spending and investment. For example, we will be very prudent in spending on sales and marketing. With that said, on one side, we continue to see a lot of growth potential in the AI-enabled new businesses, so we are determined to continue investing in these areas, such as AI cloud and Intelligent Driving, and these businesses have been developing so fast during the past quarters. And on the other side, for the mobile ecosystem, the overall mobile Internet market in China is maturing. So, we will balance our investment and growth in these areas and we will be disciplined with our investments here. Robin Li: On your long-term strategy question, despite the near-term challenges, Baidu's long-term vision for our green transition businesses remains unchanged. We believe that our mobile ecosystem provides a unique value proposition to our users and ad customers. AI will raise the bar again and again for information access in the years to come. We will also continue to innovate and provide closed-loop -- search users with closed-loop services within Baidu App. As you see that our non-ad revenue now accounted for 27% of Baidu Core, that is up from 21% a year ago. And within non-ad, we believe our new AI businesses, like Baidu AI Cloud and Intelligent Driving, are well geared with China's goal in technology innovation, digital economy and green transition. These businesses have made enormous progress over the past quarters and are well-positioned to capture the total addressable markets. Baidu AI Cloud continues to drive the digital and intelligent transformation of China's traditional industries and the public service sector. So you see that our cloud revenues from enterprises and the public sector consistently outgrow that of our peers. Intelligent and connected vehicles are becoming the new attraction in auto sales. Many automakers have come to realize that adopting Baidu's solutions is better than investing heavily in developing their in-house solutions. And Apollo Go already holds a leading position in the global autonomous ride-hailing market. And we just won the first permits in China for driverless ride-hailing services on open roads in Beijing. And in May, we were allowed to conduct driverless testing in Chongqing. So you can see our vision and strategy remains the same. We are an AI company with strong Internet foundation. There is a lot of synergy between all of our businesses and our technology innovation. So with that, we are very confident in Baidu's long-term growth potential. Operator: Thank you. The next question comes from Lincoln Kong, GS. Please ask the question. Lincoln Kong: So my first question is that we saw earlier, media reported the Chinese People's Political Consultative Conference had a meeting in Beijing last week, and Robin, you're one of the attendees from the Internet companies. So we are quite curious to learn what's your take away from the meeting, and have you made any proposal in the meeting? And my second question is about the mobile. So we noticed that user growth was pretty strong for the Baidu App, so can you help us understand the underlying drivers of your user growth for the mobile ecosystem? And how should we think about the user growth potential going forward? Robin Li: Yes. Regarding to the CPPCC meeting, many senior government officials attended that meeting. It was mainly focusing on supporting the healthy and sustainable development of digital economy. All the attendees of the conference could clearly feel the government's support and openness for technology innovation and their willingness and determination to promote the development of China's digital economy. Very notably, investment in R&D is highly appreciated and encouraged. I basically talked about two points. One, I called out the importance of using AI to improve the efficiency for China's massive infrastructure, be it in transportation, utility, energy or telecommunications. Today, China already has a very comprehensive infrastructure in these areas, but they have not yet been powered by AI or simply saying they are not smart enough. Take the transportation industry as an example. Most of China's traffic lights are not powered by real-time data from multiple sources, and AI-powered V2X has not yet become fully available here. Given the current transportation networks, many local governments have to implement strict restrictions on purchasing and using vehicles, restraining domestic consumption because of this. AI-enabled traffic lights and V2X will help improve efficiency and reduce accidents. So according to our estimate, intelligent transportation systems could help improve traffic efficiency by 15% to 30%. This is not just an estimate. We actually have proven this in a number of cities in China. So if we apply this kind of efficiency gain to the entire transportation system, that's like a 2.4% to 4.8% of additional annual GDP for the city. So I believe that intelligent transformation could significantly lift productivity, efficiency and competitiveness for these industries and also for the entire nation. In my prepared remarks, I also shared some examples of how Baidu AI Cloud help our customers to run their complex workloads in many industries. And secondly, I also called for further regulatory support for tech innovation, for example, a more comprehensive industry regulation for autonomous driving on open roads and in complex road conditions. Autonomous driving technology is reshaping the auto industry. To a certain extent, China leads in autonomous and fully driverless technologies. The adoption of autonomous driving vehicles in China will increase the efficiency by reducing traffic jams and accidents. But before that, we need to make necessary adjustments to the current transportation laws and consider the profound changes that autonomous driving and even fully driverless cars can bring to China's transportation system. So to be more specific, we need to set up regulatory standards for fully driverless vehicles to be issued license plates, get on open roads and remove safety drivers and charge passengers. Also, we need guidelines on how to identify responsibilities when accidents happen. These proposals have been well received by the officials who attended the meeting. Rong Luo: Yes. Thanks Lincoln. This is Julius. I will take your question about mobile ecosystems. I think same as Robin just talked about in the prepared remarks. In March, Baidu App MAU was up 13% year-over-year and Baidu Smart Mini Program MAU reached 500 million marks. Our platform is widely recognized as a go-to-place for high-quality information and knowledge. Let me show one example. Actually, the control measures against the COVID-19 resurgence have made many students study online from home. We are seen that they come to Baidu App to search for authoritative and reliable class-related information and knowledge. Lately, we have been seeing a significant increase of such search queries. The daily search queries for education-related keywords on mobile have increased about 30% year-over-year. So far, we received -- that's the number in the second quarter. More importantly, I think, we as a company will also continue to innovate in search and continue to improve user experiences. First priority, we will continue to use AI to improve our search experiences, driving consistent increase in daily searches per user. I think search is technology-driven with a high entry barrier, and technology is in our corporate DNA. In the second place, we continue to improve the closed-loop experience -- the closed-loop services to our search users. And we provide users with product listings, services, and connect them to the industry participants for professional advice through our building blocks. I think, for example, the e-commerce GMV facilitated by Baidu Search grew by about 14 times year-over-year in the quarter. Also, obviously, the monthly orders for local services within Baidu App increased by over 200% year-over-year in March. Now the users are not only coming to Baidu App to search information, but increasingly to also want to enjoy the closed-loop services over here. In the third place, we also made promising progress in adopting the short videos into our search results and we are working very hard to capture the opportunity. In addition to these new product features, we also work on enriching our video content portfolio by using AI to cost-effectively generate the video content. Looking ahead, we will work hard to continue improving user experiences and maintain healthy user growth. Operator: Thank you. Your next question comes from Gary Yu, Morgan Stanley. Please ask the question. Gary Yu: Congratulations on a very resilient set of results. I have some follow-up questions regarding the AI cloud business. The first one is on the outlook for the coming quarters. This is particularly because some of your peers have indicated some slowdown in cloud revenue growth. So just wanted to see how we should expect Baidu AI Cloud growth going forward. The second question is also related to that, which is, is there any update on the strategy and progress in terms of building standardized solutions? Because I think this is important to improve your AI cloud margin going forward. So just wanted to see, what's the progress there and how should we look at margins going forward? Robin Li: Gary, let me answer your questions starting from home. Baidu AI Cloud grew 45% year-over-year to RMB3.9 billion in Q1, and it contributed almost 70% of our core total non-ad revenue. Baidu AI Cloud basically includes two parts; one is the personal cloud, the other is the cloud for enterprise and the public sector. The rapid growth in cloud has been driven by the enterprise and public service sector, for example, energy, utilities, smart transportation, smart cities and more. Last quarter, revenues from this portion grew much faster than the overall AI cloud revenue. We are confident that revenues from enterprise and public service sector will continue to drive the growth of Baidu AI Cloud in the coming quarters. As I mentioned earlier, we did notice that since mid-March, this new round of COVID-19 developed quickly across many cities in China. And as a result, we had to reduce business travel and postpone the deployment of some AI Cloud projects. That being said, we think such impact is just temporary. Looking beyond COVID impact, we are confident about the unique positioning of our AI cloud. The integration of cloud and AI enables our customers from many industries to make significant productivity and efficiency gains through AI. The market potential is huge, and we are just at the beginning of capturing huge opportunities arising from the transformation in China's traditional industries and public service sector. In terms of margin, Baidu AI Cloud is still loss-making at the operational level, but we do have positive gross margin and profit -- gross profit. For our personal cloud, although its revenue growth has been slower than the enterprise and public sector, it should continue to generate decent margins going forward. And for the cloud business for enterprise and public sector, the growth driver for our overall AI cloud revenue, this part of the business also enjoys a positive gross margin. A few quarters ago, we have already set as our priority the health of the business to make sure that we grow revenue both at speed and with quality. We proactively identified key industries other than the Internet sector to explore the opportunities in AI PaaS and SaaS. And at the same time, as we accumulate more experience in each industry, we try our best to standardize our products and solutions to further scale our business. Traffic light at an intersection in the city of Baoding is not much different from a traffic light in the city of Guangzhou. So, we can at least standardize the product for our solutions industry by industry first. And in the longer term, I do think we can build a strong foundation to solve problems in different industries using more standardized solutions or technology. The recent developments in AI, especially in large models, be it in language models or vision, have given us new hope to solve all kinds of problems using one large standard deep learning platform. Now going forward, if we look beyond the COVID impact for the cloud business, we continue to aim at high revenue growth and remain focused on quality and sustainable revenue growth. Margin should gradually improve from there. Operator: Thank you. Next question comes from James Lee, Mizuho. Please ask the question. James Lee: Congratulations on Apollo Go, on achieving the breakthrough of driverless operations here. Two questions relating to that. First is, how do you expect the driverless technology to improve the curve of cost efficiency? Is that pretty consistent with what you guys laid out at the Analyst Day last year? Or are you ahead of schedule here? Second, can you also elaborate your plans on scaling up the driverless autonomous ride-hailing service? Robin Li: Yes. As I mentioned earlier, scaling up operations allows us to improve Level 4 autonomous technologies faster and facilitates our goal of ultimately providing fully driverless ride-hailing services in a much wider region. The number of rides provided by Apollo Go has been growing exponentially. Also, such scalable operation makes us the largest autonomous ride-hailing service provider in the world. In Q1 alone, we provided almost 200,000 rides. With the data gathered from such large-scale operations in real-life driving scenarios, we gain a lot of operational experience. To be more specific, serving passengers every day has allowed us to identify problems that are not visible during the testing phase. I'm highly confident that serving passengers in real word will not only speed up our operations expansion, but also accelerate technology advancement. And I think our strong driverless technologies and capabilities will allow us to receive more regulatory green lights. This is very important for us to further accelerate our operation. Our priorities remain unchanged, scaling up our operation, improving our autonomous driving technologies, and reducing the costs and expenses are our top priorities. Baidu is proud to be the first company to receive permits to offer ride-hailing services on open roads in China's capital without a safety driver behind the steering wheel. That means a lot to us because, first, on the regulation front, it is the first time that the government allows the removal of a safety driver from the driver's seat on public roads, in particular in an area of 60 square kilometers in Beijing, with a highly complex driving environment. This marks a regulatory breakthrough in China's autonomous ride-hailing industry, reflecting the government's open attitude towards a fully driverless operation in the future. And secondly, it demonstrates our strong driverless technology and capabilities, as we are the first to be granted the permits and we started to use them right away. On the cost side, labor cost is one of the largest cost items, so one of the most critical steps to limit costs in autonomous ride hailing is to remove the safety driver in the car and have a remote safety driver managing multiple vehicles simultaneously. This will build a strong foundation to allow us eventually to remove the safety staff from the cars and achieve fully driverless ride hailing. With the newly granted permits, we are much closer to achieving that goal. Once we are authorized to remove the safety staff on the passenger seat completely, our cost per mile will be reduced significantly. Scaling up also helps to reduce the manufacturing cost per vehicle. And right now, we are on the way to make our sixth generation robotaxi. In the future, we aim to further expand our fleet of driverless ride-hailing vehicles on open roads to more cities. We believe we will achieve the goal to provide safer, cheaper and more convenient mobility service to the public. So in short, to answer your question, despite all the disruptions caused by COVID-19, starting March of this year, I think we are on track to achieve our goal of fully driverless robotaxi service. Operator: Thank you. The next question comes from Tianxiao Hou, TH Capital. Please ask the question. Tianxiao Hou: Congratulations on a good set of results. My question is related to Apollo Self Driving business. So you mentioned that there were more wins following your partnership with BYD this year. Could you please share some -- the outlook for the backlog numbers for 2022? Last quarter earnings, you mentioned the backlog is about RMB8 billion. So I just want to get some update on that. The second one is related to the trends. Could you please elaborate the cooperation with Dongfeng? In particular, how does the revenue model work? That's the question. Rong Luo: Let me take this question. I think the intelligent and connected vehicles are becoming more and more popular among consumers and, therefore, also becoming new attraction in auto sales today. And our Apollo Self Driving business, which we call ASD for short, derived from our world-class, world-leading Level 4 autonomous driving technologies. So many automakers come to us, try to use our auto solutions, in order to capture the big trend of the vehicle intelligence and connectivity, especially, some larger automakers like BYD and Dongfeng Motor. They started to use our ASD solutions, in particular, ANP solutions. We call Apollo Navigation Pilot, which is our high-value solution for intelligent driving. We believe working with big automakers can also allow us to refine our product experiences and strengthen our competitive advantages in this market. With the increasing adoption of the smart EVs in China, we believe Baidu's strong autonomous driving capabilities can also put us in a very strong position to win more business. According to our internal estimates, recently, the total projected cumulative sales of our auto solutions recently surpassed RMB10 billion. Just for your reference, the same number -- the same metric we talked about at last quarter was about RMB8 billion. And the growth was driven primarily by the pipeline deals from larger automakers. This amount has been growing very fast over the past two to three years, and the contribution from ASD products has been expanding very quickly. Again, I would like to make it clear that this number is our preliminary estimates, which include the contracts signed and nomination letters that we received from customers. Our estimates also are made based on the assumption of the timing of the new models, the pricing of them and the future sales volume of them. In general, we are happy to see the ASD business pretty much on track to deliver more milestones in the future. Operator: Thank you. Your next question comes from Natalie Wu from Haitong International. Please ask the question. Natalie Wu: Congratulations on a very solid quarter. So my question is regarding the recent executive reshuffle -- regarding the news of your executive reshuffle recently, mainly for your MEG and cloud business. So just wondering, may I ask the major reasons behind it, what kind of the strategic or operational change will it bring to the cloud and MEG and mobile business? Robin Li: Yes, we do mentioned reshuffle from time to time. I believe our executive reshuffle program helps expand the capability of individuals to excel within Baidu. It demonstrates that we have already established a strong and agile team, which is able to make adjustments in a dynamic market environment. Many large companies have used this kind of program to develop leaders for their organizations and drive strategy execution, in particular, in a dynamic world. In fact, Baidu develops, coaches and promotes talents internally. Shen Dou, Haifeng Wang and Jackson have all risen to senior positions within Baidu. Dou joined us in 2012, I believe, and demonstrated his capabilities in various management roles in Baidu. He made significant contributions to strengthening our mobile ecosystem. Baidu AI Cloud is already the revenue growth engine for us, as we are benefiting from the digital and intelligent transformation of China's traditional industries and the public service sector. I trust Dou's capabilities to head the business and keep our momentum at full speed. We believe having a dedicated senior executive to lead the business will allow us to better capture the huge market potential. And as for Haifeng, our CTO, he will be able to spend more time on our long-term technology vision and drive synergies between AI and all of our businesses. Jackson joined us in 2019. In the past few years, he served in various financial management roles in the mobile business and was highly involved in its daily operation. He already built a deep understanding of our mobile business. Our mobile ecosystem is a cash cow for Baidu and will continue generating strong profits. I believe Jackson is highly capable of helping us execute our strategy, given his strong financial management and operational background. In short, with this strong homegrown team, we believe Baidu is fully capable to execute its business strategy in all areas going forward. Operator: Thank you. Your last question comes from Miranda Zhuang, Bank of America Securities. Please ask the question. Miranda Zhuang: Congratulations on the results. My question is about Jidu. So we saw the news that Jidu is about to launch a new car model soon. Can management give us more additional color on how is the current model different from other EV start-ups and traditional OEMs cars? And what's the Jidu's pipeline for this year and next year? Given the disruption to the supply chain from the COVID, are you still on track with the previous plan to take orders in second half this year and start mass production next year? Robin Li: Yes. Miranda, Jidu plans to introduce its first model for mass production in early next month. The market that Jidu targets is family passenger vehicles with the price above RMB200,000. We believe it is a very big and promising market in which Jidu has a lot of room for growth. We are all very excited about the features that Jidu will have installed and the value Jidu can offer to consumers when it becomes available. For Jidu, the key point is not being electric, but being intelligent. We believe Baidu is the best in intelligent driving technology, which Jidu will leverage in the upcoming models. So Jidu's key selling point for upcoming model will be more on the software side as well as the seamless integration of hardware and software. This model will be equipped with Baidu's leading autonomous driving solutions, like ANP, AVP, as well as our advanced infotainment system like DuerOS for auto. And the team has filed many patents during the development stage. Jidu car will be much more like an auto robot than any other car on the market. On the pipeline side, Jidu plans to introduce its first concept production car on June 8 and take orders for its first model in the second half this year and deliver the vehicle starting in 2023. Despite the COVID stuff, despite the majority of the team based in Shanghai, I think we are pretty much still on track. So this is in line with our expectation when we started this business. We're also very happy to see that Jidu plans to launch its second model at the end of this year, then to start taking orders in 2023 and deliver the vehicles in 2024. So we believe Jidu, equipped with our industry-leading intelligence driving capabilities, will be well positioned in the EV market. Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: Hello, and thank you for standing by for Baidu's Fourth Quarter and 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. [Operator Instructions]. Now I'd like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone and welcome to Baidu's fourth quarter and fiscal year 2021 earnings conference call. Baidu's earning 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 Li, our Co-Founder and CEO; Rong Luo, our CFO; Dou Shen, our EVP in charge of Baidu Mobile Ecosystem; and Zhixiang Liang, our SVP in charge of Baidu Intelligent Driving. 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. Private Securities Litigation 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 the SEC and Hong Kong 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 includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. We delivered a solid results in 2021. Revenues from Baidu Core were up 21% year-over-year in 2021 driven by a 71% increase in non-ad revenue, which accounted for 22% of Baidu Core revenue up from 16% in 2020. Within the non-ad business, our cloud revenues consistently showed outstanding growth throughout the year, and the [indiscernible] the cloud market in China. Furthermore Apollo Go, scaled up its operation and delivered key milestones to drive the long-term commercialization of our autonomous ride-hailing services. Today, I'll review our operation by walking through our AI Cloud, Intelligent Driving, DuerOS and mobile ecosystem business in 2021. And after that, I'll discuss our priorities in 2022. Starting with AI Cloud, we achieved strong revenue growth in 2021. The growth rate of Baidu AI Cloud has accelerated from 2020 on and we believe it has been meaningfully higher than its peers. We made great strides in several industries, notably transportation, manufacturing, public service sector, and energy and utilities. Total revenues from this industries more than doubled in the year driving our cloud business growth. I'll share with you on some of our latest developments in the above verticals. In the energy and utility sector, state grade has been utilizing our AI Cloud since 2020 to perform early detection of malfunctioning equipment and estimate utility demand to ensure a consistent electricity supply. By now we have covered almost 90% of its branches nationwide. In the manufacturing industry, Baidu AI Cloud has expanded into Chongqing, a major manufacturing hub in China, enabling automated workflow, processes and helping to improve operational efficiency. In Tongxiang, we serve Liangjiang new area, which hosts 1000s of enterprises, including some top automakers and electronic companies. More broadly, we observe an increasing adoption of AI in China. According to IDC PaddlePaddle Baidu's open source deep learning platform continues to gain market share. Our internal data show that by the end of last year, PaddlePaddle developer community has grown to 4.1 million and served 157,000 visitors. In the same timeframe, developers have created 476,000 models based on the platform. Meanwhile, in ACE smart transportation, we continue to expand our footprint geographically by year-end last year. Baidu ACE has been adopted by 35 cities up from 14 a year ago. Based on contract among over RMB10 million 94% of cities that have purchased our solutions in 2020 expanded their collaboration with us in 2021. Revenues from smart transportation have been growing rapidly and more than doubled in 2021 versus the prior year. Next in intelligent driving. Apollo Go continue to take big steps toward scalable operation of its autonomous ride-hailing services. We believe that large scale operation allows us to identify the problems that are not visible during testing stage and also push the level for autonomous driving technology advancement. In the fourth quarter last year, Apollo Go advanced, Apollo Go provided 213,000 rides and once again almost doubled its rides quarter-over-quarter, reaffirming our leadership position in the global autonomous ride-hailing market. Apollo Go is now available in eight cities Beijing, Shanghai, Guangzhou, Shenzhen, Chongqing, Changsha, Cangzhou and Yangquan. Meanwhile, we have begun to charge fees for the autonomous ride-hailing service open road things November 25, 2021 in Beijing, and February 18, 2022 in Chongqing, and February 27, 2022 in Yangquan. Baidu have been working hard to improve the safety performance and maximize the efficiency of autonomous driving by synergizing our ACE smart transportation solution, autonomous vehicles, maps, and cloud services. Our Beijing project is a case in point. About one year ago, we built ACE smart transportation and introduced Apollo Go in E-Town region of Beijing. Currently, almost 100 vehicles are providing autonomous ride-hailing services in the drunk on a daily basis, and we have started charging passengers. At the same time, our ACE smart transportation solution has expanded its coverage almost tenfold in terms of intersections in the wrong area over the past year, providing extra support for Apollo Go. We believe that the Beijing project serves as a showcase for other cities to follow and replicate. As intelligent and connected vehicles are taking the center stage of auto sales, Baidu's autonomous driving solutions have one increasing acceptance among automakers. We believe that we will gain further traction as more automakers recognize that partner in Baidu is better than investing extensively in developing their in-house solution. Recently, we received a nomination letter from BYD one of China's largest automotive and technology companies intending to adopt AIC in particular ANP and AVP for multiple popular models. In DuerOS, Xiaodu again was ranked number one in smart display globally and number one in smart speaker in China, based on the first nine months shipment data last year, according to strategy, analytics, Canalis and IDC. Xiaodu revenues continues to grow rapidly. At the same time, we are pleased to note that our services revenue already surpassed 10% of Xiaodu revenue last year. Finally, in mobile ecosystem, solid user growth demonstrated continuous expansion of our mobile ecosystem. In December, Baidu AVPs, MAU accelerated year-over-year growth rates to 14% reaching 622 million daily logged in users on Baidu apps already surpassed 80%. Users are not only coming to Baidu to search information, but increasingly to enjoy diversified formats of content and closed loop services accessible whizzing Baidu app. Through search out our building blocks, users now can enjoy a full service cycle from information search to fact checking to interaction with industry participants, and to purchasing products and services without leaving Baidu app. In services, our instant replies to search queries cover over 40,000 industry participants from 19 verticals in the fourth quarter. Total daily instant replies increased about 60% from December to -- from September to December. In particular, daily telehealth consultations on Baidu health grow to 2.4 million in the fourth quarter 2021 that's up 60%, 62% from last year. Monthly orders for local services such as moving services and home repair services missing Baidu app multiplied fivefold year-over-year in December. E-commerce GMV facilitated by Baidu, though still small, grow about five-fold in the fourth quarter compared to the first quarter of last year. Furthermore, in 2021, we further diversified the format of video content offerings within Baidu app. In 2021, we introduced a fully immersive video experience that combines horizontal and vertical short videos in an endless flow. This and other enhancements have significantly improved short video dealership and driven up ad conversion missing Baidu app. In monetization, manage page continue to make progress, revenue from manage page grow up by 52% in 2021, and reach to 40% of Baidu for advertising. Well, Baidu Core ad revenues increased by 12% in 2021, macro witness and COVID-19 resurgence have impacted the app industry in late 2021. In the fourth quarter, our ad revenue declined by 2% quarter-on-quarter with year-over-year growth, slowing down to 1%. Going into 2022, China is determined to promote technological innovation and upgrade the traditional industries. Such strategic goals were promoted during China's 14 Five Year Plan and reemphasized by the General Office of State Council in early January of this year. In addition, the Beijing Municipal Government recently released its 2021 work report, emphasizing the target to accelerate the construction of a holistic transportation system containing intelligent vehicles, smart transportation, cloud and map as well as leading the development of high level outcomes driving nationally in 2022. Navigating in this favorable operating environment, Baidu will continue to leverage our world class AI capabilities to grow our non-ad business which is a clear growth engine for our overall revenue. For the coming year, we have set the following operational priorities. For AI cloud, we aim to sustain above industry level revenue growth. We will continue to bring our innovations in AI to where with traditional industry and the public service sector, enabling our customers to improve efficiency and boost productivity. We believe we will be able to make further breakthroughs in more verticals. For intelligent driving, we will further scale up the Apollo Go operation to provide rides to more passengers, we will steadily work towards the goals of removing the safety drivers and providing fully autonomous ride-hailing services in China. We will continue to expand our partnership with more automakers, in ASD, in particular ANP and AVP to enable them to be better positioned in the evolving auto industry. As a result, we expect to further drive up our pipeline. Jidu plans to take orders in the second half of 2022 after launching its first concept production car in Beijing Auto Show, April of this year, and aim to deliver mass production in 2023. For Xiaodu, we will seek quality revenue growth and margin improvement, Xiaodu has already completed two rounds of financing. And for mobile ecosystem, we will continue to leverage AI to improve the user experience in search and feed and further build closed loop services within Baidu app to fulfill user needs. In addition, we focus on a healthy and sustainable business model in order to consistently generate strong cash flow to power our investments in new AI businesses. With that, let me turn the call over to Rong to go through our financial highlights. Rong Luo: Thank you, Robin. Now, let me walk you through the details of our first quarter and full-year 2021 financial results. We closed 2021 with solid financial results, Baidu Core revenue was RMB26 billion increasing 12% year-over-year. In 2021, Baidu Core generated RMB95 billion, $15 billion. This revenue up 21% year-over-year. Now our business grows very fast and reached 26% of Baidu Core revenues in the first quarter after 18% a year-ago demonstrating how our previous investments in AI have built a new growth engine for Baidu. Now as well as in long-term. For the full-year 2021, now our business accounted for 22% of Baidu Core revenues up from 16% in 2020. Our business Baidu AI Cloud is a clear revenue growth driver. Revenues from Baidu AI Cloud increased by 60% year-over-year to RMB5.2 billion in Q4, and was up by 64% year-over-year to RMB15.1 billion in 2021. Now us accounting for more than half of it by the AI cloud revenues, our business benefited from multi-cloud strategies adopted by many of our customers. Our non-ad business profited from Baidu's strong AI capability and upgrade of China's traditional industries. As Robin mentioned earlier, Baidu AI Cloud make great strides in several industries. Total revenues from transportation, manufacturing, the public and energy and utilities industries more than double in a year. Looking ahead, we're into above industry revenue growth for Baidu AI Cloud. Excluding Baidu AI Cloud, Baidu Core now our business includes intelligent driving, as well as other growth initiatives. Intelligent driving, mainly composed of revenue from that including HD maps, automated valet parking, AVP, and autonomous navigation pilot, ANP, and our autonomous ride-hailing fleets. Xiaodu is an important component of other growth initiatives. Xiaodu continue to achieve solid revenue growth, ad revenue grow by 12% year-over-year in 2021. In Q4, ad revenue was up 1% year-over-year, yet decreased by 2% quarter-over-quarter, due to softness in the macro environment and a COVID-19 with that. Our ad business was impacted by significant headwinds in sectors such as education, real estate, franchising, healthcare and travel and may remain challenge in the near-term. We say our trading business should remain relatively resilient and should recover once the macro environment start to improve. In addition, we expect the revenue diversification to continue within our ad business exhibiting strong growth. IT revenue was RMB7.4 billion in Q4, decreasing 1% year-over-year. IT revenue was RMB30.6 billion in 2021, increasing 3% year-over-year. Cost of revenue was RMB17.3 billion in Q4, up 19%, year-over-year, primarily due to an increase in traffic acquisition costs, bandwidth costs, other costs related to a new AI businesses. Cost of revenue was RMB64.3 billion in 2021. You created 17% year-over-year, primarily due to an increase in common costs, acquisition costs, bandwidth costs, cost of goods sold and other costs relate to the new AI businesses. Operating expenses was RMB13.8 billion in Q4, up 29% year-over-year, which was primarily due to an increase in channel spending, promotional marketing and personnel related expenses. Operating expenses were RMB49.7 billion in 2021, up 32% year-over-year, which was primarily due to an increase in channel spending, promotional marketing and personnel related expenses. Non-GAAP operating income was RMB4.3 billion in Q4 and non-GAAP operating margin was 13%. Non-GAAP Baidu Core operating income was RMB4.8 billion, and operating margin was 19%. Non-GAAP operating income was RMB19 billion in 2021. Non-GAAP Baidu Core operating income was RMB22.2 billion and non-GAAP Baidu Core operating margin was 23% in 2021. Adjusted EBITDA was RMB5.8 billion, adjusted EBITDA margin was 17% in Q4. Adjusted EBITDA for Baidu Core was RMB6.2 billion or $974 million. Adjusted EBITDA margin for Baidu Core was 24%, adjusted EBITDA was RMB24.9 billion or $3.91 billion. Adjusted EBITDA margin was RMB20 billion in 2021. Adjusted EBITDA for Baidu Core was RMB27.7 billion, or $4.34 billion and adjusted EBITDA margin for Baidu Core was 29%. In 2021, we will continue to invest in new AI businesses, including AI Cloud, intelligent driving and smart assistants. While the non-GAAP operating margin for Baidu Core decreased from 2020. Our investment resulted in the rapid growth of that revenue. Overall, we expect our ad business to continue generating cash flow to support the rapid growth of our non-advertising AI businesses. So Baidu AI Cloud, we are trying to return rapid revenue growth for 2020, for 2022 and beyond. Cash and short term investments for Baidu Core as of December 31 2021 were RMB186.5 billion or $29.27 billion. Free cash flow for Baidu excluding IT was RMB15.4 billion or $2.4 billion in 2021. Baidu Core had approximately 39,600 employees as of December 31 2021. A few words on unlocking value of other new businesses. A number of our younger businesses are seeing exciting developments in 2021, we completed spot raising for Xiaodu and Baidu, in late January 2022, we do close a Series A financing and raised nearly $400 million. An update on our share repurchase program, we return $650 million to shareholders in Q4 bringing the cumulative repurchase of approximately $1.2 billion in 2021. As of year-end 2021, we have returned approximately $2.9 billion to shareholders under the 2020 share repurchase program, which authorized a total of $4.5 billion. Taking into account the practice of other U.S. listed companies that are listed on Hong Kong exchange, the company has decided not to provide guidance on a company's revenues going forward. Operator with that, let's now open the call for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Alicia Yap from Citigroup. Please ask your question. Alicia Yap: Hi, thank you. Good evening management. Thanks for taking my questions. And also congrats on solid results. I wanted to ask Robin on these questions. I guess management has been talking about different business transitions since 2019. And since our Baidu is still undergoing a transition period. How would you assess your achievement and progress during this transition period? I remember if I recall, I think management mentioned a few times in the past the tailwinds of China's transformations in the traditional industry. So I wonder, as we enter into 2022, how would you quantify some of these opportunities? Thank you. Robin Li: Thank you, Alicia. As you can see, we closed 2021 with non-ad accounting for 26% of Baidu core in Q4 last year, and a year ago it was 18%. Our new AI business have been growing at a pace faster than industry average. 2021 was a year with many challenges and opportunities. Despite the uncertainties caused by macro by geopolitical tensions and other factors. There's one thing for sure, that is the world is moving toward AI. As I mentioned in my prepared remarks, Baidu has brought AI to whereas traditional industries and the public service sector to help them improve efficiency and strengthen their competitiveness. Our enterprise customers increasingly recognize the value we can add to their business. And we have made breakthroughs in industries like transportation, manufacturing, energy and utilities. As more automakers recognize the importance of AI, they have indicated to us that they want to use ASD and DuerOS for auto for more and more popular models that account for potentially billions in sales. And we expect that trend to continue this year. But what is more important is our autonomous driving technology and robotaxi service. Apollo Go has scaled up its operation significantly. If you happen to be in any of the cities we just mentioned during the prepared remark. You're welcome to try out our service via Baidu app or Apollo Go apps. It sounds like an experienced and attentive driver. But in fact, it's powered by AI. We believe providing more rides to passengers. The open road will help us further improve our level four autonomous driving technology further improve the safety performance and user experience and therefore further solidify our leadership position. And going into 2022 in short, the backdrop of policy tailwind, we will continue to expand our AI Cloud and make further breakthroughs in intelligent driving. At the same time, we focus on a healthy and sustainable development for the mobile ecosystem. And AI generated content could become a big differentiator for us in the years to come. So overall, I think AI's contribution to our growth will become more apparent in 2022. Operator: All right. Thank you. Our next question comes from Piyush Mubayi from Goldman Sachs. Please ask your question. Piyush Mubayi: Thank you for taking my question Robin, Rong Luo, and Liang. Congratulations on another solid quarter. Could you share your thoughts on the business outlook for 2022 in general, and Q1 in particular? Also, how should we be taking off margins for the business in 2022? My second question is on your cloud business, which has grown very nicely outgrowing the pace of the industry. What are the drivers that you see for this business for the rest of the calendar year? And also, if you could comment on the margin outlook for the cloud business, splitting it by gross margin and operating margin? Thank you very much. Rong Luo: Thank you so much, Piyush. I think that's a very good question. When we look into our business in last year and looking forward. In the year 2021, the revenue from Baidu Core were increased by 21% to RMB95 billion, particularly driven by the AI Cloud. Baidu AI Cloud grew by 64% to RMB15.1 billion last year, and contributed to over 70% of the core non-ad revenues. As we mentioned in the prepared remarks Baidu AI Cloud may breakthrough in several important verticals. As Robin just mentioned, total revenues coming from transportation, manufacturing, energy and utilities. And the perspective sectors is more than doubled last year. When customers realize that by being equipped with our AI capabilities, that becomes stronger. I think that's part of the reason why we have seen repeated purchase coming from a sick customers last year and deepen the penetration in various industries. I think in particular, one thing we need to draw attention is our ACEs small transportation, which start from scratch only few years ago, and has maintained strong growth momentum ever since. Year 2021 ACEs patients revenue achieved triple digit revenue growth. Our breakthroughs in these verticals have built our confidence to maintain a solid growth momentum for AI Cloud. And we aim above industry level growth in 2022. One thing I would like to remind you is actually our current revenues might fluctuate quarter-over-quarter, and we will suggest you our focus on annual revenue growth, which makes more sense. In the margin wise, we have to state that it's Baidu AI Cloud in push parts the personal cloud services, enterprise and public sector cloud services. Revenue from personal cloud services contributed to a small portion and has been growing more slowly than overall cloud revenues, but enjoys a relatively healthy margins. Revenue coming from enterprise and the public sector, including smart transportations has been consistently up outgrowing the overall AI cloud business. From a long-term perspective, we believe that our solutions become more mature and more standardized, our margins of AI Cloud will improve. Baidu Core ad revenue grew by 12% in 2021, and the margins are heresy. We need to know that the app industry has been facing challenges in the near-term due to the macro environment and the resurgence of the COVID-19. Let me see Baidu Core ad revenue growth slowdown in Q1 from Q4 2021. Having said that, if the COVID-19 trend don't get worse post Q1, then the first quarter should mark the bottom of the app industry. Overall we believe that our advertising business could recover once the macro environment that to improve. I think going forward we will maintain a disciplined approach to balance investments and returns to ensure heresy development for ad business. Managing heresy gross is always our one of our priorities. [Indiscernible] in our AI Cloud business, Xiaodu is so important component, in 2021 Xiaodu revenue growth by where and we target to sustain solid revenue growth momentum in 2022. Within the cloud business, our Intelligent Driving was also achieving some breakthroughs. As Robin mentioned, BYD chose Baidu as a partner to provide Apollo self-driving solutions. This partnership covers BYDs multiple hot models across several years. That is one of the example of the promising development for ACE business in Baidu. While the revenue of such punishes that will be recognized over the few years, alongside the shimmer of each model. While encouraged about progress with May and are relatively optimistic about the future business outlook. In summary, I think we will continue to invest deputy in AI enabled business, especially in the Intelligent Driving AI Cloud, which have been developing rapidly. And we believe that all of this will generate a huge growth potential over the long-term. Thank you, Chris. Operator: Thank you. Our next question comes from Alex Yao from JPMorgan. Please ask your question. Alex Yao: Thank you management for taking my question. And congratulations on Apollo achieving another record breaking number of growths this quarter. My question is how will Apollo achieve large scale autonomous ride-hailing operations in Chinese cities, given extremely complicated road conditions? And also what are your strategies for Apollo Go to accelerate its operational and the technological roadmap? Thank you. Robin Li: Liang will answer your question. Victor Zhixiang Liang: Okay, thanks Alex. As Robin mentioned in 2021 we build-up of local operation, supported by all early moving advantage in our four autonomous technology. Today, we believe that we're already the largest autonomous ride-hailing service provider in the world. I would anticipate the number of rides that we have completed. Based on our experience, together public obligations can generate a large number of long tail data with better quality and a better match with actual user demand, which is different from small scale test driving. By combining this data with our simulation system, we enjoy a flying wheel. In fact, that drove the separation of technology integration. Hence, improving safety performance and the consumer experience and lowering cost. I think you mentioned the complicated road conditions in China. How can Apollo accommodate those challenges and provide autonomous ride-hailing services? I think one distinct feature is our business is our holistic approach, which trend again our ACE smart transportation solution, autonomous vehicles, map and cloud services to improve the safety performance on China's complicated global roadways. Our E-Town Beijing project is a case in part. E-Town the economic-technology development area of Beijing is a typical Chinese open road as you may know. Apollo began autonomous growing testing in E-Town back in 2018. 2020 we have collaborated with Beijing government to construct a high level autonomous driving and domestications and within four years Apollo Go has grown from our for testing to offering large scale operations and throwing passengers in E-Town. Lastly in November, we started up to collect face. Nowadays, almost 100 records are providing autonomous ride-hailing services in E-Town on a daily basis. On orange each autonomous ride-hailing we had provided about 20 rides daily from 2021. At the same time, our ACE smart transportation solution has expanded its coverage almost tenfold from covering 13 intersections to 300. What is even more exciting that Apollo is not conducting fully autonomous driving testing, with no one as [indiscernible] in E-Town on a regular basis. We are working steadily towards goals or removing the safety drivers and providing fully autonomous ride-hailing service in the near future. We believe that we will the number of safety drivers will allow us to significantly reduce our costs and expenses and it will help the business to generate profits in the future. Lastly, I want to highlight that our autonomous driving business has navigating a favorable operating environment. The Beijing government has enacted plans to expanded autonomous driving region to a large era in 2022. Several large cities such as Guangzhou, Chongqing and Shanghai had proactively adopted our ACE smart transportation solutions. And the facility the public obligation for Apollo Go autonomous ride-hailing. We believe that in the short future, those cities will follow a gauntlet to embrace our solution using our holistic approaches system. We also are recently expanded the commercial operations of Apollo Go in Beijing, Chongqing and Yangquan. We believe that we will continue benefit from China's ambition to establish autonomous driving as national pride and the home grown technology. Thank you. Operator: All right. Thank you. Our next question comes from Gary Yu from Morgan Stanley. Please ask your questions. Gary Yu: Hi, good evening management. Thank you for the opportunity. And congratulations on the strong progress you've made on AI and intelligent driving. I think most of the questions around these areas have been asked. So my question is more related to your marketing or advertising business? So I think you mentioned earlier that we think first quarter we'll see slower growth, but should mark the bolt-on? So how should we look at the impact of your advertising, marketing revenue from macro from COVID and from regulations said? When you think about, potentially slower growth in first quarter that we cover afterwards, how bad can first quarter be? And you know, how should we look at recovery for the remaining of the year? And then I think my second question also related to that is more on longer-term. So another policy tail wind that I think Baidu is facing is, with more openness in ecosystem, we may see more potential opportunity from, platforms being more kind of inter operational. So in videos, surging e-commerce, what kind of progress have we made so far? And how should we look at the long-term opportunities there? Thank you. Dou Shen: Hi, Gary, thanks for your questions. This is a Dou. So for a first question, our ad business is highly correlated with micro developments. So actually, as the juniors has already mentioned, the macro economy and the COVID-19 impacts the whole industry and clearly, our business as well in the Q4. These challenges are likely to continue in Q1. So, the factors that underperformed in Q4 such as the education, real estate, franchising and travel are likely to be soft as well, in Q1, but meanwhile, we were cautiously optimistic about the macro developments, because we already see many macroeconomic regulations are being put into places and likely to have positive influence on the economy, so we already witnessed some early signs of the recovery and the momentum for some industries like healthcare. So we're building once the macro environments begins to improve, and our ad business starts to normalize along the economic recovery in Q1, it could be a trough for our ad business in this year. So in the long run, our strategy to build a stronger user base, and the commercialization capabilities and is also making our ad business and mobile ecosystem more resilient than before. So as Robin already mentioned, so we made a stride to enrich both the content in the closed loop services within Baidu app through our efforts on smart mini program, manage pages by that, the building blocks we have been talked about a lot before. So in turn, the user experience for both the content and service consumption, and also the commercial conversion, both on iOS and non-iOS, so being enhanced accordingly. Our mobile ecosystem, then from the mid to long-term perspective will become a platform where our users had one-stop satisfaction for majority of their needs. So with that, besides as, and we believe that the monetization approaches such as live streaming rewards, the Commission, the subscription membership, and et cetera will grow clearly. So therefore we are still investing in many initiatives in our mobile system. Now, we believe our capability will continue to make our margin healthy and sustainable moving forward. For your second question about the proposal, we think it is very, very important for the whole Internet, and will lead to a fundamental open ecosystem in which but which will benefit in every single user of Internet. So we are no search by nature is open. And Baidu has been making its efforts to strengthen the open nature of our mobile ecosystem. So we have made a meaningful progress. And we believe there are many more to come. Let me show you a few examples. So content wise, in addition to [indiscernible] we have leveraging the H2, H5 and Smart Meter program to make our users able to access a vast amount of content from China's top as well as the long tail apps covering long form video platforms and the short form video platforms like B2B and the lifestyle platforms and the podcasting ads and a lot much more long tail comic book apps, with the native app experience. And as you know, just mentioned for the shopping side, as we mentioned earlier, we had made more than 1 billion H2 from our major partner platforms available for our users. And for services, again with the smart meter programs, we now can fulfill a variety of user requests spanning over almost 300 service categories from top platforms such as [indiscernible] an in many vertical platforms like Mauya, low service. Last but not least, we open sourced our smart meter program framework in the very beginning and to empower our partners so that the smart meter programs can actually run seamlessly in their apps recently the leading smartphone makers, such as Oppo, Vivo, Xiaomi have adopted Baidu smart meter program framework in their in house products which resulted in more than like a 20 million more daily active users for smart meter programs. And we already see this has been encouraging more and more developers to embrace the ecosystem. So we believe that interoperability could bring more market opportunities for not only Baidu, but also for the interior industry. So we will continue to closely monitor the dynamics. And we will do our parts to make move on faster. Gary Yu: Thank you. Operator: Thank you. Our next question comes from Eddie Leung from Bank of America Merrill Lynch. Please ask your questions. Eddie Leung: Good evening and most of my questions have now been asked, just curious on your use of cash including investment plan as far as any potential increasing your buyback program. As for investment, we noticed that quite some of your major peers talking about more disciplined going forward in terms of investment. So wondering whether you have a similar strategy going to 2022, thank you. Robin Li: Thanks for the question. I think in terms of a corporate strategy, I would like to emphasize that the most important investment always investing in ourselves. If you're looking to our business today, our growth is clearly driven by the ad happiness, which is already 26% of the total revenue now. And now ad mainly composed of AI cloud, intelligent driving, AI related growth initiatives. All of these are kind of newbies for us, and which requires more investment. This AI business represent different stage of growth, and they are very important for the long-term revenue growth of our company. Our investments are pretty much packed with growth potential. So we will continue to invest dedicated AI on ourselves in particularly intelligent driving and cloud to lay a solid foundation for our future growth, and meanwhile, will remain open but also we are disciplined in investing and choosing which may complement our new business initiatives. In terms of capital allocation, yes some of our new business have completely different reasons, and which have created more capital for their future development. On the other hand, is such arrangement, which can better align their manager employees interests, I think going forward will maintain open attitudes. And we're open to bring in more diverse investors, including structure investors, to help the companies to grow. In addition, you've mentioned the share repurchase program, I think we believe that our AI business has been undervalued by the market. For example, the market has not placed sufficient values on our intelligent driving businesses. That's the reason why we keep buying back our shares. As of the end of 2021, will have returned approximately $2.9 billion to the shareholders under the 2020 share repurchase program. I think this reflects the condition that we have in the direction of our businesses. Thank you for question. Operator: Thank you. Next question comes from Jerry Liu from UBS. Please ask the question. Jerry Liu: Hi, thank you management. Yes, I want to go back to the Apollo topic. Maybe just from a different perspective, on this call, you guys mentioned some more wins with automakers and especially the new partnership agreements with BYD. So I just want to ask what are some of the operating metrics that you can provide to help us quantify how big can this opportunity, can this business be? How will these partnerships benefit the ABS business going forward? How will it benefit overall revenues? Thank you. Robin Li: Hi, Jerry, this is Robin. Intelligent connected vehicles are becoming the new attraction for auto sales. Many automakers have come to realize that adopting Baidu solution is better than investing in their in-house solutions. That's why a lot of automakers have chosen to partner with us. Our in-vehicle informing timing system to our auto has been on market for quite a few years. But our ASP namely both ANP and AVP has been gaining traction over the past or so, we have seen strong acceptance from the automakers. You mentioned, BYD as a very good example they are one of the largest EV automaker in China. It probably accounts for close to 20% of China new EV market last year, and their sales volume grow for new EV grow by over 200% last year. They have selected us to be a partner to supply the autonomous driving solutions, especially ANP and AVP for multiple popular EV models across multiple years. With the increasing adoption of Smart EV in China, we believe Baidu's strong autonomous driving capability put us in a very strong position to win more businesses. As the end of last year, according to our internal estimates, the total projected cumulative sales of ASP and auto from new wins should be about RMB8 billion and that's unrealized revenue count was growing very fast over the past two to three years, especially, the contribution from ASP has been very strong. Rong Luo: Yes, and I tried to make it clear about the numbers. We're seeing the very promising numbers of our accumulative sales of auto in the past few years. They grow, the growth is quite promising about this number, which includes the contract side and a nomination letters from customers. I think the auto industry's nomination letter means the supplier is successfully accepted by OEM or certain projects following the nomination letters OEM typically contracts with suppliers. Our estimates made based on our assumptions, the timing of new models, the pricing and the future sales volume, according to the discussion with our customers, and some projections also coming from the professional third-parties. Of these projects usually last for three to five years, during which time we will recognize the revenue based on actual installations. I hope this can give you a better understanding of our ASP business. Thank you. Operator: Thank you. Our next question comes from James Lee from Mizuho. Please ask your questions. James Lee: Great, thanks for taking my questions. A couple of follow-up questions on autonomous driving. I recently read your recently published book on smart transportation and in this book specifically you guys elaborated a number of details about the industry landscape including V2X, traffic management, smart EV and autonomous driving and just looking at the various fields that you mentioned the book here what is Baidu's mid-term core strategy and long-term development goals? Thanks. Rong Luo: Let me start with why I wrote this book. The application of AI technology has given me new ideas and new solutions to digital transformation of many industries. I think transportation and auto is probably the best example. So, in this book, I demonstrate how AI is going to reshape this industry and create enormous value for all of the stakeholders. The ITS or intelligent transportation system has two building blocks. One is the intelligent and connected vehicles, the other is the low side infrastructure. This tool works well independently, much more effective together. The system deeply integrates a wide range of technologies including AI, 5G in Cloud computing into the transportation and auto industry. It is dedicated solving three major issues first, to minimize job safety accidents, 94% of the accidents are caused by human error in driving and autonomous driving will be much safer. Second, systematically reduce congestion based on our experience with certain Chinese cities, Apollo V2X or vehicle to road infrastructure has helped reduce traffic congestion during peak hours by 20% to 30%. Thirdly, reduce the carbon emission, road transportation accounts for over 80% of the carbon emissions from transportation sector. Therefore, improving the efficiency of transportation system is critical for sustainability. AI is reshaping the transportation and mobility industries creating trillion dollar industry opportunities. In China, there are more than 300,000 road intersections in urban roads, and about 150,000 kilometers of highways and 10s of millions of parking lots. There have been all in the process of upgrading with AI technology, not to mention the autonomous ride-hailing and smart EV market opportunities. As I mentioned in the prepared remarks, Baidu has made significant progress in intelligent driving. So in the medium and long-term, we aim to expand the Apollo goal to 65 cities in 2025 and 100 cities in 2030. And expand our smart transportation into more cities and deepen our penetration in each city. From a more macro point of view, ITS is a microcosm of future digital city operation. I think the digital city operator mode assisted by AI technology will be a good solution. Through AI, new infrastructure we are confident to further contribute innovative solutions to the digital transformation of industry and city. Thank you. Operator: All right, thank you. We have reached the end of the question-and-answer session. And with that, ladies and gentlemen, we conclude the conference for today. Thank you for participating. You may all disconnect.

Operator: Hello, and thank you for standing by for Baidu Third Quarter 2021 Earnings Conference Call. Well, at this time, all participants are in listen only mode. After management's prepared remarks, there will be at an answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I'd like to turn the meeting over to your host for today's conference Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello everyone and welcome to Baidu's third quarter 2021 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 Li, our Co-Founder and CEO our CFO Dou Shen our EVP in-charge of Baidu Mobile Ecosystem, and Herman Yu, our CSO. 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 Private Securities Litigation 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 the SEC and Hong Kong exchange. Baidu does not undertake any obligation to update any forward-looking statements, except as required under uptick follow-up. 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 directly comparable GAAP and is available on our website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. We delivered another solid quarter in Q3, with Baidu core revenue growing 15% year-over-year, driven by AI Cloud, growing 73% year-over-year. Many years ago, we doubled down on AI, believing that it would expand our market opportunity and accelerate Baidu's long-term growth. Non-ad revenue accounted for 21% of Baidu co-revenue in Q3 and remains a strong growth engine for us. Through AI, we are bringing innovation across the consumer price and the public sector on the backdrop of positive tailwinds and the rising tide of tech innovation being digital transformation in controlling that by OT and intelligent mobility. Baidu AI Cloud is empowering enterprises from traditional industry and the public sector to better serve customer and move faster with greater efficiency. At Baidu World in August, which was broadcasted on CCTV, we showcased Baidu AI Solutions including smart quality assurance to automate the screening of electronic components of manufacturing, assembly . Smart logistic to optimize fleet management, and smart monitoring to ensure a steady energy supply from the utilities sector. We are excited about Baidu AI Cloud continuing fast growth. Leading companies across industries are adopting Baidu AI Cloud solutions to improve their operation. And we are working hard to standardize such solutions for industry adoption. An example is our end-to-end AI solution composed of for financial services sector. Our AI Cloud customers are recognizing Baidu's value proposition with strong consumer Internet reach. For example, we are winning smart public parking projects with our solution, offering the convenience of collect public parking fees by a Baidu maps without the need for meter maid. Hospitals are choosing Baidu for cloud solutions that save patients trips to the hospital with continued patient care for chronic diseases at home through dual OS smart display. According to the World Health Organization, there are 1.35 million road traffic deaths every year. Apollo Autonomous Driving aims to reduce traffic accident, accelerate mobility to EV, and provide greater passenger safety especially after dark. Apollo Goal has become the largest Robotaxi service provider in the world. Based on our estimate. Our leadership position in autonomous driving, well, land strength to AFD and Gduauto. DeepWay, agiley between Baidu and Lion Bridge a leading trucking Company in China, recently unveiled its first-generation EV truck powered by Apollo to automate road fright. Marking Apollo's entry into the multi-trillion dollar truck market. DeepWay leverages Apollo's leading autonomous driving capabilities and . Baidu is making great progress as its plans to release the first concept production car at the Beijing Auto Show early next year. showcased Apollo's intelligent, self-driving, and an incoming feature with the aim to deliver mass production in 2023. For the third quarter, China's GDP growth, 4.9%, much slower than the 18.3% and 7.9% growth rate in the first 2 quarters. Our has being impacted by sectors like education, real estate, and home furnishing, travel, and franchising and we expect this headwind to continue in the near-term. As we look forward, there are also positives coming into play. For example, Baidu app is reaching over 600 million users each month, our hosted marketing solutions is becoming ever more popular despite owners and the twinned, it's for the internet to become more open. Non-ad mix up over 1/5 of Baidu's co-business and growth over 70% year-over-years. We stand to benefit from China's plan to leverage technology to grow the enterprise and public sector part of the economy. ESG is at the heart of Baidu as we leverage our strong Internet foundation to grow our AI business at scale. Apollo mission is aligned with lowering carbon emission from making traffic in large cities, closer, to accelerating the adoption of EV through G2 software for EVs and EV powered ride-hailing. In June, we announced our goal to become carbon-neutral by year 2030. Our young Chen data center was awarded the carbon-neutral data center reader certification, and MSCI named Baidu as 1 of the 2 companies in China with transparent reporting on greenhouse gas emission in its net 0 tracker. Turning to Q3 operational highlights. Baidu's AI Cloud continues to see strong growth, leveraging our world-class AI technologies and our capabilities to provide one-stop-shop solution to our customers. Our AI solutions are being increasingly adopted across different industries and for different scenarios. We enriched our cloud offering with the release of an end-to-end AI cloud solution, powered by and PaddlePaddle deep learning framework to help financial services firms digitize and automate their operational processes in listing leading customers like China Life and Bank of Jiangsu. Baidu AI Cloud is expanding into industrial Internet by partnering with industrial park and municipalities. Our deployment to serve large pool of enterprises, is frightening. Last year, we spent 7 months implementing our AI Pass in GuiYang economic and technology development loan serving approximately 100 enterprises. Our deployment of AI Pass to enterprises in Tongxiang, including those in their Economic Development Zone, took only 3 months. Tongcheng hosts 40,000 . Mostly manufacturing based and we believe our AI solution can help these companies, improve their operational capabilities. Baidu AI Cloud is moving into smart city. UNESCO heritage site with 800 year-old bridges and waterways in Southwest China is using Baidu AI solution to keep the city safe and clean for visitors. Leveraging the digitization of tourist areas, Baidu AI Cloud, helps local authority timely detect and address in fractions such as illegal parking and public littering. Our success in is leading to projects with and other cities. Moving to SAE smart transportation, Baidu SAE has been adopted in 24 cities, up threefold from last year based on contract size over RMB 10 minute. About half of ACE projects signed in Q3 came from repeat customers. In addition to supporting policy, tailwind SEE is benefiting from the value we deliver to the public sector. For example, the SEE smart transportation solution that was deployed in Guangzhou earlier this year helped improve congestive traffic by over 30%. Smart parking has made it easier for local residents to find available parking spaces shortening travel time. Turning to autonomous driving. Apollo level for testing has accumulated over 10 million miles or 16 million kilometers, setting a new milestone. We continue to receive green light being our application or autonomous driving testing as we demonstrate to local authorities Apollo's progress in technology and operation. Apollo has received 411 autonomous driving permits, an increase of 237 permits from a year ago. Our progress in autonomous driving technology, operations and continuous cost reduction positions us for , monetization in a few years as paid right scale. In July, Baidu opened its third Apollo Park in Shanghai, a 10,000 square meter facility housing Apollo Cloud and Data Operation. Shanghai marks Apollo goals, fixed ride hailing service open to the public. Following the cities of Beijing from and . In August, we introduced the Chinese brand for Apollo goal Global , fanatic interpretation of Robert taxi in Chinese. Apollo goal is resonating with ride-hailing passengers with total ride doubling quarter-on-quarter to reach 115,000 in the third quarter. Apollo goal is off to a good start, as we set an ambitious goal to expand operations into 65 cities by year 2025, and 100 cities by year 2030. Turning to ASD and dual OS in vehicle infotainment software. Wema Motor Chinese EV OEM find Baidu to install a total navigation pilot in its new W6 SUV, taking Apollo partner network to 31 makes, including those from automakers like GM, Ford, Toyota, Honda, and Great Wall. Turning to Jidu Auto. Jidu has completed its first vehicle wind tunnel testing with the full side oil and Clay model. We have identified the model design schemes and engineering development, and design optimization are underway. Jidu will showcase the latest ASE, demonstrating the appeal of smart EVs with advanced autonomous driving and smart in-cabin features. We hope to success of will, increase appeal of Apollo solutions to other automakers. On dual OS. , was ranked the number one in smart display globally and number one in smart speaker in China, based on second quarter shipment, according to strategy analytics, and IDC. A key growth driver for Baidu smart display is a shift of user time spend at home to large screens for services like karaoke, short and long videos, online games, education services, video conferencing, and other visually oriented activities. Popular mobile apps, appearing to our OS skills like 58.com, Haiti and Kentucky Fried Chicken to name a few. In addition Xiaodu completed its Series B financing at a market valuation of 5.1 billion in August, 9 months after its Series a financing at $2.9 billion Baidu remains super majority shareholder after the Series B fee round. The continued strong performance of our new AI (ph), will not have occurred without our relentless investment in technology and our pursuit of better products and more customer adoption from our technology leadership. Baidu released Plato-XL, the world's first $11 billion-parameter pre -trained dialogue generation model. Achieving breakthroughs in Chinese and English conversations. Plato allows for different kind of conversation with users, including chitchat, knowledge-based dialogues, and conversational Q&A, which will be incorporated into Xiaodu in the future. Turning to mobile ecosystem. Daily logged in users in Baidu app reached another all-time high at 79% and in-app search queries was up 11% year-over-year, reflecting a better search experience from Baidu app. We continued to focus on deepening the service offering of our key verticals. For example, Baidu Health has built a strong community of medical experts that allow users to frictionless move from search to telehealth consultation. We recently enabled doctors in our network to write a prescription for online consultation and home delivery. Baidu app now offers instant replies to search queries from over 30,000 industry participants spending 19 industry verticals. Instant replies were up 5 votes from a year ago and 40% are paid services. For example, users who search for tips on job interviews can readily connect to career advisors to get help on reviewing their resumes and selecting career training programs. Instant replies have enriched Baidu's search experience, further driving the vibrancy of our in-app search. Revenue from managed page reached 43% of Baidu core advertising as we make doing business online for merchants simpler through Baidu's hosted marketing cloud. For example, mainly on health, a physical checkup clinic chain in Shanghai opened a managed page storefront allowing users to browse its services, chat with customer service, make payments, leave comments, and share reviews. Monthly orders increased 4-fold, 3 months after using managed page promotion. Third, supplier nature is open and we are benefiting from the trend to make Internet more open in China. Our e-commerce feature is seeing good progress. In September, the number of third-party SKUs from China's top e-commerce site, searchable on Baidu, reached almost 1 billion and e-commerce GMV on Baidu, though small, grow 19%, sequentially. The open nature of our mobile ecosystem, is leading smart speakers -- smart maker -- smartphone makers to select Baidu 's Smart Mini Program as the landing page for their browser search. MAU from such collaboration has reached 24 million, and we believe such trends well, intense user experience and monetization or union search. Last but not least, I want to welcome who has joined us recently as our new CFO. Juan brings a wealth of financial management and capital market experienced I also want to thank Herman for his 4 years of service as Baidu CFO, and we expect more quick things from him as CSO. With that, let me turn the call over to loan to go through the financial highlights. Rong Luo: Thank you, Robin. Hello, everyone. I'm excited to have joined Baidu recently and participate on my first earnings call at Baidu. I look forward to meeting with everyone in the coming months. Now, let me walk you through the details of our quarter 2021 financial results. All monetary amounts views in my discussion are in RMB unless stated otherwise. Baidu's curator revenue was RMB 31.9 billion or US $5 billion at 13% what three year-over-year. Baidu cost, Q3 revenue reached RMB 24.7 billion or $3.8 billion up 15% year-over-year. Now advertising for Baidu call reached RMB 5.2 billion up 21% of Baidu cost revenue. AI Cloud revenue was RMB 3.8 billion up 73% year-over-year. Our AI Cloud growth is benefiting from the demand for close services by customers from the Internet and media, financial services, energy, manufacturing, and the public sectors. AC as much as is another growth driver for AI Cloud revenue. We're fighting those automakers that subscribed to our infotainment solutions, are also interested in Apollo ASD. Plus, we are reclassifying ASD revenue into AI Cloud. ISD revenue is quite smart now and ADI approximately 1% growth year-over-year to AI Cloud as a result of retroactive adjustment. ID and OGI, continues to make great progress. Demand for higher ASP products keeps growing as customers come to appreciate the value of steel OS smart assistant and service revenue continues to grow. Baidu call app revenue was RMB 19.5 billion up 6% year-over-year. In app search advertising was solely, partially offset by the weakness in junior revenue. IQiyi revenue was RMB 7.6 billion up 6% year-over-year. IQiyi subscribers reached 104 million in September and the membership revenue was up 8% year-over-year, mainly due to the refund membership strategy improved monetization capabilities, cost of revenues was RMB $16.1 billion up 26% year-over-year. Primarily resulting from an increase in tech, content costs, and the cost of sales associated with new AI business. Operating expenses were RMB 13.5 billion, up 46% year-over-year. During the third quarter, we incur a contingent loss of RMB 976 million, pertaining to the legal proceeding involving former advertising agency. Excluding such contingent loss, operating expense was up 35%, primarily due to an increase in channel spending, promotional marketing, and personnel-related expenses. Non-GAAP operating income was RMB 4.6 billion or U.S. $731 million. And non-GAAP operating margin was 15%, 1, and 5. Non-GAAP operating income for Baidu call was RMB 5.8 billion or U.S. $904 million, and non-GAAP operating margin for Baidu call was 24%. Adjusted EBITDA was RMB 6 billion or U.S. $925 million and adjusted EBITDA margin was 19%. Adjusted EBITDA for Baidu call was RMB $7 billion or U.S. $1.1 billion, and adjusted EBITDA margin for Baidu call was 28%. Cash and short-term investment for Baidu call as of September 30th, 2021 was RMB $183.6 billion, or U.S. $28.5 billion. Free cash flow for Baidu, excluding IC, was RMB 2.9 billion or US $449 million. Baidu call has approximately 39,000 employees as of September 30, 2021. As Robin mentioned, China's GDP growth has slowed over the last 3 quarters and sectors in our app businesses, such as education, real estate, estate and home furnishing, travel and franchising has been negatively impacted. With the resurgence of COVID-19 in many cities recently, local governments are putting in place preventive measures, including quarantine, travel suspension, and mass testing. Consequently, our own advertising business may remain soft in the coming quarters before normalizing. Turning to Q4 guidance. For the fourth quarter of 2021, Baidu Express revenue to be between RMB 31 billion, which is US dollar $4.81 billion and RMB 34 billion, which is US $5.27 billion representing a grocery of 2% to 12% year-over-year, which assumes that Baidu call revenue will grow between 5% and 16% year-over-year. The above forecast pace into consideration that the current COVID-19 situation in China, which is still evolving and business visibility is limited. The above forecast reflects our current and preliminary view which is subject to substantial uncertainty. Before I turn the call to Operator, let me recap this quarter. China is adjusting its economy because drivers, with the introduction of a new 5-year plan in March this year. Historically, the Chinese economy has been very resistant to such adjustments and new drivers allow the GDP growth to come back. We're optimistic about China's future, especially when the current COVID-19 situation comes under control. It's quite clear that China will leverage technology to grow the enterprise and public sector portion of the economy leveraging AI our close services -- our core business continued to outperform the market, growing 73% year-over-year in the third quarter. Apollo is making great progress from L4, Autonomous Driving testing, surpassing 10 million test miles to Robotaxi ride, sharing rights. Sequentially to ASD, signing on new partners to G2, finished the weight tunnel testing of its first-cut model, 8 months after its CEO joins to build a team. We are moving at China's speed. China is doling our new policies to support great energy. We are hopeful that Baidu will benefit from the promotion of decoupling night vision, as we leverage AI to minimize traffic conjectures in thousands of cities across China and helped accelerate the switch to EV with G2 ASD, and Apollo Go Robotaxi. Our mobile ecosystem, Baidu MAU reached 607 million up 12% and daily login reached 79%. Our app business is susceptible to macro environment, and what is fair, our gross rate to peak, when GDP grows our salaries. Operator, with that, let's now open the call to questions. Operator: Certainly. Thank you, ladies and gentlemen we will now begin the question and answer session. If you wish to ask the question Participants are requested to restrict to 1 question at each time. Question comes from the line of Alicia Yap from Citigroup. Please ask your question. Alicia Yap: Hi. Good evening, Robin, Rong, and Juan, congratulation Rong on your new role and for taking my questions. I actually tried to fit into if I may. For the fourth quarter core -- Baidu core revenue guidance, you provided a wider range, which is 5 to 16%. Can management elaborate the scenario and the situation that you baking through the low end of this 5%. What would be the implied core ad revenue growth versus the AI Cloud revenue growth if we end up in the low end? And then similarly, what would be the scenario if we end up in the high end of the revenue guidance of 16%, would that come from better macro or a more car project that will be closing? And then secondly, just in the days overall broader regulation backdrop, has Baidu started to have any discussions with other major Internet peers as related to these potentially opening up of your social network content to the search engine. If this were to go ahead, what is management view on the potential benefit and upside to Baidu fundamental going forward? And also any discussion you have with some of the e-commerce leading player to allow Baidu to crawl into the e-commerce content item on that digital storefront. So any color you can provide would be appreciated. Thank you. Robin Li: Alicia, I will have Herman answer your first question and I'll answer your second. Herman Yu: Hi, everyone. So with regards to our guidance, we normally guide -- totally assuming that we will hit the midpoint. You asked about, what do we factor in and what would it be, it goes to the low. I think obviously, as Robin has mentioned, 21% of Baidu Core is non-advertising, and almost 80% is advertising. And as we're in the process of trying to control COVID-19, that obviously is the highest risk right now. In our model, we assumed that COVID-19 will be under control for the most part in China by the beginning of December. We have seen since Guangdong's situation that normally 60 days after it happens, that -- it gets under control. But this time it spreads through several cities. Given the pattern that we've seen, given the example in Beijing, we've seen the cases have slowed down, we think that's a doable situation. Secondly is no. The other side of our business is mainly Cloud, right? When you think about the Cloud, the -- trying to recognize revenue, trying to make sure that the software is installed, it's a more complicated process than advertising. So as you get in into year-end, the risk there is that we delivered software, but it's not up and running, so we cannot recognize revenue. And that's always the case when you have 2B businesses. I think that there is a risk there with our Cloud business. There's a risk there with transportation. I think those are the key risk factors, I think, I will call out. But as we said, normally when we go out with the guidance, given the information that we have today, we think we're more likely to be somewhere in the middle. Rong Luo: Hi, Alicia. I'll take the second one. As you know, search by nature is open, and with the leaving of being able to share content across apps, provides better user experience. And also with believing on this will be a going forward trend. Actually we already see things are happening around this direction for example, some developers are more willing to open up their ecosystem nowadays because is also good for their own business. As Robin already mentioned, our e-commerce effort are almost 1 billion SKUs from the top, e-commerce sense, were now searchable on Baidu. And the GMV in Baidu goes 90%, sequentially. So actually another great example, I want to share, which Robin already mentioned is that, the major smartphone makers in China are adopting our open source smart to mini program framework for their in-house partners. With this adoption, users will have better experience and the developers or significant, again, significantly extend their reach through the major in China. So you're right. We believe we'll benefit from the openness over the whole Internet and we're seeing things are happening in that way. Thank you. Operator: Great. Thank you. Our next question comes from the line of Piyush Mubayi from Goldman Sachs. Please go ahead. Piyush Mubayi: Thank you for taking my question. When I look at the guidance that you talked through Herman, it appears to be generally slowing down and we realize it's a very high base for the Cloud business in the fourth quarter of last year. As we look at that pace of growth and we go through the core which looks like it's a 5 to 16% range. And we try to estimate where are the in the advertising vertical weaknesses and whether it's COVID related or macro-related or third-party related. As you exited third quarter, what was the pace of decline that was the commencement of the fourth quarter? You could take us through that pace, so we can understand where we might end up to a certain degree. And also, I know it's very early to talk about it, but broadly speaking, into 2022, we'd be opening up our platforms with so much that's going on from a business perspective on the AI front, as well as on the cloud front. What is the pace of growth we can expect on the call? Herman Yu: Can you repeat that last sentence? I missed that. Piyush Mubayi: As we look at -- we've seen a slowing down into the third quarter, which is probably one of the reasons why you're giving a very wide range for Q4 for the core. But there's so much that's going on that is -- that leads to a level of optimism for what 2022 would look like, including the opening of the systems, opening of the platforms, how much search you can originate in the e-commerce vertical, and that's just the e-commerce space. I don't know how many other verticals you can tap into. Do we think through 2022 and the core pace of growth, any feelings around how that would be would be great. Herman Yu: Okay. Let me answer that. We talked about Q3. When you look at advertising Q3, we've been gradually slowing down in terms of our growth. And in Q3, what we've seen that sectors that have impacted us. Some of these are pretty obvious, like education, like real estate and home furnishing, like travel and franchising, these would probably be more related to COVID-19. These situations are going to extend into Q4 and we suspect that this might be a multi-quarter . Based on what we have seen right now, we expect that advertising for Baidu Core, which was a 6% year-over-year in Q3 would probably go into even a slower growth rate in Q4, assuming that a COVID-19 gets under control by the beginning of December. So a lot of uncertainty there. If that continues to not get -- if that continues to have new cases every day, then our advertising could even perform worse than that. So I think a lot of it has to do with COVID-19, but there are other factors that's impacting that, such as regulations and so forth. I think with regards to the AI businesses, I think COVID-19 does impact that a lot. As we talked about before, that our AI Cloud is based on solutions and we have to customize for certain customers and so forth. If we are unable to travel or we were not able to be as fluid as before, that will have some impact. Others are just your normal end of the year trying to complete these enterprise solutions. And sometimes, given that the difficulties that we have right now having about and so forth, might not make it. I think we're just putting that uncertainty in there. With regards to our range, actually we've been pretty consistent. If you look at over the last year, it's -- at the Baidu consolidator level is always a plus or minus 5%. I don't think we've made any changes in the recent quarter. Going to 2022, it's hard to look out so many quarters into 2022, but what we have seen for advertising, as I mentioned, we think that this could be a tight quarter impact because example COVID-19 comes and goes and then the regulations and so forth. And when we look at -- talk to our peers in the market. There seems to be a consensus that this could be beyond 1 quarter. I think that's where we're advertising. Sure enough, there's also that upside with the opening up with a different apps and so forth but it's hard to bake that in until we actually see more development. We'll keep you guys apprised as that comes. The other side of this is that we're pretty optimistic with our AI businesses. Robin has been QB, which we've seen year-over-year. If you look at the last few quarters that we've been always growing above market speed. We continue to believe that we can grow above the market. If you look at our NDR for example, it's been gradually improving or increasing. We're coming -- feeling pretty good about that. One of the thing is that if you look at our cloud business, SaaS businesses, is the fast right now. We were ranked by IDC as one with the largest AI solutions in China. And this is a piece asset facet of our Cloud solutions or our Cloud AI. So I think we're pretty -- feel like we're in a good spot right now because of the policy trends supporting technology, supporting a leveraging AI for enterprises, also for the public sessions. Robin Li: About the opening up on e-commerce platforms; that will enable users to do transactions, Baidu Mobile Ecosystem, especially Baidu app more easily, given that the e-commerce infrastructure in China has matured it's very easy for people to pay using their mobile phone, and it's very quick to get something delivered to our home. And now that we can index a lot of that to use on Baidu, we expect a very quick increase in terms of TMV from a low base revenue contribution directly from transactions will not be large, but once users get used to do transactions from the Baidu platform, I think the overall conversion rate for our advertisers will also improve. I think that the benefit will be well beyond simple transactions on the Baidu platform. Operator: Your next question comes from Alex Yao from JP Morgan. Please ask a question. Alex Yao: Thank you management for taking my question and welcome back to the Internet investments community. I have 2 questions. Number 1 is we have seen a lot of regulatory and operating environment changes recently for example Apco's that idea of the policy change. For example, the implementation of on 1st of November. Can you guys talk us through the operational and the financial impact from those changes particularly, how should we think about the union business into the next couple of quarters? And then second question is regarding the general corporate strategy. Well, the advertising revenue outlook through the week for the next couple of quarters. How do you guys think about the general corporate strategy? For example, are you still pushing the investments on head counts and user acquisition costs? And I think -- in the past, you guys had a very tough cost control when the top-line was under pressure. Are you thinking very differently this time? Any thoughts on the general corporate strategy in the current revenue on look will be helpful. Thank you. Rong Luo: The first one. On the IDF because majority of Baidu's core ad business do not rely on user data not like, some of the US companies do. The impact on that side is most pronounced, actually. In January, we strive to be a global technology leader in issues such as this type of data, privacy and security has been taken into consideration for a long while. Many years ago before this topic even caught up in -- caught the industry's attention, we saw the need to establish internal committees to define strict policies and procedures to address data privacy, data management and data security. Also, we are working with the leading companies globally and domestic to treat ideas and drive best practices. But we also share our experience with authorities to help the industry address these complicated issues. Again, all the efforts we have done, I think the impact on this study is not that pronounced. Operator: The next question comes from James Lee from -- sorry. Go ahead, please. Herman Yu: Alex, you mentioned about corporate strategy. So where we are at this time is that we have our expenses. You can look at mainly 2 buckets, right. 1 bucket of spending is related to our growth with our new business, whether that's in Cloud, whether that's in intelligent driving and so forth. And you got it to invest ahead of time to make sure that your sales force is there, to make sure that people are doing a pre -sell there to support your future growth. And as we mentioned earlier, that piece of the business is still growing very fast. When you look at non-amortizing, we're growing over 7%. So you've got to build a funnel. You've got to get the people and so forth. I think that's going to continue. Secondly, a new AI business has higher cost of goods sold. Whether you are talking about selling smart devices, whether you're talking about delivery for solutions or smart transportation. Those things we have to factor in for this new business; that's just part of it. We look at gross margin very carefully but you still have to find the the salespeople, the development people to support the business growth. And we're leading in those businesses, so we feel comfortable continuing to invest. The 2nd pool of investment that we have is with a mobile ecosystem, and what you see there mainly is supporting our Baidu (ph). A big part of that spending is channel spending, or marketing spending for the Baidu ABP. This year, we've been pushing Baidu ABP , which will allow us to tap in to users from lower tier cities. And that has been working. And in addition to that, we've been beefing up some development in that area to help search experience. I think we manage that side of the expenses, especially channel spending based on ROIs. As long as we're seeing positive good ROI, we will continue to spend in the channel and marketing areas. Robin Li: I will just like to emphasize that our investments is pretty much pegged with growth potential. We see a lot of growth potential in the AI enabled new businesses. So, we'll continue to aggressively invest in that area. Mobile ecosystem in general, not just for Baidu, I think the overall mobile market in China is maturing. So, we will use discipline to balance our investment and growth. Operator: Thank you. Our next question comes from James Lee from Mizuho. Please ask your question. James Lee: Great. Thanks for taking my questions. My questions on intelligent driving, Autonomous Driving, and obviously does a lot of moving parts in this business right now. I think you guys have lay out, your plans of robo-taxi. Can you also lay out the road map and how Apollo can achieve a meaningful presence in connected infrastructure, and OEM licensing your technology? So what I mean is that does your footprints of your smart transportation influence OEMs decision to choose the Autonomous Driving Solutions? Thanks. Rong Luo: Hi, James. Apollo is a platform for both smart transportation and autonomous driving. It has gained a lot of partners, customers, and so we being a leader in many of the fronts including Robotaxi as I mentioned, we are probably the largest Robotaxi service provider in the world by number of rides which we provide. And it's open to the public in 5 cities in China and for many of those areas, we also have smart transportation projects going on. Government pay off to install roadside units, and also software systems to better managed the traffic and help -- I'm striving to become safer and greater. We also worked with quite a number of OEMs to provide infotainment system, as well as other pilots or navigation system what we call AIC. And we have gained quite a number of OEM customers. So all-in-all as a platform Apollo connects smart transportation, OEMs, services altogether. And we are quite confident that we will continue to lead that market and even become dominant in the future. Operator: Your next question comes from Jiong Shao (ph) from Barclays. Please go ahead. Jiong Shao: Thank you very much, for taking my questions. First off, big congrats to both Herman and Rong, on your new roles. My question are related to your Apollo Autonomous Driving and a robo-taxi as well. Just following up on the previous question, could you elaborate a bit on the top line for G2 in terms of when the assembly line manufacturing facility will be ready? What kind of scale we are talking about when you talked about mass production in 2023? And you talked about your partnership with Lion Bridge for semi-truck. I understand GD just announced their ambition for the EV semi-truck business a couple of days to go. I think -- I was wondering, since you are big partner, do you have any plan to work with them for their Semi truck EV initiative? And then lastly on Robotaxi, I recall I may have read somewhere you may have commercial operations up and running for Robotaxi sometime next year. Is there anything there you can share with us? Thank you so much. Robin Li: Alright. On Jidu, like I mentioned during the prepared remarks, we are planning to launch the concept production car early next year at the Beijing Auto Show. That car will be the final shift in architecture for when it is available for sale in the latter part of 2023. So, by mass production, we mean everyone, every consumer can place an order or to buy the Jidu car sometime in the second half of 2023. Of course, it's too early for us to predict how many units we can sell at that time but we are all very excited the feature we're putting in and the values we can offer to our consumers when it's available. In terms of Autonomous trucking, it’s a huge market. We already have a partnership with Lion Bridge and GD, as you know, is a strategic partner of Baidu too. We are open to all kinds of collaboration with them. And again, this kind of collaborations are not exclusive. Apollo is an open platform. We can work with everyone and we would like to help a lot of companies to become successful. And now the commercial operation of robo-taxi, we can charge right now in a couple of the areas in Beijing and Tongzhou and we are applying such licenses in other cities. It's a very quick wrapping up process. We are already providing -- we already provided 115,000 rides in 1 quarter in Q3 and in Q4, I think that number will continue to increase. And this is probably much, much larger than the reported number you can hear anywhere else in the world. Operator: Thank you. Our next question comes from Natalie Wu from Haitong International. Please ask your question. Natalie Wu: Hi, good evening. Thanks for taking my question and congrats on my question is regarding the investment plans for your new AI business. Firstly if we take -- look at the development history of AliCloud, when the revenue scale approached RMB annually, it developed loss ratio actually might lower significantly. So, should we expect that margin profile on to improve next year after an AI account revenue scale which also goes scale. Or how should we see the modern chain of your AI car business in the next 1, 2 years? Also for the intelligent driving, what kind of investments down shall we expect for the next 1 to 2 years, and how could that impact the margin? Thank you. Herman Yu: Yeah. So on the AI Cloud, I think -- yes, I think when you talked about other Cloud players, do you talking about scaling with regards to us right? As we talked about before us, there is a smaller piece of our business where we're more excited about where we're differentiating in the market as our SaaS. And as I mentioned earlier, SaaS is the fastest growing piece of our business. And when you look at SaaS, as we talked about a Baidu world, there's several factors with regards to our margin improvements right. As we come out with new solutions, working with new customers, that the first project -- the first few projects, we might have to spend that extra time in order to integrate with your legacy system in order to build towards and so forth way to go looking ready. When we're going into new industries. That would also -- there's that ramp up the cost to be able to adapt our current solutions to that new industry. So you are seeing with our fast-growth, as Robin mentioned, 73% year-over-year growth is much faster than market right now. And we cannot have done that without going into new industries with new solutions, without consistently getting new customers. So at the early stage where we're just expanding market, expanding customers, you're not going to see good margins. But when you look at a particular solution over time, when you looking at particular customer overtime, you're seeing margin improvements. And we went to that in very detail during the Baidu World presentation and IR can go through that with you again on those things. This is a proven business. If you look at our counterparts in the U.S. who are in the SaaS market. As you see the same trends. So we're pretty confident that as we continue to grow our businesses here in the beginning, you're not going to have a good margin because you have to customize. But as the product line becomes more standardized, as we become more standardized to industry and so forth. You're going to see their margin pickup. That's number 1. Number 2 is, the proportion of SaaS is getting hired versus IaaS. And IaaS as we know, because it's a commodity, it's just going to have lower margins. So you have several trends that are playing in our favor. So I can see it a few years out, you're going to see margins are improving. Okay. Intelligent driving: I think there is 3 pieces that we talked about before. At times driving is the technology and then out of that there's ways to monetize. There's the infotainment business. There's the -- what we call ASD Apollo, the , navigation pilot, so forth. That is a business where you have to invest upfront with R&D and so forth. But when we sell it on a gross margin level, that gross margin is usually pretty healthy compared to other AI businesses. Okay. There are other piece where Apollo is smart transportation. Smart transportation is mainly with government sector and so forth. It's usually very complicated assumptions where those margins are pretty healthy, especially when you compare to a business like our asked. So, I think when going into smart transportation the factors that impact margins are very similar to what I described earlier. Coming out with new solutions when you're working with new cities, you got to make that investment. With new solutions, as we're working with the same city we understand your legacy system and we got to towards and so forth. Over time with the particular customers. We're seeing a margin improvement. So I'm pretty confident because when we look at us, we're growing on the one hand, as we've mentioned -- Robin mentioned despite the transportation the customers went up a 3.0 year-over-year. So the new customers are they going to adapt the margin. On the other hand, half of that business, but it's with our repeat customers. With that, that's going to improve. So I think over time, we see -- as well for the next few years that more and more revenue is going to be reoccurring, which is going to Operator: Thank you. Our next question comes from Gary Yu from Morgan Stanley. Please ask your question. Gary Yu: Thank you for the opportunity to ask question. I have 1 follow-up question regarding the opportunities with the -- for the open up of the internet. Seems like there is great opportunity from both kind of e-commerce space and also potentially content space. But at the same time, given users have already got into the habit of doing those transactions in some of the other competing platforms, how are we going to change some of these user behaviors to start doing more e-commerce transaction on Baidu? And as a result of that, are we going to go into another investment cycle in terms of crying traffic and users on this transaction-based traffic? Thank you. Rong Luo: Yes, Gary. I'll take this question. Actually as we see the users behaviors in our web search, before the people do their -- make their final decision to buy something or not, so they come to BIDU for more information. So this is how we step in to help them to do their transactions actually. So also, as Robin just mentioned right. So the infrastructure for transactions in terms of the payment to delivery are odd, and it's pretty maturity in China. So that said, once we give the user comprehensive information for them to make the right decisions, people will come back again for their another transaction. In terms of getting more traffic, I think for now, we still have tons of actually do their search volumes in BIDU for not just the typical e-commerce queries and are other questions – queries related to transactions. That's why at this stage we were trying to make the transaction experience as smooth as possible on Baidu's platform. And actually, we have been working on this for a while, since we started building Smart Mini programs, pages, and by , so. That's how we can not only get the right information but also have the right support for this transaction related inquiries. Operator: Thank you. Our next question comes from Eddie Lao from Bank of America. Please, ask a question. Eddie Lao: Good evening. Thank you for taking my questions. May I have 2 questions on your Cloud pieces? The first one is about hybrid count and private count. As the government is pushing for the awareness of data security, will there be a potential increase in demand for private cloud and hybrid cloud versus public count? And how might that affect your basis? And then secondly, I remember Robin, you mentioned earlier a pretty interesting point. You guys have been focusing your Cloud basis on a SaaS and end-to-end solutions while some of your industry peers are seem to be emphasizing more on the, should we say, the modules or the component capabilities and performance. So probably a bit more about that, a little from a marketing perspective, right? So could you share your thoughts on any difference between their clients that these 2 approaches may get? Thank you. Robin Li: Hi, Eddie. I think you're right. Given the regulatory environment changes, I think more and more customers would want private deployment, where private cloud or hybrid cloud rather than public cloud. And like Herman mentioned before, that -- our highest growth area and also higher margin area comes from those private placements or solutions offered to our customers. Typically, end-to-end solutions, leveraging our strong capability in all kinds of A.I. value chain. PaaS, Saas all included, A.I. chips, frameworks, and deep learning frameworks. And when we see SaaS, it means more like end-to-end solution which typically would include the past part. It's just AI part in China or part in general, in China. It's not a big market yet. It's growing very fast, but it's very hard to charge a lot of money for a middle layer of the solution. But yes, I think a lot of our customers do value our end-to-end capability and solution in terms of AI. And I think Cloud overall it's a better large market and our strength is to really leverage Baidu's investment in Ai and the provide end-to-end solution to our customers in important verticals like industrial Internet, smart transportation, energy, financial services. These kind of verticals that we think we have a very strong proposition. Operator: So we have reached the end of the question and answer session. With that, we conclude our conference for today. Thank you for participating. You may all disconnect.

Operator: Hello and thank you for standing by for Baidu's Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a Question-and-Answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference Mr. Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's second-quarter 2021 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 Li, our Co-Founder and CEO, Herman Yu, our CFO, and Dou Shen, our EVP [Indiscernible]. After our prepared remarks, we will host a Q&A session. Please note that the discussion today will use forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause the actual results to differ materially on our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other documents filed with the SEC and Hong Kong Exchange. Baidu does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Earnings press release and this call, discussions of certain unaudited non-GAAP financial measures. Our press release contains [comparisons to] (ph) the un-audited non-GAAP measures to the unaudited most directly comparable GAAP measures, and it's available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello, everyone. We delivered another solid quarter with Baidu quarter revenues growing 27% year-over-year. Accelerated by non-advertising revenues, with AI Cloud growing 71% year-over-year in the second quarter. We are entering a new era where technology is becoming more powerful. And we are benefiting from the deployment of technology to upgrade China's industrial competitiveness [due to tight] [ph] urban cities and improved mobility. As China plans for the next stage of growth, it rests upon us to recognize the need to align our business strategy with the environment that we're operating in, and the future that we want to build with our stakeholders. [Indiscernible] a highlight a shared future of humanity to support China's pledge to achieve carbon-neutrality by the year 2060, Baidu aims to reach carbon neutrality by 2030 through the use of green data centers, smart-office buildings, and other [Indiscernible]. In addition, we hope to improve urban traffic flow and lower carbon emissions for 100 metropolitan areas across China, with our build-out of Smart Transportation and accelerate the switch to EVs for the mass through our investment in Robotaxi and Smart EVs. Leveraging technology to serve a larger population to achieve inclusiveness is part of China's growth plan. In June, we introduced Apollo Moon, the fifth generation of Apollo Robotaxi vehicles, that once again saw a 60% drop in cost per mile. It's the rapid pace of autonomous driving technology advancement and cost efficiency improvement Apollo Robotaxi stands to become much cheaper than a driver for higher ride-hailing in the coming years, which will make robotaxi ride-hailing much more accessible. Baidu Health is another example of expanding resources to a broader population for improved living. We are enabling closed-loop, telehealth, online prescription, and home delivery to free up hospital resources for critical treatments. Concurrently, we are helping hospitals find patients with specific illnesses that match their treatment specialties, by leveraging our AI-powered search and Smart Mini Program. We see great opportunities to use technology to advance sustainability and inclusiveness. As we go through our quarterly highlights, you will see other examples of how our AI-powered business is naturally aligned with these goals. This is due in part to our belief in using technology to build a better world. Turning to Q2 operational highlights. Our AI Cloud continued to see strong growth. IDC once again ranked Baidu AI Cloud the number one AI Cloud provider in China in their 2020 report on public cloud. Over the past decade, [Indiscernible] has been the growth driver for China's Cloud market, which sets up a strong foundation to implement AI solutions that solve industry-specific problems and provide urban living upgrades. By differentiating with AI solutions, we have the opportunity to provide repeat business with expanded applications and become a one-stop-shop cross across selling [assets] (ph) and other services. In the past, we discussed empowering financial services, utilities, and Internet media sectors with AI. Let me give you an example of how our AI file empowered the auto sector. We are helping Geely, a leading automotive manufacturer to develop a multi-year digitization plan, which entails: 1, setting up their private Cloud infrastructure; 2, moving Geely's business onto Cloud; 3, leveraging Baidu AI solution to advance Geely's high-tech manufacturing capabilities, such as IOV security and risk management; and 4, enabling Geely to provide Cloud services to their automotive suppliers and customers. Baidu AI is deployed into a multi-faceted environment. For example, Quanzhou, Fujian, a city of population of 8 million, implemented Baidu AI solution added to water treatment plant. Our Smart monitoring capability was used to provide early detection of malfunction equipment, replacing labor-intensive patroling, and a customized machine learning model was developed to predict water usage and dynamically adjust the water pressure of different water pipelines, cutting electricity needs by 8%. Our employees feel a sense of pride when natural resource is optimally managed and sustainability is indirectly advanced. In Healthcare Cloud, we have expanded into over 400 hospitals in 29 provinces and over 1500 primary care clinics in 11 provinces. This leading solution like our [CB assets] (ph), resulting in rapid revenue growth at 245% year-over-year for the first half. According to IDC's June report, the Baidu Deep Learning platform became the most widely used in China, surpassing Google's. Our PaddlePaddle developer community reached 3.6 million up 62% year-on-year. And it's adopted by 130,000 businesses. Baidu's large development community helped improve our Machine Learning models and [initialize] (ph) our AI tools and technologies. Moving onto ACE Smart Transportation, as of June, Apollo has signed with 20 cities to try the ACE Smart Transportation, up from 5 cities a year ago based on a contract amount of RMB 10 million and above. Apollo also renewed agreements with 9 cities to roll out their next phase of ACE Smart Transportation. Beyond urban roads, Apollo signed with Xiongan, Hebei to deploy V2X smart highway, enabling the cities to remotely identify the need for highway maintenance, assess road closure for poor weather conditions, and identify travelers, who dodge toll terminals. Turning to autonomous drive. Apollo continued to see strong momentum. Level 4 testing on a public road has reached 12 million kilometers or 7.5 million miles. Apollo has received 278 AD permits reflecting AD piloting in [the dispersed] (ph) geographic region and are under wide-ranging test scenarios. Apollo monetization. In Q2, Apollo Go ride-hailing expanded into Guangzhou, our 4th city of operation, and provided 47,000 rides to the public, up 200% sequentially. Customer satisfaction for Apollo Go has been high with a user rating of 4.9 out of 5.0. As pointed out earlier, our fifth-generation robotaxi vehicles saw another 60% drop in cost per mile compared to an average decrease of 62% in the first 4 generations of AV vehicles. We plan to roll out Apollo Go ride-hailing across 30 cities over the next 2 to 3 years. ASD, Great Wall Motors become the latest automaker to announce plans for ASD. Apollo Automated Valet Parking will be installed in their WEY-Mocha SUV flagship throughout later this year. On infotainment, DuerOS for auto have been installed in 1.8 million vehicles, up 265% year-on-year. 12 other OEM, the likes of Ford, GM, Toyota, and Hyundai have signed with DuerOS for installation in 17 makes. On DuerOS, Xiaodu continues to innovate the SmartHome device market. For example, the OS on DuerOS Smart Assistant allows one to conveniently order fresh home delivery flowers and other commonly used goods in a matter of seconds through conversational AI. China's elderly population is slated to exceed 300 million. Xiaodu smart displays connect elders with immediate senior community assistance and serve as a virtual companionship around the clock through conversational AI, improving their quality of life while allowing family members to monitor their loved one's health and safety from remote. During the June 18 e-commerce festival, Xiaodu smart display, and Xiaodu Smart Path for education market topped the sales volume list in their respective category, on leading e-commerce platforms like JD.com. Xiaodu is receiving high customer satisfaction, standing well on higher price points, product lines, and topping the list on units sold demonstrating how hardware can be differentiated with innovative AI, such as new input modalities and services. Turning to Mobile Ecosystem, in June, Baidu App MAUs reached 580 million, up 9% year-on-year. And daily logged-in users reached 77%. As an open in-app search app, the Baidu app offers users instant replies on various topics. For example, daily pending health consultation on Baidu Health surpassed 2 million in second quarter, up 47% year-on-year. In addition, more than 8,000 industry experts spanning 14 other verticals, such as legal, finance, and fashion are able to instantaneously reply to user search inquiries through our AI building blocks. When a user seeks specific information of service, Baidu Search has a distant advantage. Managed Page now accounts for 40% of Baidu core advertising, reflecting merchants, opening storefronts on Baidu, as opposed to operating their own sites. For example, a local moving company, [Shenshi Moving] (ph), changed their search landing page to its Managed Page and saw its daily orders doubled five weeks after adoption. Through Managed Page, users are able to browse its services, interact with the merchant, schedule a move, and pay a deposit, all seamlessly on Baidu. Managed Page also monitors merchants' activities on Baidu with AI for added personnel safety. For example, a moving service entails strangers coming to your house. Before I turn the call to Herman, I'd like to congratulate him on his new role as Chief Strategy Officer of Baidu. Herman will continue to act as CFO until we find a qualified replacement. He will spend more time on company strategy and [Indiscernible] divestments afterward. Over the past 4 years, Herman has helped Baidu transform from a mostly search company to a leading, diversified AI Company. With demonstrated business leadership, a holistic view of our business, and a keen sense of the capital markets, I'm confident in Herman's ability to help chart a course for our long-term growth and success in the age of AI. With that, let me turn the call over to Herman to go through our financial highlights. Herman Yu: Thank you, Robin. Good morning, everyone. Welcome to Baidu's Second Quarter 2021 call. All monetary amounts used in my discussion are in renminbi unless stated otherwise. Baidu's Second Quarter was -- Baidu's Second Quarter revenue was $31.4 to $4.9 billion, up 20% year-over-year, driven by the growth of Baidu Core revenue, which reached 24 billion or $3.7 billion, up 27% year-over-year. Non-advertising for Baidu Core reached 5 billion or 21% of Baidu Quarter's revenue. The AI Cloud revenue was 3.3 billion or up 71% year-over-year, which is an acceleration from the 55% growth last quarter. Our Cloud growth is benefiting from the demand of enterprise customers looking to use AI to transform the industry and strengthen their leadership position. For example, customers from the Internet media, from financial services, from energy, and from manufacturing sectors. We're also benefiting from the urban cities seeking to adopt Apollo ACE Smart Transportation to modernize and digitize their transportation network. AI solutions and Smart Transportation are showing fast growth, serving as a catalyst for our Cloud to grow faster than the overall Cloud market, with ASP being a smaller part of our Cloud business. Intelligent Driving and other growth initiatives, we continue to take advantage of product development by leveraging Baidu AI capabilities, such as speech recognition in LP and computer vision in our strong Internet foundation, Xiaodu has become the leader in smart display globally based on shipments. Xiaodu speakers enter the SmartHome device market in 2018, competing on sub-100 product lines. Home devices equipped with AI features can be so and much higher price points. For example, in May, we introduced Xiaodu TIAN TIAN, key 10, a 10-inch smart display with karaoke features at an MSRP of 1699. Through our innovation, Xiaodu services revenue, such as advertising and membership has grown five-fold from last year. Now, accounting for over 1/10 of Xiaodu 's revenue s. Xiaodu powered by DuerOS is transforming the Smart speaker market from selling hardware to selling AI-powered features and services. The operating system for the automotive industry is a much larger market. Apollo has an opportunity to leverage its leadership in the tons-driving and infotainment operating system to enable every passenger vehicle to be a Smart vehicle. Just as Xiaodu transformed the home device market, Apollo hopes to leverage Baidu's capabilities, ASD, and existing OEM channels to boost computing intelligence and transform the automated industry. Moving to online marketing. Q2 online marketing revenue was 19 billion up 18% year-over-year. In-app, advertising was solid, growing 26% year-over-year, partially offset by the slow growth of mobile and PC ad revenues. Most of our top ad verticals continue to perform well. CPM saw double-digit growth, especially for in-app online marketing. iQIYI revenue was 7.6 billion up 3% year-over-year. iQIYI subscribers reached 106 million in June, which supports the large in-house production of entertainment blockbusters. The cost of revenue was 15.9 billion, up 21% year-over-year, primarily resulting from an increase in tax and cost of sales associated with the new AI business. Operating expenses were 12 billion, up 30% year-over-year. SG&A for Baidu Core was up 40% primarily due to an increase in channel standing and promotional activities, as well as an increase in Sales hiring, particularly as we lookout for the next 6 to 12 months to grow our Cloud and also our Intelligent Driving business. Non-GAAP operating income for Baidu Core was 6.5 billion for $1 billion, and non-GAAP operating margin for Baidu Core was 27%. Adjusted EBITDA for Baidu Core was 8 billion or $1.2 billion, and adjusted EBITDA margin for Baidu quarter was 33%. Cash and short-term investments for Baidu Core as of June 30th, 2021 was 167.7 billion or $26 billion U.S. Free cash flow for Baidu excluding iQIYI was 6.9 billion or $1.1 billion U.S. Baidu Core had approximately 36,000 full-time employees as of June 30th, up 24% from last year. Turning to Q3 guidance. For the third quarter, Baidu expects revenues to be between 30.6 billion and 33.5 billion, representing a growth rate of 8% to 19% year-over-year, which assumes that Baidu Core revenue will grow between 9% year-over-year and 20% year-over-year. The above forecast takes into consideration the current COVID-19 situation in China, which is evolving and business visibility is limited. The above forecast reflects our current improvement their view, which is subject to substantial uncertainty. Before I turn the call back to the Operator, let me summarize our Second Quarter results. Baidu Mobile Ecosystem continues to be strong. Baidu Core online marketing revenue was up 18% year-over-year in the Second Quarter, within that Marketing revenue growing 26% year-over-year. Baidu App MAU reached 580 million of 9% year-over-year and daily user log-in was 77%. Four years ago, we committed to strengthening our Mobile Ecosystem and be with AI. Our searching is stronger now with AI Building Blocks and Marketing Cloud, and non-marketing has become sizable and growing quite fast. We have delivered on our goals and we're very proud of our team for their strong execution. Many investors have enquired about the recent regulatory landscape. Governments generally favor fair competition and maybe, even so, when mobile Internet is low penetrated. We see this being play across Europe and in the U.S. Search fundamentally is open. As exclusivity is forbidden for the largest players, this will allow more players in each Internet sector to exist, which gives consumers more choices and make search more useful. Some investors have asked about government incentives and special tax treatment. It's important that we elevate this to see the overall direction of China's Development Plan. Consumer Internet has been in China for 2 decades. And the country is promoting new growth sectors, such as industrial Internet, V2X, autonomous driving, and the monetization of city government. Thus, it will not be surprising if certain incentives for the older industries gradually decrease while the new economy benefits from government incentives. We believe government policy will also be adjusted to support these new growth areas. Our new AI business is well-positioned in sectors of the new economy, such as AI cloud, Smart Transportation, autonomous driving, smart devices in AI chips. In the second quarter, I'm sorry -- Baidu will return $566 million to our shareholders under the 2020 share repurchase program this year. During the cumulative repurchase from last year to 2.5 billion U.S. Dollars. We're excited about Baidu's future, excited about Baidu's durable search and fee business. and our new AI business to support China's growth while advancing sustainability and exclusiveness. On August 18th, starting at 9:30 AM Beijing time, we will be hosting Baidu World on CCTV. Please join us to follow the latest on our product development. And lastly, it's truly been a privilege to serve as Baidu CFO and witness our growth initiatives like AI Cloud solutions, Smart Transportation, self-driving solutions, and smart devices developed into 1/5 of Baidu Core business, using the steady profitability of our search to expand and accelerate Baidu's growth. I'm excited about my new role as CFO, which will allow me to spend more time thinking about technology opportunities. Operator with that, let's now open the call to questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from the line of Alicia Yap from Citigroup. Please ask your question. Alicia Yap: Hi. Thank you. Good evening, Robin, Herman, and Juan. Thanks for taking my questions. Congratulation, Herman, for your new role as the CFO. To follow up your brief remarks about the regulation, I actually have a question on this data security. What could be the impact on Baidu, anything that we need to do, or the changes that we need to do to ensure in compliance by September 1st for this data security law? And then very quickly, as we just finished the Summer Olympics and with the Winter Olympics coming up, can you provide some update in terms of the latest Robotaxi or even the Robobus commercialization service, any expectations on these ride hailing demand in this upcoming winter game? Do you think Baidu's driverless car service could leverage this big event to draw more commercial usage and enhance the branding? Thank you. Robin Li: Hi, Alicia. Data security is very important to us and we have consistently improved on the management of our internal data security system over the past few years. We have a data privacy committee among our management team that oversees that the [crack cases] (ph) of the whole company. We are also active in assisting with the setting of industry-standard and we share our [Indiscernible] dialogues with others to ensure that we are on top of industry best practices. If you look at the [Indiscernible] Baidu is leading on data privacy, and data protection is amongst the highest compared to our peers. So I'm quite confident we will be able to cope with the new regulatory involvement well, in terms of data security and user privacy. On the Olympics side, yes, we do plan to do something with our Robotaxi during the Winter Olympics. But what's important is that we just launched this fourth city of Robotaxi operation, which is Guangzhou. I think we will continue to roll out our Robotaxi services in many different cities, different regions, and the number of rides that we are providing, having grown very quickly, as I mentioned, during the prepared remarks, we delivered 47,000 rides for our customers. That's 200% growth over the first quarter of this year. We believe that the scale will grow very quickly. And we all will be able to learn all kinds of quanta cases and quickly improve our technology. I'm quite optimistic that Robotaxi will be commercially available in more than 30 cities in 2 to 3 years. Herman Yu: Yeah. And I just wanted to add a point from what Robin just say. You asked specifically about Winter Olympics. If you look at today in Shougang Park in Beijing, we believe we're the only second autonomous driving car company in the world, where you actually have a car driving without someone at the driver's seat. So I think that shows the number of years of experience that we've been doing in autonomous driving. It also just shows the fact that we've been doing operations for autonomous driving for a while. That's why we can get the permit and actually start testing that. So it's open to the public. You guys are free to come and look at how autonomous driving is being done without someone at the driver's seat. Operator: All right. Thank you. Our next question comes from the line of Piyush Mubayi from Goldman Sachs. Please go ahead. Piyush Mubayi: Thank you, Robin, Herman. When I look at the way your ride-hailing business is expanding, I can't help but think that you'll soon be running a business without the cost of a driver to factor in. If you could just take us through the math as you see it evolve to getting to 20 cities, at what point of time does it get to the revenue line that you'll spell out separately and talk about the profitability of it all? Thanks. Robin Li: Yeah. We continue to work very hard to drive down the cost of the Robotaxi vehicles. It has just come down 60% for our fifth-generation vehicle. And in the meantime, we are running more testing miles and taking more orders to learn from all kinds of quantitative and quickly improve our technology. Based on our current projection, I think by the year 2025, we will cross the line, which means that the total cost of Robotaxi ride-hailing will be lower than manned-vehicle ride-hailing. And after that, I think that the scale will be able to grow much larger than it is today. And I think around that time, we should be able to report in a separate line. Herman Yu: Yeah. And just to add to that Piyush, if you look at the economics, Robin talks about how from 4th generation to 5th generation, we reduced by 60% in cost per mile. If you look at the prior 4 generations, we averaged around 62%. So we've been consistently decreasing costs for the last 5 generations and at around 60% each time. And if you look at what Robin just said, throughout to 2025, what we're seeing in the economics is that in a ride-hailing with after drivers, look the concept of a person -- labor costs only goes up, it doesn't go down over time, but you're competing with technology. You're competing with the fact that the more miles that we have, the more data that we have, our operation experience that this thing will continue to go down. So I think that's the [Indiscernible] of this business model, if you look beyond 2025, if you look at the next 5 years, what we have internally, we can drive that cost down a lot, lot more based on what we have seen in the first 5 generations. So, sure this thing will be very interesting once you pass 2025, you have efficiency, technology, operational improvements compared to labor cost. Operator: Thank you. And next question comes from Alex Yao from JP Morgan. Please ask your question. Alex Yao: I have a follow-up question to Piyush's question. So you've got [Indiscernable] in 2025, the [CPM] (ph) of your Apollo solution could be cheaper than a human driver. My follow-up question is, when do you expect the [Indiscernible] ratio for your Apollo solution to be safer than the human driver? And then for these two conditions to materialize, so what does it take? Is it the cumulative mileage to reach a certain level or is it something else? Thank you. Robin Li: Yeah, that's a good question. We take safety very seriously. I think we've been testing for more than 10 million kilometers. We haven't had a serious injury, yet. So that demonstrates that once we decide to operate a certain [Indiscernible] for Robotaxi ride-hailing services, we have the confidence that the service has a higher safety level than human drivers. That will be the minimum bar for us to roll out services without human drivers. But my [Indiscernible] really that we should be ten times more safer than a human driver. That benefit is quite clear and it's absolutely assured. What's the second part of the question? Alex Yao: Second part is what does it take for these two conditions to play out? Are we -- Robin Li: Yes, yes. That's right. Alex Yao: -- and that would be cheaper. Robin Li: Right. There are 5 million kilometers of roads in China. And the road conditions vary greatly. The approach we're taking is a very gradual one. We carefully choose roads that we have high confidence that can be operated without human drivers. That's why you're saying that we were pacing ourselves. We are carefully picking areas and road so that we have high confidence that we can operate this Robotaxi. Operator: Thank you. Our next question comes from Gary Yu from Morgan Stanley. Please ask your question. Gary Yu: Thank you, management for an opportunity to ask a question. I actually have two questions, both of which are follow up on the previous questions. The first is on regulation. I appreciate the management comments about data piracy. How about on data security issue? Have we heard anything from the regulator or government level where the officials are comfortable for a private Company -- tech Company like us to have full control of these sensitive roads data traffic on our system? Or if there is any discussion on the potential formation of say, own joint venture, a Company having full access to this data. Is that fully in the hand of private companies? So that's our first question related to data security. My second question is also related to Robotaxi. So we talk about the cost -- the opportunity, How do revenue after 2025, or even longer-term, how should we project in terms of penetration, mobility penetration, or share mobility penetration that we think will be served by driverless cars? The reason I am asking this question is, it seems like currently, driverless cars are still limited to a certain safe scenario with specific locations. So how should we look at penetration going forward? Thank you. Robin Li: Yes, on the regulation with the data security, we maintain a constant dialogue with the regulator in the -- as I mentioned that sometimes we participated in the setting of industry standards. So I would say that we have a very high standard and we haven't heard anything that's very abrupt or adverse -- that's going to have an adverse impact on our operation yet. On the penetration of Robotaxi. Right. Like I mentioned, we're taking a gradual approach. There is a certain road that is suitable for Robotaxi. We have certain roads that are not suitable for Robotaxi. We are careful in selecting what road to operate on. But if you looked at the overall market, I think ride-hailing, half like the probably 50 million orders per day. As for the cost can become -- there's been 1/5 of the current cost. I think that the number of orders could get easily double. So it's a huge market. It just depends on how fast we can improve our technology and still up to our services. Operator: All right. Thank you. Our next question comes from Jerry Liu, from UBS. Please ask the question. Jerry Liu: Hi. Thanks for taking my question. Yeah. Maybe let me ask a question about the advertising business. Mainly, if I look at the Third Quarter guidance, we will talk about some of the COVID-19 resurgent's potential impact. So I just want to ask, first of all, is this something we're already seeing, or is it more preempted? And then secondarily, we're also seeing some potential COVID or regulatory impact across different sectors in the whole industry. So I wanted to get a sense of the strengths and weaknesses of the different verticals at the moment? We've seen the further impact, for example, online education, eCommerce, or other verticals. Thank you. Herman Yu: Okay. Thanks for the question, Jerry. You're right. So we already see the impact because of COVID-19 for the Q3, especially for travel, and it's very good, those trends, even though we're in the early few weeks for Q3. That certainly, the COVID-19 dropped that trend, actually, it dropped pretty quickly. On the other hand, we did pretty good progress on the media in the [Indiscernable] and vocational identification and those verticals. So talking about the regulation, so far we see revisions or on the kick-out adaptation and some other verticals. So 50 forces that the [Indiscernable] adaptation itself is pretty bigger on vertical bores, but 6 out more quotation in our venue. And also for the Q12 innovation, and now we were pretty optimistic about it because we see two potential good themes. Number 1, is that we are expecting more quarreling along the [Indiscernable] because the current [Indiscernable] And the second one, for us, I know. So some of the resources or moving to our vocational allocation, which is a very good, vertical leap, pretty strong edge [Indiscernable] Operator: Thank you. Our next question comes from Eddie Lao from Bank of America Merrill Lynch. Please ask your question. Eddie Leung: Good evening all. I would like to have a question about your Cloud pieces. It seems like the strong growth, this couple of quarters was potentially driven by new projects. So I just wondering, could you give us some rough timeline that when we could get into the development stage that the growth of your Cloud pieces more chosen by your existing clients upgrading the services and then buying more -- kind of like more from the usage of existing clients rather than opening up a new project. Thank you. Herman Yu: Yeah. As you know that our Cloud wins are still growing at a very high rate, a high double-digit growth rate. So by nature, you get back -- you're right that there are a lot of new projects from new customers. And what I can say is that our customer retention has been very good and it's also improving as we expand our customer base. More of them they decide and give us new businesses. If we want to maintain a very high growth rate, it's inevitable that we will have a large percentage of -- I spoke on new projects. So at this stage, I wouldn't manage the percentage of new customers or our existing customers. We will try to grab the opportunities that are presented to us if it's an AI-driven solution or a cloud solution. That is our sent to try to do as much as we can. Yes. And let me add to that. I think Robin summarizes that pretty well. When you're growing at 71% year-over-year, clearly you cannot be relying on one driver. What you're seeing actually are two drivers. Number 1 is, you are seeing us getting repeat solutions. We talked about, for example, Smart Transportation. Look, we're in 20 cities, if you look at contracts over 10 million, 9 of them have renewed. But if you look at, for example, we've talked about that Geely, we didn't just -- our first phase was building that private part for them, and then we talked about the three-year plan, and then we talked about the other things that we're going to do. And Robin talked about those four steps. So clearly that's not a one solution one-time, that is a repeat solution, right? Join us for our call for Baidu World. We're actually going to AI solutions for many different industries. And you'll see what I'm talking about. Basically, our model is we've served on where the AI Pass, that's the AI engine. And if they want to do different things, they would then come back for different phases to add applications. So those you can see is because that the original engine is on Baidu Cloud, the applications that will come back to us, to add on that. Very similar to Smart Transportation at V2X, and they can expand to different applications of our V2X. So you can see, our business model enabled us to do repeat business. At the same time, if we don't expand to different industries, if we don't add different customers, we cannot keep up with the kind of growth that we have. Look, we look at our Q2, our annualized revenue for the base in Q2 is 2 billion U.S. and growing at 70%. So you have a very exciting business and wanted to continue that robust growth, you really have to accelerate from products from different industries and adding through some of our customers. Operator: Thank you. Our next question comes from James Lee, from Mizuho. Please go ahead. James Lee: Great. Thanks for taking my questions. Just I want to follow up on Eddie's question on Cloud. Maybe can you guys talk about the improvements that you guys are making to make your offering more scalable? I think last quarter, you talked about developing standardized solutions layered out in April, third-party developers, and system integrators to customize for their clients. Can you give us an update on that? And also secondly, the adoption of machine-learning AI or Cloud in the U.S. is much smaller and much slower in the U.S. Can you help us understand why we're seeing a faster adoption cycle in China? Thanks. Robin Li: Right. On the Cloud solution, as we do more projects and we serve more customers, we are able to more or less standardize our solutions. So in the beginning we can only take more of the system integrator role to get all the deals, but at this stage, we are able to provide seeing a lot of cases standard packages or parts to the other people who are system integrators, who gets a large part of those Total Solution projects. That demonstrates that our capability to continue to improve and that the standardized vision of our -- in our adoption of per-share learning, I think the difference between U.S. and China is that the U.S. tends to separate the product or solution on a more hard income fashion. Mainly that they have in the past, and that at At each layer you have large players that are all kinds of different industries. But in China, you can easily see more of those vertically integrated solution providers. For example, for Baidu, we provide Smart Transportation solutions for a lot of cities. That's summarizing through hardware, software, Cloud, and on -- and all kinds of things. But that doesn't mean, if -- are not the standard designs that will -- it's actually quite similar from city to city and from customer to customer. And by vertically integrate, or by providing an end-to-end solution, we can actually innovate a lot more to really improve efficiency and serve the customer better. Therefore, the customers are better served, and when you can vertically integrate a lot of things, AI, for Machine Learning, naturally plays a much more important role. Herman Yu: And let me just give more granularity of what Robin just said. When you look at, for example, Smart Transportation, we started with V2X, right? You're trying to synchronize traffic lights. We posted the project back in Upoldin (ph). So obviously, we had the product where you're going into a city, you're trying to understand their systems and so forth, and a lot of times you've got to then connect to the system, to a legacy system that will want to make it work. But as you're going to different cities in China, and if once you have certain tools that are set up to deal with the same legacy system and so forth, You get to number 1 that proceeds from operational experience. And secondly, a lot of tools that we've built up. So when you think about us doing V2X specifically to synchronize our traffic lights because we've done this for several years, you're actually seeing very high scalability. You're actually seeing better margins, and so forth, because we've been doing this. So, now you see us start expanding into different scenarios, right? For example, into highways, into math, and so forth. And what I would predict based on our past experience is that these margins will improve as we buy more technical environment. Same thing as we're going into our enterprises where we talked about automated call centers. The first one with a unit converse and very profitable, and then they start expanding into different call centers throughout the country, so all of a sudden we're familiar with the backend system. We just have to buy another server, you're going to put the software in there, all up and running because you've already trained the Machine Learning model for a specific client. And then once you start expanding into different industries, you get 1 or 2 leading customers. Again, you are now repeating a lot of things that you're doing, all the same, you get the inertia. So, I think AI Solution is very similar to the enterprise solutions they have, software, and so forth in the U.S. It takes time whenever you're getting into a new industry, into a new customer. But once the environment connecting to the legacy system is very familiar, you get that initial and phases after that. Operator: All right. Thank you. Our next question comes from Natalie Wu from Haitong International. Please go ahead. Natalie Wu: Hi. Good evening. Thanks for taking my question. We noticed recently from a press release as you are expanding your candidate's recruitment this year, giving out [Indiscernable] of the community headcount. So just wondering if management can share with us [Indiscernable] now behind that advancement expansion at this point and how should we see the margin chance of Baidu Core ahead? Also, if we simply look at marketing-related business in Baidu Core, just wondering what's the margin profile of that segment alone. Thank you. Robin Li: Yeah, on the headcount growth, if you look at our growth rate of our Cloud, it's very high. And this kind of industry solution requires a lot of headcount additions. If you compare our cloud to use with some other industry peers, I think that the headcount for Baidu, it's not that high. It's actually quite reasonable. And we do need a lot more people to come up to deliver our services. Herman Yu: Yeah. And then on the margins for Baidu Core, we're looking at a non-GAAP basis. You look at Q3, my estimate right now would be, we're probably going to increase the cost of sales plus our OPEX, maybe 1 billion to 1.5 billion RMB on a sequential basis. So that's how I look at this. And you guys have the last two quarters, I will look at the non-GAAP for Baidu Core, and then I think you guys have a very clear trend. Operator: Thank you. Our next question comes from Tian Hou from T.H. Capital. Please go ahead. Tian Hou: Hi, Robin, Herman. The question is related to your AI Cloud. So there are normal Clouds and there are AI Clouds. So I wonder, if we merged these two types of Clouds, so from a financial point of view, can I say AI Cloud is a much higher margin? So can I treat that as a difference? That's number 1. What kind of clients need AI Cloud? What kind of clients need a regular Cloud? So that's the first question. The second one is Managed Page has already increased to a bigger portion of the online marketing. So what's the outlook for this Managed Page going forward? Thank you. Robin Li: Yeah. The margin for AI Cloud is higher, significantly higher than the more general cloud, especially the app. I think you all know that app and CDN generally have a lower margin, but I will say clients need AI Cloud and general cloud, they need all kinds of technology and solutions. It's just that our strength is that we are very advanced in AI and we find that by integrating our AI technology, AI solutions to really solve our customer's problems, we are able to do a much better job. We do provide general Cloud Services. But I think the market is very large, it's large enough and it's growing very quickly. And we are gaining market share in this very attractive space. Herman Yu: And let me just add. You asked about who needs AI. If you look at our customer set, we see several specific. One is, for example, Internet media, right? When you have a media link, for example, some of the Media Companies it is very data-heavy. When you look at, for example, our industrial sectors, different areas of manufacturing, when you look at our utilities, energy, and so forth, they all have a lot of datasets. But you look at, for example, Smart Transportation, the government has a lot of datasets. So our AI solution, basically said, if you are a customer, you have a lot of data sets. You need to improve operational efficiencies and so forth. Are Machine Learning models when you go in there is Baidu Brain. We can help you. A lot of things that you had to do manually before, we can automate that, we can do them much faster with AI computing. So companies or industries that have a lot of datasets, we can automate. For example, you look at financial services rather than computing and improving every loan, we have examples of 2 million customers, we can automate that whole computation, where you just ask Baidu Brain rather than having someone manually compute all the different ratios and all the numbers on that particular customer. So you can see that users are very helpful, especially in China's economy. Robin Li: Yeah, Tian, I will take the second one. You're right, so Managed Page now accounts for like 40% of the Baidu Core advertising. Actually Managed Page is not alone. We treated part of them marketing Cloud that we have been discussing a few times, right. Including the Managed Page and also the tools we provide to the merchants, and to make it easy for them to run campaigns on Baidu. So as we always side, so Managed Page together with -- by Yahall (ph) and the Smart Mini Programs, they work together with all the building blocks for the Mobile Ecosystem. Actually, with NYSE because we can provide an even more close-to-loop experience, which increases the thickness of the engagement between the user and the Baidu app. So as a result, we can see -- so then converting wait. The Building Blocks or much higher than before. That's why we can see now due to COVID-19 outbreaks in Q1 last year. So we -- are online marketing business is actually rebounded inconsistently in the last 5 quarters. The impression for the impact marketing because of it then 3 building blocks and it grows as much as 26 year-over-year. So that's either we will keep working on the Managed Page s because it will improve the user experience and also monetization capability. Operator: Great. Thank you very much. So, ladies and gentlemen, we have reached the end of the question and answers session. So with that, we conclude our conference for today. Thank you very much for participating. You may all disconnect.

Operator: Hello, and thank you for standing by for Baidu’s First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today’s conference, Juan Lin, Baidu’s Director of Investor Relations. Juan Lin: Hello everyone and welcome to Baidu’s first quarter 2021 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 Li, our Co-Founder and CEO; Herman Yu, our CFO; and Dou Shen, our EVP In Charge of Search and Feed. 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. Private Securities Litigation 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. Potential discussions of these risks and uncertainties, please refer to our latest Annual Report and other documents filed with the SEC and Hong Kong Exchange. Baidu does not undertake any obligation to update any forward-looking statement, 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 directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on Baidu’s IR website. I will now turn the call over to our CEO, Robin. Robin Li: Hello everyone. We delivered strong results in the first quarter with Baidu Core revenue growing 34% year-over-year to RMB20.5 billion. Our business was strong across the board, particularly in our new AI business including Cloud, Smart Transportation, and Intelligent Driving. Non-advertising revenues within Baidu Core rose 70% year-over-year to RMB4.2 billion accounting for 21% of Baidu Core. China held the two session annual congressional gathering in early March and technology innovation was repeatedly mentioned. It was emphasized that never in the history of China has innovation been more important to the development of China. China’s pursuit of innovation through technology to boost long-term growth and productivity will further expand the use of AI. We have witnessed AI platforms or AI powered infrastructure enabling applications disrupting markets. For example, we entered the smart device market three years ago, despite two dominant market leaders with strong manufacturing and distribution capabilities. We leveraged the Baidu’s leading AI technology including national language processing and speech recognition to make DuerOS Smart Assistant understand humans better. This in turn has resulted in making Xiaodu smart display Number 1 in shipments globally. We further changed the market dynamics by introducing smart devices over RMB1000, compared to the sub RMB100 devices that our peers focused on. AI powered platforms are changing the technology landscape. New vehicles sold are being equipped with sensors and AI capabilities, both internally and externally to provide intelligent driving and in-vehicle infotainment. Apollo serves as the AI platform that powers this two critical functions of intelligent vehicles. Apollo autonomous driving is making new breakthroughs and over 1.5 million vehicles have been sold in China pre-installed with DuerOS for auto. Installation of DuerOS for auto saw continued strength in the first quarter growing over 100% year-over-year. According to IHS, over 50% of the vehicles sold in China this year are expected to be connected and the percentage is expected to rise. We are excited to be deploying V2X vehicle-to-road infrastructure across China, which enables connected vehicles to be more intelligent. Just as the continuous upgrade of telecom networks since 2G has enabled mobile phones to become better and smarter, we believe Apollo Smart Transportation infrastructure can be continuously upgraded to make connected vehicles, more convenient, safer, greener and in general, more intelligent over time. As we build Apollo V2X infrastructure in cities across China, we are getting requests to expand our Smart Transportation offering through greater use of AI into Maps and solutions to digitize public parkings and highways. The expansion of Apollo Smart Transportation beyond V2X into different sectors of transportation in metropolitan and highways leading into them will create a powerful network effect when these solutions are integrated and synchronized a transportation network powered by Baidu Brain. Our divestment of PaaS for different industries and empowering our ad customers with marketing cloud are further examples of how AI platforms are changing industry dynamics from digital transformation to mobile Internet. On the latter, we have a big opportunity to expand online marketing from selling traffic to empowering merchants with AI powered marketing cloud and improve search to transaction conversion. Our strong Internet foundation, coupled with growing user engagement provides us with another driver for non-advertising growth. Turning to Q1 operational highlights. Our AI Cloud continues to see strong adoption due to our holistic approach including a large developer community, self-designed chips, best-in-class machine learning services and large AI patent portfolio. With increasing AI adoption in China, Baidu PaddlePaddle has become a top one deep learning framework globally in terms of core requests, alongside with Facebook PyTorchand Google TensorFlow according to Github. We have spent years developing AI chips to optimize workload and improve cloud cost of structure with external demand for GPU chips and Baidu Kunlun completed its first round of funding at a post-money valuation of US$2 billion in April this year. Baidu EasyDL, a simple to use machine learning service for non-developers was rated Number 1 in terms of usage in China, per IDC, topping the list for the second time. Customers are telling us that they are choosing Baidu due to us having the largest AI patent portfolio in China, Baidu’s decade long experience with AI technology and our large patent portfolio gives customers the confidence that we can deliver end-to-end cloud solutions with PaaS and SaaS that meets their needs. Last quarter, we illustrated AI solutions that were scalable and replicable across different industries such as our automated AI call center. We are also seeing customers who implement Baidu AI PaaS return for repeat purchases. For example, we helped a major retail bank in China implement Baidu AI PaaS, which has led to five follow-on purchases including applications to automate customer service and customer loan approval and the recent purchase of private cloud services. In the media sector, we partnered with online arm of China's largest TV network CCTV to implement Baidu AI PaaS with capabilities to automate video clip creation and tagging from live broadcasting and use smart assistant to quickly locate desired video content. During the two sessions, we enabled CCTV.com to simultaneously interview congressional meeting participants with AI reporters, powered by Baidu Brain, and the timely share these interviews on the Internet. Smart transportation is becoming a way to digitize the transportation industry in China to improve traffic conditions and build safety and reduce carbon emissions. Our V2X Vehicle-to-Road infrastructure has helped reduce traffic congestion time by 20% to 30%. Chongqing, which implemented Apollo V2X last year and opened the door for Apollo into Western China reengaged with us this year to make their smart transportation infrastructure 5G-enabled laying the foundation for our future roll-out of robotaxi ride-hailing.. Chengdu the capital of Sichuan and a leader in science and technology development recently partnered with Apollo to implement V2X too. Turning to Intelligent Driving, since its founding eight years ago, Apollo has accumulated over 6 million miles of Level 4 autonomous driving testing miles on the road and over 600 million miles of simulated testing. Apollo continues to be the leader in autonomous driving in China with our early investment, open platform strategy, and comprehensive technology infrastructure. With Apollo platform driving and operate – while Apollo platform driving can operate independently on vehicle sensors, it is uniquely empowered by Baidu’s HD Maps, our AI Cloud and Apollo Smart Transportation. The comprehensive data set and the integration with city smart transportation network, we believe will enable Apollo to offer better driving behavior and reduced accident rate. Following the opening up of highway testing for autonomous driving in January, Apollo received the permit to operate at night and under special weather conditions on public roads in Beijing. Apollo also received permits to pilot fully autonomous driving in Beijing, Cangzhou and Changsha. Apollo Go, China's first fully autonomous ride-hailing service, with no one in the driver seat is now open to the public at the Shougang Park, a Beijing 2022 Winter Olympics site rides are priced at RMB30 each. In March, Apollo Go began to charge the robotaxi ride hailing in Cangzhou, based on the distance traveled starting with a minimum fare, similar to regular ride-hailing. Jidu Auto, an intelligent EV company established in partnership with Geely has appointed Xia Yiping as CEO. Yiping previously served as CTO at Mobike and worked various positions at Fiat Chrysler and Ford. We welcome Yiping to the Baidu family and look forward to his contribution to innovate the smart EV sector. On Apollo Self Driving GAC Group joins Apollo's network of over 10 leading local and multinational automakers to install ASD services in its new vehicles. According to China’s Insights Consultancy, a market research and consulting firm, the TAM for Apollo Intelligent Driving, which includes robotaxi riding-hailing EVs and self driving services for automakers will reach US$467 billion, almost nine times the size of our advertising TAM of $53 billion in 2025. Apollo platform powers Jidu and other automakers, as well as Apollo Go robotaxi. It is in a unique position to be well funded and widely adopted. Such coveted position has earned Baidu the only Chinese company selected for the leader category in autonomous driving by Guidehouse Insights previously known as Navigant Research, for the second consecutive year. Turning to Mobile Ecosystem. In March, Baidu App MAU reached 558 million. Creators on Baijiahao more than doubled and the number of Smart Mini Programs grow 74% from a year ago. Our AI building blocks, coupled with our marketing cloud continue to attract more third-party content and service providers on to our platform, which improves user experience. Merchants are adopting our Direct-To-Consumer model to get closer to their customers. Traditional ecommerce tends to accentuate its platform over the strengthening of individual brands and merchants. Baidu on the other hand, empowers merchants to build their own online presence and grow their brands by leveraging our social and live streaming capabilities, ecommerce features, and AI tools from our marketing cloud. Our AI building blocks, coupled with marketing cloud help merchants acquire customers, better understand them, engage with them, and perform lifetime customer management. Such search to transaction, closed-loop experience, improved user stickiness resulting in daily logged on users on Baidu App reaching over 75%, that’s up 16 points from a year ago. On social and interest based communities. Our search users sometimes have questions on their search results with professional content providers like attorneys and designers opening enterprise accounts on Baijiahao, they are able to respond to search queries and interact directly with users. 8% of our top one such results now enable users to ask questions and interact with the original content provider. Baidu Health has attracted approximately 300,000 doctors and medical experts to provide in-depth authoritative content and online consultation to consumers. As our users adapt to more services on Baidu, we see a great opportunity to offer non-ad services on our own to meet the needs of our large user base. When you couple this with the robust growth of our AI business, non-advertising revenues could possibly exceed advertising revenue with Baidu Core, within Baidu Core in the next three years. With that, let me turn the call over to Herman to go through our financial highlights. Herman Yu : Thank you, Robin. Hello everyone. Welcome to Baidu’s first quarter 2021 call. All monetary amounts used in my discussion are in RMB, unless stated otherwise. In March, we listed on the Hong Kong Stock Exchange under the Ticker number (9888) raising US$3.1 billion. Two weeks later, we were added to the Hong Kong - the Hang Seng Tech Index, the Composite Index and the China Enterprise Index. Listing closer to our user base with strong brand and unique profile as a leading AI company with strong Internet foundation generates incremental interest for Baidu and increases our stock liquidity. Our retail tranche during the Hong Kong listing was 111 times oversubscribed and our daily trading liquidity on the two exchanges in aggregate average 8.4 million shares last week ADS adjusted and approximately US$1.6 billion in amounts, compared to say, 2.8 million average daily traded shares last September or approximately US$350 million in amount. That is an increase of 4.5 times in daily trading amount on Baidu over the past seven months. Sustainability is an important focus for Baidu. We have worked diligently on ESG and we are upgraded twice by MSCI last year. Greenpeace, a global environmental organization, published a report on China’s Cloud and Datacenter Companies ranked Baidu Top 3 based in Cloud Services and number one in the utilization of renewable energy, based on their April report entitled Clean Cloud: Tracking Renewable Energy Use in China's Tech Industry. Turning to financial highlights. For the first quarter of 2021, Baidu revenue reached RMB28.1 billion or US$4.3 billion, up 25% year-over-year driven by the growth of Baidu Core whose revenue reached RMB20.5 billion or US$3.1 billion, up 34% year-over-year. Non-advertising grew 70% year-over-year accounting for 21% of Baidu Core’s revenue. Let me give you more color on each area. AI Cloud was RMB2.8 billion, up 55% year-over-year and we expect our AI Cloud growth rate to accelerate in the future. Our cloud growth benefited from customers from the Internet media, financial services and other high tech sectors, as well as from the strong adoption of Apollo Smart Transportation by cities seeking to modernize digitalized transportation and network vehicles. Intelligent drive and OGI revenue also grew rapidly. Apollo Self Driving or ASD though a small base grew over five times from last year. ASD revenue is booked upon vehicle shipments and revenue is recognized ratably over the contract period if the service is provided over the air, in other words upgraded regularly. Revenue for Xiaodu smart devices and services saw robust double-digit growth in the first quarter. Online marketing revenue was up 27% year-over-year driven by Baidu App, growing over 30% year-over-year. Most of our top add vehicles performed well. CPM was up double-digits. Managed Page grew - Managed Page reached 35% of Baidu Core's online marketing revenue, enforcement of our advertisers have adopted Baidu Marketing Cloud which is a one stop shop to purchase online marketing, build audience and leverage Baidu AI to enable user lifetime management. The strong adoption of our Managed Page and marketing cloud shows our customers’ preference and move from managing their own website to operating their hosted site on Baidu to better leverage Baidu’s advanced technology and tools to improve close transactions. iQIYI revenue reached RMB 8 billion, up 4% year-over-year and its net losses narrowed to RMB1.3 billion, up - down from RMB2.9 billion last year. iQIYI subscribers reached 105.3 million, serving as a strong foundation to support their over 50 in-house studios and produce entertainment blockbuster originals. Cost of revenues was RMB15 billion, up 2% year-over-year, primarily due to an increase in TAC and cost of goods sold, offset by a decrease in content costs and amortization/impairment of intangible assets. Baidu Core’s cost of revenues increased 15% year-over-year, as TAC revenues increased, while iQIYI’s cost of revenue decreased 10% year-over-year. Operating expenses were RMB10.3 billion, up 25% year-over-year, primarily due to an increase in channel spending and promotion expenses, as well as R&D-related personnel expenses. SG&A for Baidu Core was up 58%, partially reflecting the ramp up of our sales force, especially to support the pipeline of our new AI business as we look out the next six to twelve months. In addition, we accrue for bad debt allowance on new AI business, which holds accounts receivable unlike our online marketing, which generates revenue mostly on a prepaid basis. Non-GAAP operating income for Baidu and Baidu Core were RMB 4.4 billion and RMB 5.1 billion or US$773 million respectively. Non-GAAP operating margin for Baidu Core was 25%. Adjusted EBITDA for Baidu and for Baidu Core were RMB5.9 billion and RMB6.5 billion or US$990 million respectively. Adjusted EBITDA margin for Baidu Core was 32%, compared to 30% last year. Cash and short-term investments for Baidu and Baidu Core as of March 31, 2021 were RMB172.9 billion and RMB159.6 billion or US$24.4 billion respectively. Free cash flow for Baidu and excluding iQIYI were RMB2.6 billion and RMB4 billion or US$615 million respectively. Baidu Core had approximately 34,000 full-time employees as of March 31, 2021, up 18% from last year. Turning to second quarter guidance. For the second quarter of 2021, Baidu expects revenue to be between RMB29.7 billion or US$4.5 billion and RMB32.5 billion or US$5 billion representing a growth rate between 14% and 25% year-over-year, which assumes that Baidu Core will grow between 20% and 33% year-over-year. This guidance does not give any potential contribution from the acquisition of YY Live. The above forecast reflects our current and preliminary view, which is subject to substantial uncertainty. Before I turn the call back to the operator, let me summarize our first quarter results. We continue to see strong momentum in our business powered by our leading AI. Non-advertising revenue grew 70% from last year accounting for over one-fifth of Baidu Core revenue. China’s goal to drive innovation through technology will serve as a tailwind for our new AI business. Embarking on the digitalization of transportation and connected vehicles is like investing in a new telecom network to drive economic growth and productivity, except this time it is on a transportation network and the connected computers are smart vehicles rather than smartphones. Transportation is 16% of China’s economy. Thus, AI platforms that power smart transportation, autonomous driving and in-vehicle infotainment working in tandem can bring incredible operating efficiencies and convenience, as well as improve traffic safety, reduce carbon emission for the transportation sector. Apollo autonomous driving continues to be the leader in China with fully autonomous ride-hailing open to the public in Beijing. Apollo Go ride-hailing is now available to the public in three cities. We are quite encouraged that Apollo Go ride-hailing is gradually permitted to charge a fee, for example in Cangzhou, as well as in Beijing. Over ten domestic and multinational automakers have signed up with Apollo to install ASD in the new vehicles, a recognition by the auto industry that partner with Apollo is the preferred choice versus committing to heavy investments in autonomous driving for the next decade or maybe two. Apollo’s open platform and diversified monetization to support autonomous driving through ASD, Jidu Auto and Apollo Go ride-hailing put Apollo in a unique position to be well-funded and well - widely adopted. IDC ranks Baidu Number 1 in autonomous solutions for public cloud. By focusing on AI PaaS, our AI Cloud is differentiated in the market. We are seeing the information - implementation of our AI PaaS drawing repeat purchases and over the long run, we expect our AI Power business to have higher margin as we build on our PaaS and SaaS business, compared to pure IaaS players. Advertising revenue growth was solid, up 27% year-over-year. Merchants are adopting our direct-to-customer model to get closer to their customers and Baidu’s open platform model to accentuate the merchants by allowing them to build their brands on Baidu, access their own user data, and leverage Baidu’s AI powered cloud services is a huge opportunity for our mobile ecosystem. ESG is an area that we focus on, in addition to leading the industry in cloud and datacenter construction. We hope to contribute to the sustainability in a big way as we help cities across China deploy smart transportation to significantly improve the flow of internal combustion engines and promote the crossover to EVs. Baidu is also developing smart EVs, empowering automakers with intelligent driving services and providing robotaxi ride-hailing and Robobuses, which are all powered by EV. Baidu returned US$300 million to shareholders under the 2020 share repurchase program this year, bringing the cumulative repurchase from last year to US$2.2 billion. We are confident about our future on the strong profitability of our search and feed business and how we are using the AI technology developed from this business to fuel growth in the new AI business, which along with our other non-ad business has a TAM ten times the size of our online marketing business and three times the CAGR growth through 2025, even when you exclude robotaxi ride-hailing according to CIC. Operator, with that let’s now open the call for questions. Operator: [Operator Instructions] First question comes from the line of Alicia Yap from Citigroup. Please go ahead. Alicia Yap : Hi. Thank you. Good evening management. Robin and Herman, thanks for taking my questions. Congrats on the solid results and guidance. My questions is related to cloud – your AI Cloud business. So, wondering if management could share some of the operating metrics for example, the total numbers of the cloud customers and also the industry vertical that you are – major in. And then also, for example, like, how much or how big it is coming from the government or the big enterprise versus the smaller semi-merchants in terms of using your cloud business. And also, the current loss ratio that if you can share and how you envision your cloud business to grow into – in the coming quarters and years? Thank you. Robin Li: Hello. Hi Alicia. Alicia Yap : Hello. Robin Li: So, so – yes, you guys hear me okay? Alicia Yap : Yes. Herman Yu: Yes. So, the way we look at our cloud business – the way we look at our cloud business, as you know, in our AI Cloud there is several segments to our business. Number one is our infrastructure cloud where we have IaaS, where we have PaaS and where we have SaaS, right. In that segment, we have our key accounts and then we have our SMEs which are much smaller cloud providers. So, you have your typical key accounts and then we have SMEs, we have many, many customers there. In addition, we also have our customers for our smart transportation in that space. So, that will be the key cities the top tier cities that we are in China. We don’t have this exact number of prepared for you for just today, but you can think of our segment it’s mostly smart cities in mostly key accounts in our AI Cloud. Our top sectors are things like, Internet, media, financial services, and transportation. And when you look at how we are growing, I think, last quarter, we said we are growing 67% year-over-year. This quarter, we are growing little bit somewhere 55%, part of the reason is because, if you recall last year, COVID-19 started toward the end of January. So, we did – we had a pretty good base in Q1 because, typically, if you think about COVID-19 affected us a lot, but when you think about the beginning of the quarter, we had a higher base. So, the way I would look at it is, we think that we can continue to grow at the way we did last quarter, higher than what we have 55% this quarter. We think that we see in our pipeline that that we should be able to grow at a higher rate. Alicia Yap : Okay. Thank you, Herman. Operator: Thank you for the questions. Next question comes from the line of Piyush Mubayi of Goldman Sachs. Please go ahead. Piyush Mubayi : Hi, Robin, Herman. Thank you for taking my questions. When I look at the core, the core seems to have bounced back very nicely in both the first quarter as well as based on the guidance you are providing for the second quarter and the marketing revenue was up 27% I suspect in the second quarter based on the high end of the range at 33%. It would be a similar number. Could you just take us through some of the verticals where you are seeing spending come back very nicely and try to – so that we can try and see whether this is sustainable through the rest of the year with the clear emergence of a trend coming back very nicely. That’s the first question. And if I might slip in a second question, you talked about the TAM for ride-hailing, I wonder if you could just take us through what your strategy is and how deep you want to go? Thank you. Robin Li : I will ask Dou to answer your first question and I’ll take on the second one. Dou Shen : Okay. For the first one, actually we see pretty good performance for most with the top ad verticals actually, not just by a single one. Actually, talking about the performance of the ad revenue, I think it’s not only because of the low base of last year’s first quarter. I want to actually give the credit to the three building blocks we have been working on in the past three years. As Robin mentioned in the prepared remarks, Baijiahao and Smart Mini program and also the Managed Pages, they all grew quickly and these building blocks actually, they provided high quality content and also the services to the users, so that the users you know they can not only get new information before, but they can also get the service in the closed-loop experience. Now with that, the users, they can complete their tasks like book a flight or buy a book in one stop - step instead of talking away. So all these building blocks actually they contribute to the monetization capability we have built. Especially for Baidu AVP, so, we can see it actually grows even faster than the average 27% - it’s more than 30%. So, with that actually we are seeing pretty good performance for all the verticals on the way down the road. Robin Li : Yes. So for the TAM of Apollo, it’s huge. It’s very large, and right now, it’s growing very fast. If you recall, we started to invest in autonomous driving roughly eight years ago. Over the years, Apollo has morphed into a very comprehensive platform that supports all kinds of business models and directions that includes robotaxi, ride-hailing that includes, software services provider for that OEMs and also that includes building our own smart EVs. I think all of this effort, well, feedback data and other kinds of market signals to the Apollo platform making Apollo a stronger and a better platform for both autonomous driving and smart transportation. We are very excited that each of this new directions including the smart transportation project we are building for many, many cities, because it all can be integrated together and provide a much more efficient transportation system for the cities, for the society and provide better experience for the drivers and the consumers. And it all comes together and we are very happy we invested early and we start to reap the benefit of this direction. Operator: Thank you for the questions. Next questions comes from Alex Yao of JP Morgan. Please go ahead. Alex Yao : Hi, good evening, management. Thank you for taking my question. I have a couple of follow-up questions on the cloud. Robin, you mentioned deployment of V2X infrastructure will play – will generate network effects to your broader Apollo strategy. Can you elaborate that network effect little bit more? And also, what strategic benefits will the broader Apollo ecosystem benefit from the build-out of your V2X infrastructure in China? Then the near-term financial question is, Herman, you - I think you mentioned despite of the strong – in addition to the strong growth momentum in first quarter, you expect the cloud revenue to further accelerate into the coming quarters. Can you talk about the fundamental driver to the strong revenue growth momentum, particularly in the Smart City market? What is your competitive edge or who do you see as the biggest competitor? And what are the unique value proposition you bring to this market segment? Thank you. Robin Li : Yes. For the V2X project, it’s quite clear that the sensors build on the roads can communicate with vehicles. Therefore vehicles, be it with autonomous driving capabilities or not, they are connected so they can get signals from the infrastructure and therefore become more informed when deciding on their driving behavior. If there is a driver on the car, we can alert on any risks that’s not directly visible by a human eye, because there are sensors surrounding the environment that can alert the drivers, and also better tracking driver behavior in some cases. For example, in the city of Guangzhou, there are some commercial trucks. Their license plates could be covered by mud. So the drivers were not afraid of violating the traffic laws. But now, with the V2X infrastructure and on-vehicle devices sometimes installed on those trucks, the city regulators can much better track those violations therefore making the road safer and more efficient. Of course, with vehicles with autonomous driving capabilities, they can be assured that the infrastructure can send signals to those kinds of vehicles and help the vehicles to better assess the environment, therefore improve the accuracy of the planning and controlling process for autonomous driving. The more V2X projects we deploy, the more cars can benefit from this kind of infrastructure. Therefore, the autonomous driving capabilities can improve faster and also become safer for the passengers on those cars and also it can reduce the cost of a single - because sometimes you don’t have to rely on very expensive onboard devices such as the high-end Lidars in order to really drive on fully autonomous. Herman? Herman Yu : Yes. And to add to what Robin just said, I think, a couple of things. You asked us for Smart Transportation, what are the growth drivers. One thing is recognized how AI works, right? That the more data you have synchronized, it becomes more powerful. So, what V2X does, for example, in Guangzhou, it’s 102 intersections where we are offering an AI solution that allows the traffic lights to be synchronized throughout that whole part of the city, okay? So, when you think about that and that the chance of getting to a Phase 2, so that the first phase of the project is synchronized with the second phase. That would give you that kind of network effect. So that’s why for example, when you see in the City of Baoding when we first had our first phase, we were called back for a second phase, because you want that second set of lights to this part of the city to be synchronized. And then we even see, for example, now a third part of the phase as we continue to expand the traffic lights. So, that’s one way to expand our business is to continue to take in more area of the city and be able to synchronize all of the traffic lights synchronized with the traffic flow, okay? And you asked us our competitor. We see competitors in the area, but we don’t see them focusing on a whole part of the city. They are more looking at one light at a time, while we are using Baidu Brain to power the whole thing. And our opportunity is in addition, as Robin mentioned in the prepared remarks, once you go in there will lead to actually have the opportunity to go in there with MaaS, right. MaaS is our open platform and which controls robotaxi and Robobuses like in Guangzhou not only does it power the Robotaxis that Apollo have, you also have Robobuses in there. You also have another brand of robotaxi that our MaaS is powering. So, you can think of it as the operating system for that part of the city and whenever there are other robotaxi transportation and so forth, the government uses our MaaS to kind of power those robotaxi or Robobuses, so that you could prioritize the ride and so forth. And then, there is other product expansions like, for example, going to highway, going to parkings and so forth. So the more of these projects are synchronized, obviously, through AI and so forth, you’re going to make the traffic a more smoother. So, you’re seeing two trends. One is, as we are going into cities, we are getting multiple phases. We are expanding the products and you’re also seeing us entering new and new – more and more cities, because a lot of cities in China now, they are leveraging on technology to improve their infrastructure rather than closing down roads and taking more land in order to widen the roads to basically reach the same goal. Operator: Thank you for the questions. Next questions comes from the line of Jerry Liu of UBS. Please go ahead. Jerry Liu : Hey. Thank you. Thank you, management. Robin, if I may go back to your earlier statement about how non-ad revenues could surpass ad revenues in the Baidu Core in three years. So, I mean, that makes me feel that you guys see more – have a bit more visibility and confidence of this mix shift. So I just want to ask, what are some of the drivers you’re seeing here? Now, obviously, cloud Apollo maybe YY Live or can contribute to that. But I am just wondering what are maybe the bigger drivers in this mix shift. Thank you. Robin Li : Hi, Jerry. This is Robin. I don’t know if you’ve noticed that when we say what kind of company Baidu is, we see that we are a leading AI company with strong Internet foundation. That means that, we can not only benefit from the investments we did over the past like, ten years to more - to getting more new businesses like intelligent driving and smart cloud, we also can leverage our AI capability to better monetize our strong user base we accumulated over the past, like 20 years. If you compare the Baidu mobile ecosystem with other leading mobile ecosystems in China, you notice that we are probably one of the very few that has online marketing revenue as the majority of total revenue. This is not a very reasonable situation. Our tens of millions of users can enjoy other kind of services of Baidu, not just clicking on maps, they can pay for premium content, they can do ecommerce transactions, they can play games, they can watch live streaming and tip their influencers. There are a lots of things we can do and as we deploy more closed-loop user experience, we think that the Baidu App and as we leverage our AI algorithms to better recommend services and better understand users’ needs, we can monetize the strong user base through multiple ways. That’s how we look at this landscape. Herman Yu : Yes. And just let me add to that - to Robin. You asked us what are the key drivers, I think Robin was very clear, when you look at a mobile ecosystem, our non-advertising like here, because we can leverage our huge user base, right? We are reaching over one billion mobile devices per month, right? So, in addition to that, we talk about our cloud. You look at our cloud. It’s pretty significant in size right now and it’s still growing very robust. And I think as we mentioned before, there are two main areas that’s driving the growth. One is our infrastructure cloud. You have us differentiating with AI solutions, like on the prepared remarks whenever we go into a big customers with AI PaaS, we are seeing them having cross-selling and having upselling. So not only does it sell more PaaS in applications, you’re also seeing them, for example, crossing into IaaS, like the example we gave, one bank started buying hybrid cloud as a result of building their relationship with us. So, we are going to see that digitalization of enterprises drive our sales. I think particularly in AI PaaS, particularly, in application and it’s also going to allow us to go into the IaaS of that business. Smart transportation we talked about, we think that that’s a huge opportunity. When you look at, for example just last year in the number of projects that China has with transportation and so forth, there is probably over 300 cities. I think 302 cities recorded by the government that have a transportation project. So, there is huge opportunity for us in that area. And then, when you are looking at OGI, we look at a few areas. You look at, for example, our DuerOS with smart display, smart devices and so forth. You are looking at, for example, Apollo Self Driving, we are signing up with lot of OEMs as they are starting to ship their cars in the next few years. You’re going to see more and more come on. For example, in this year, just for example, ASD we are still in the pipeline, by the end of the year, we should have maybe four automakers install our ASD, right? And then, on top of that, we are already testing robotaxi ride-hailing. For example, went live in Beijing and so, we should see that pretty exciting in the next couple of years. So here are just some of the areas that we think that there is potential for growth and because the TAM is ten times and the CAGR is three times of advertising and you look at the pace that we have gone through, right? If you recall, just two quarters back, our non-advertising was growing at 14%. Last quarter, we said it was a little bit higher at 52% and this quarter we are saying 70%. So, you are seeing us really starting with our firing power for our non-advertising ASD - AI businesses that we have incubated over the last decade start to mature and start to monetize. Operator: Thank you. Next questions comes from the line of Miranda Zhuang from Bank of America. Please go ahead. Miranda Zhuang : Thank you, and good evening management. Thank you for taking my question. Congratulations on a very strong results and outlook. So, my question is about your EV business, can management provide any color on the scale of the financial investments that we are planning for the EV business this year? And also, as well as if there is any update to the product timeline? I would remember that in last earnings call management mentioned about planning to launch the EV car in three years time. We would like to check if there is any update to this plan given that the EV market is recently becoming more and more crowded with more newcomers and more capital inflow. So, just want to check our timeline. And also want to get a sense of what will our EV business roadmap look like? And what kind of key business milestones can we expect this year and next year? Thank you. Robin Li : Yes. As you know, the EV business is relatively independently operated company controlled by us. The goal is to make our latest and coolest technology available on the market as soon as possible. We mentioned that we intend to launch that within three years and of course the team is trying very hard to make it available earlier, as soon as possible. And our thesis remains unchanged, because Apollo is a very comprehensive platform for all kind of autonomous technologies. And we’ve been investing in this for many, many years. But we see a lot of opportunities to offer unique user experience and technology through a seamless integration of software and hardware, as well as fully take advantage of infrastructure that’s available to the consumers. Herman, do you have any financial color to add on that? Herman Yu : I think that the CEO just saying on, I think we are still working to our business plans. But it’s - to look at that whole EV market, you can actually – there is quite a few analysts that have given projection on the size and so forth. I think where we are lucky in a sense that the hardest part, if you think about EVs and so forth is the autonomous driving that that ability being able to build intelligent driving and also being able to power infotainment within the car, so that you’re having more intelligence both within the car as the person drives and also outside of the car. So, I think that would give us that ability to actually be able to design the car and to have those kinds of technologies and products ready. So we don’t have any particular numbers to give out now. But you do have projections on where the EV volume is going to be in three years. And you do have other automakers that have shown in the last few years. So, we are going to be looking at that kind of model and we are going to be looking at the market that fits us - our profile, as Robin mentioned, so that in this model. Maybe another way to look at this, if you look at where a lot of the EV cars are going, a lot of them are going direct to customers, right? If you look at a model with intelligence just like our speakers and so forth, in the past, the speakers people sell hardware, right? When you think about EVs nowadays, you look at for example, some of the cars, when they sell the cars, they are also trying to swap batteries. So that they can get users to actually have more frequent contact, so that they can also make more money after the post-sales of hardware. So they could sell more services. So, when you think about our business, number one, we are already selling a lot of services like intelligent driving. We are already getting a lot of our infotainment installed in OEMs and so forth. So, this whole business model of having more contact with the users with the consumers to build the brand and also be able to drive more services after the initial sales of hardware is something that we are very familiar with. So, I think we’ll be more prepared as we go into that model of EV and adapting to that direct to customers, rather than the traditional way of just trying to make the dollars by selling just hardware. Operator: Thank you. Next question comes from Gary Yu of Morgan Stanley. Please go ahead. Gary Yu : Hi. Thank you, Robin, Herman, and Juan. I have one follow-up question regarding your three year kind of revenue mix outlook. Even to-date, the biggest part of your non-marketing revenue is coming from AI cloud. So how should we look at contributions from various businesses in three years time when non-marketing surpasses your marketing revenue? Should we still expect kind of AI cloud to be a dominant driver of that? Or we expect some of these autonomous driving revenue and also car hailing revenue will start to become more material? And a related question to that is, how should we look at margins given the revenue mix shift? So, how should we look at the mobile ecosystem margin trend going forward? And by what time should we expect the non-marketing business to become profitable? Thank you. Robin Li : Yes. On the revenue mix, if you look at our AI cloud, we have been disclosing the revenue number and growth rate for a number of quarters. And you can probably do a projection based on the past performance. And there are many other ways that we can monetize our strong user base and AI technology through either intelligent driving or other things mentioned by myself and Herman. I think that all – when that all add up, it should represent more than half of our total revenue. But the foundation for them, we’ve been accumulating that the user base for the past 20 years and we’ve been investing in AI technology for more than ten years and this all come together and opens up a lot of new opportunities for us to grow our revenue. I’ll let Herman answer about the margin question. Herman Yu : Yes. Yes. So, on the margins, let me answer several ways. I think, number one, obviously, mobile ecosystem search and feed that is a mature business growing not as fast. When you have a business that we are in where our search is the largest in China, where we have tremendous amount of traffic, obviously, you’re going to have very good margin. But at the same time, with our mobile ecosystem, we were able to afford a lot of investments in these AIs and we are leveraging AIs into these businesses. So it helps us allocate some of that cost structure into other businesses. But as we are ramping up two types of businesses, one is 2B business right? When you think about AI cloud going into enterprises and we are also ramping up our 2G business going into cities working with municipalities and so forth, right? So, you’re going to see us getting impacted by the margins in several ways. Number one is, you’re going to have a cost of sales, right? Whether we are selling a more AI solution projects, you have cost of sales. Whether we are selling more projects with smart transportation, whether we are selling more displays, you’re going to have cost of sales. Furthermore, when you’re seeing a strong steep ramp up of our AI cloud business, smart transportation, and so forth, we have to hire ahead of the curve. We have to be looking at for the next 6 to 12 months where our sales are going to be and hire those salespeople in early so that we can train them for two quarters or so forth. And then they could start going out there and get orders. So, I think for the margins as you’re seeing for example, you’re seeing us give very robust Q2 revenue guidance, then you should assume number one is, a lot of that growth is coming from new AI business. You’re going to see gross margins, compared to last year, you’re going to see gross margin this year more incrementally from AI business. So, you got to consider that. And secondly, you got to consider the fact that we are going to increase our sales and marketing to support the current growth and also over the next few quarters, you’re going - should expect, for example, us to accrue for a bad debt, because these new business 2B and 2G, they all have AR allowances unlike our advertising. So, these are the things you should consider. So, let me just summarize. I think when you’re looking at non-advertisings, the opportunity is in our typical cloud business. It’s in smart transportation. It’s within OGI. The key drivers are going to be related to intelligent driving such as our ASD. And we think that our EV and our robotaxi and then lastly, our smart devices. So, here are the three – the few areas and then in terms of margins, cost of sales, you’re going to see it dampening. You’ve already seen that, for example in Q1, and then we have to prepare for our sales and marketing and also G&A, okay? Operator: Thank you for the questions. Next questions comes from James Lee of Mizuho. Please go ahead. James Lee : Great. Thanks for taking my questions. Two here. First on the cloud businesses and clearly you guys having a lot of success in AI point solution through customized projects and maybe can you talk about how you plan to make the business more scalable? How close are you in building a standardized solution? So you can expand across various industries using third-party developers and system integrators? And also, do you have the backlog numbers? So we can get a better understanding of the underlying trends? And second is, for second quarter, Herman, can you talk about maybe your expectation on expense growth and to the extent you can break out between core advertising and new investments? Thanks. Robin Li : First of all, I think a lot of the projects we are taking on for AI cloud is very scalable. The solution can really be standardized on a vertical industry basis. We have been talking about smart transportation. A smart transportation project in one city can be easily copied to another city. And although it is loss making right now, but the gross margin is very good at this time already. And going forward, as we do more and more this kind of projects, I think margin will improve and the investment in R&D will gradually pay-off. I mean the solutions are pretty standard from city-to-city. And more broadly, I think, other industries, be it in the financial industry or in the energy industry, we’ve been building a standardized layer mainly on the PaaS, platform-as-a-service layer. We have a lot of AI capabilities, speech recognition capability, text-to-speech capability, OCR capability, natural language processing capability. There are lots of things that can be standardized and we do work with system integrators to deliver turnkey solutions to many of our customers and we will continue to do so. And going forward, I think the standard part of our AI cloud solution will become a bigger and bigger part of the total cloud revenue. Operator: Thank you. Next question comes from the line of Han Joon Kim of Macquarie. Please go ahead. Han Joon Kim : Great. Thank you, management. As we looked at some of the cloud revenues for your, perhaps larger peers in the market, we’ve noticed a few other key accounts depart recently, partially sometimes for extenuating circumstances, but others maybe just as customers want to build out their own services and so forth. So, as we think about stickiness of our own cloud revenues and perhaps dependencies on key accounts, can you give us any kind of indication of how we think about the stickiness of that and yes, just some general, some observations you might have had about the market situation? Thank you. Robin Li : Yes. I think, at an early stage, we may be very sensitive to one or two key customers. But as the base becomes larger and larger, any single key account customer will contribute a lower and lower percentage of our total revenue. I think this is kind of different from those standard app solutions provides - provided to those Internet and media customers like some of our peers do. We’ve been more focused on vertical industries where we’ve been providing more AI empowered cloud solutions. I think that’s a more defendable approach and a direction that’s not so sensitive to any one or a few large customers. Operator: Thank you. Next question comes from Tian Hou of TH Capital. Tian Hou : Yes. Thank you, management for taking my questions. Congratulations on the good quarter. I have a quick question. In the EV car area, there are lots of new players in the market. Let’s say, Huawei right now is like announced that they have the EV cars. So, I think maybe it is better for the audience and for the street to understand, what’s the advantage of Baidu’s EV cars, compared with other guys? So, that is simple question. Thank you. Robin Li : Yes. As I mentioned that we’ve been investing in this for many years for – since 2013 and we’ve accumulated the best-in-class autonomous driving capability and over the years, Apollo also morphed into a more comprehensive platform that offers all kinds of capabilities, be it V2X capability or infotainment for individual vehicles. I think at this time, nobody on this planet has a more comprehensive solution than we do for smart EV. That’s why we are very confident when we launch our own car, we can provide the best user experience and best price to performance ratio for our consumers. Our technology is just more advanced and mature than any other people in this industry. And on a broader note, I think, Baidu has been investing very aggressively in AI. If you think about autonomous driving, it almost uses all kinds of AI technologies. And we’ve been investing in this for more than 10 years and we spent roughly RMB20 billion in R&D last year. And we will continue to aggressively invest in R&D over the next 10, maybe 20 years. And we will make sure that our technology – our AI technology and our autonomous driving technology will continue to lead in this market. It’s very hard for anyone who comes on the street new and makes this kind of claims and it’s very hard to imagine a EV maker with a smaller market share, let’s say if they are number 4 or number 5 in terms of market share, they can’t afford this kind of continued intensive investment in R&D. And I think, it’s widely known that autonomous driving will not become mature for the next 10 or even 20 years. So, this kind of sustained intensive investment in R&D is necessary to keep the lead in terms of technology. Operator: Thank you management. With that ladies and gentlemen, that does conclude the conference for today. Thank you for your participation. You may now disconnect your lines.