Baidu, Inc. (BIDU) Q4 2025 Earnings Call Transcript

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Overview

The earnings call reveals strong AI Cloud revenue growth, strategic partnerships, and expansion in autonomous driving. While there are some concerns about competition and unclear timelines, the overall sentiment is positive due to the optimistic guidance for 2026, robust AI-powered business growth, and a new share repurchase program. These factors suggest a likely positive stock price movement in the short term.

Key Financial Performance

Baidu General Business total revenue (Q4) RMB 26.1 billion, increased 6% quarter-over-quarter. Reasons: Growth in Baidu core AI-powered business.

Revenue from core AI-powered business (Q4) RMB 11 billion, accounting for 43% of Baidu General Business revenue. Reasons: Strong momentum in AI Cloud Infra and AI applications.

Subscription-based revenue from AI accelerator infrastructure (Q4) Grew 143% year-over-year. Reasons: Expanding enterprise AI adoption and shift to a recurring revenue model.

Total rides by Apollo Go (Q4) 3.4 million fully driverless operational rides, increased over 200% year-over-year. Reasons: Robust momentum in autonomous ride-hailing services.

Revenue from AI Cloud Infra (2025) Approximately RMB 20 billion, up 34% year-over-year. Reasons: Efficient training and inference capabilities, outpacing industry growth.

Revenue from AI applications (2025) Exceeded RMB 10 billion. Reasons: Comprehensive AI application portfolio and enterprise adoption.

Revenue from AI native marketing services (2025) Up 110% year-over-year. Reasons: Growth in digital humans and agents.

Total revenues (Q4) RMB 32.7 billion, increased 5% quarter-over-quarter. Reasons: Increase in Baidu core AI-powered business.

Total revenues (2025) RMB 129.1 billion, decreased 3% year-over-year. Reasons: Decrease in legacy business, partially offset by growth in core AI-powered business.

Cost of revenues (2025) RMB 72.4 billion, increased 10% year-over-year. Reasons: Increase in costs related to Baidu core AI-powered business.

Operating expenses (Q4) RMB 13.0 billion, increased 10% quarter-over-quarter. Reasons: Increase in expected credit losses and one-time employee severance costs.

Operating income (Q4) RMB 1.5 billion, operating margin 5%. Reasons: Positive momentum in Baidu core AI-powered business.

Non-GAAP operating income (Q4) RMB 3.0 billion, non-GAAP operating margin 9%. Reasons: Excluding certain adjustments, reflecting operational efficiency.

Net income attributable to Baidu (Q4) RMB 1.8 billion, net margin 5%. Reasons: Positive contributions from core AI-powered business.

Non-GAAP net income attributable to Baidu (Q4) RMB 3.9 billion, non-GAAP net margin 12%. Reasons: Excluding certain adjustments, reflecting operational efficiency.

Operating cash flow (Q4) RMB 2.6 billion. Reasons: Positive cash flow from operations.

Operating cash flow (2025) Negative RMB 3.0 billion, but positive for the last two quarters. Reasons: Improved operational efficiency.

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Operating Highlights

AI-powered business revenue: Revenue exceeded RMB 11 billion in Q4, accounting for 43% of Baidu General Business revenue. For the full year 2025, revenue from AI applications exceeded RMB 10 billion.

AI Cloud Infra: Subscription-based revenue grew 143% year-over-year in Q4. Revenue reached approximately RMB 20 billion in 2025, up 34% year-over-year. Achieved a more recurring revenue model and broadened client reach across industries like gaming, autonomous driving, and embedded AI.

Apollo Go: Delivered 3.4 million fully driverless operational rides in Q4, with total rides increasing by over 200% year-over-year. Cumulatively provided over 20 million rides as of February 2026.

Digital humans: Revenue grew 110% year-over-year. The number of digital humans live streaming increased nearly 200% year-over-year in December 2025.

Apollo Go global expansion: Expanded to 26 cities worldwide, including new markets like South Korea and Switzerland. Progress in the U.K., Middle East, and Hong Kong.

AI search API: Adoption accelerated in Q4 with call volume up over 110% quarter-over-quarter. Added multilingual capabilities for international markets.

AI chips spin-off: Proposed spin-off and separate listing of Kunlunxin, validating long-term strategic vision.

Operational efficiency: Introduced Yijian for visual intelligence and FM Agent for operational challenges, improving efficiency across industries like manufacturing and logistics.

AI integration: AI became the core of Baidu's portfolio, with advancements in AI cloud, robotaxi operations, and mobile ecosystem.

PSIG business group: Formed to integrate Baidu Wenku and Baidu Drive, focusing on AI application innovation.

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Risk or Challenges

Regulatory Risks: The transcript mentions the need to comply with regulatory requirements, especially in the context of autonomous driving and AI applications. This could pose challenges in obtaining necessary permits and adhering to safety standards in different regions.

Economic Uncertainties: The financial results indicate a decrease in total revenues for the full year 2025, primarily due to a decline in legacy business. This highlights potential vulnerabilities to broader economic conditions and market shifts.

Operational Challenges: The company faced increased operating expenses due to expected credit losses and one-time employee severance costs, which could impact operational efficiency and profitability.

Competitive Pressures: Baidu's focus on AI-powered businesses and autonomous driving faces intense competition from both domestic and international players, which could affect market share and growth.

Supply Chain Disruptions: The reliance on high-performance computing resources, both domestic and international, for AI cloud infrastructure could expose the company to supply chain risks, especially in the context of geopolitical tensions.

Strategic Execution Risks: The proposed spin-off and separate listing of Kunlunxin, as well as the restructuring of model development teams, introduce execution risks that could impact the company's strategic objectives.

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Guidance & Outlook

AI Cloud Infrastructure: Baidu anticipates continued strong growth in its AI Cloud Infrastructure, driven by enterprise AI adoption and a shift towards a recurring revenue model. The company expects to maintain advantages in stability and cost-effectiveness, addressing enterprise needs for AI deployment. Embodied AI revenue is expected to grow significantly, with momentum in humanoid robotics.

Foundation Model Development: Baidu plans to advance its proprietary foundation model, ERNIE, with a focus on application-driven improvements. The company has restructured its model development teams to enhance technological edge and scalability for business needs.

AI Applications: Baidu aims to expand its AI-powered applications, including AI search, digital humans, and Miaoda (vibe coding platform). The company expects broader adoption of these technologies, with digital human production costs declining and Miaoda enabling global users to create AI applications without coding.

Apollo Go Autonomous Ride-Hailing: Baidu plans to accelerate the global expansion of Apollo Go, its autonomous ride-hailing service, targeting more cities worldwide. The company expects to improve operational excellence and unit economics, with a focus on safety and scalability. Testing in new markets like London, Dubai, and Seoul is underway, with commercial readiness in Hong Kong progressing.

AI Chip Spin-Off: Baidu has announced the spin-off and separate listing of its AI chip business, Kunlunxin, to unlock new opportunities for value creation. The company sees significant demand for AI infrastructure and plans to capitalize on this trend.

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Shareholder Return Plan

Dividend Policy Adoption: Baidu has adopted a dividend policy for the first time.

Share Repurchase Program: Baidu announced a new USD 5 billion share repurchase program.

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Key Q&A

Q:How does management view the current competitive landscape and the relationship between model evolution and application in their AI strategy?

A:Management views the market as highly competitive and fast-moving. They believe applications matter more than models, as models create value through applications. They take an application-driven approach with ERNIE, guided by valuable use cases. They have restructured their model team into two focus areas: one for pushing frontier capabilities and another for specific business needs. They leverage ERNIE's strengths and use other models where better suited, aiming for the best application outcomes.

Q:What were the key growth drivers behind Baidu AI Cloud's strong revenue growth in 2025, and what is the outlook for 2026?

A:Baidu AI Cloud revenue reached RMB 30 billion in 2025, with AI Cloud Infra revenue growing 34% year-over-year. Subscription-based revenue from AI accelerator infrastructure grew 143% year-over-year in Q4, becoming the primary growth driver. The growth is underpinned by accelerating enterprise AI adoption and demand for AI computing. Management expects strong growth momentum in 2026, driven by their full-stack AI architecture, proprietary Kunlunxin AI chips, and evolving agent infrastructure.

Q:How does management view the development of AI-powered businesses, and when is it expected to exceed 50% of Baidu General Business revenue?

A:AI-powered business revenue reached RMB 11 billion in Q4, accounting for 43% of Baidu General Business revenue. Management sees AI-powered businesses as the core driver of revenue growth, with significant expansion potential in AI applications, robotaxi business, and AI-native marketing services. They expect AI-powered businesses to become the majority of Baidu General Business revenue in the foreseeable future.

Q:What is Baidu's framework for capital allocation, and what is the long-term strategic positioning of Kunlunxin within the group?

A:Baidu's capital allocation framework includes enhancing disclosures, improving efficiency, optimizing structure, advancing Kunlunxin's spin-off and listing, and implementing a new share repurchase program and dividend policy. Kunlunxin, a result of over a decade of investment, is a critical infrastructure component of Baidu's AI capabilities. The spin-off and listing are expected to unlock significant value for Baidu.

Q:What is Baidu's overseas strategy for robotaxi in 2026, and how does management view Apollo Go's value?

A:Baidu is accelerating international expansion of Apollo Go, which operates in 26 cities globally. Apollo Go has completed over 20 million cumulative rides and achieved UE breakeven in Wuhan. Management highlights its cost advantage with the RT6 vehicle and strategic partnerships with Uber and Lyft. They see Apollo Go as a strategic growth engine with significant long-term potential and are flexible about strategic options to maximize shareholder returns.

Q:How does Baidu assess the competitive dynamics in the consumer-facing AI market, and what is the path to monetization for AI2C products?

A:Baidu sees the AI2C market as highly competitive but remains focused on user needs. They enhance products like ERNIE Assistant to improve user experience and integrate capabilities like multilingual AI and MCP agents. ERNIE Assistant's MAU surpassed 200 million in December. Monetization will follow as products mature, with a focus on product excellence and user experience.

Q:What is Baidu's approach to AI-related CapEx and its impact on returns and efficiency?

A:Baidu has invested over RMB 100 billion in AI since March 2023 and plans to maintain this level. They focus on improving financial performance, with positive operating cash flow and free cash flow in Q4. They explore alternative financing options, such as low-interest bank borrowings and leasing, to sustain AI investments while maintaining profitability and positive cash flow.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the specific timeline for AI-powered businesses to exceed 50% of Baidu General Business revenue, providing only a general statement about the foreseeable future. Additionally, they did not provide detailed financial metrics or specific plans for Apollo Go's potential spin-off or monetization strategy.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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