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Baidu receives Q2 revenue jolt from AI and streaming services

Baidu posted revenues of 26.3 billion yuan ($3.84 billion) for the three months to June 2019, an increase of 1% — or 6% if the impact of divested businesses Global DU and Du Xiaoman are excluded — compared to the same quarter a year ago.

The search giant’s CFO Herman Yu said the company’s revenues had remained steady “despite the weak macro environment, our self-directed healthcare initiative, industry-specific policy changes and large influx of ad inventory”.

According to Baidu, the steady quarter was largely attributed to strong growth from its video-streaming business iQIYI. Revenue from iQIYI reached 7.1 billion yuan ($1.04 billion), up 15% year on year while the amount of iQIYI memberships also rose by 50% year on year, with the streaming service having amassed over 100 million users as of June 30.

Baidu’s AI segments also experienced increased uptake during the three months to June, with Baidu’s AI Open Platform growing 37% year on year to 1.3 million developer accounts. Meanwhile, developer downloads on PaddlePaddle, Baidu’s open-sourced deep learning platform, increased 45% sequentially for the quarter. 

Baidu’s core business, meanwhile, recorded revenues of 19.5 billion yuan ($2.85 billion) for the quarter, a 2% decrease year on year. Online marketing revenues were 19.2 billion yuan ($2.8 billion) — which is primarily funneled into the core business — was a 9% decrease year on year.

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Despite the drop in revenue for Baidu’s core business, the Baidu app’s daily active users in June 2019 reached 188 million, growing 27% year on year. 

There was also an increase in downloads for DuerOS, Baidu’s voice assistant, which has been installed over 400 million times, a multiple of 4.5 compared to last June. The amount of monthly voice queries by DuerOS also shot up by 7.5 times year on year to 3.6 billion as of June. 

In total, the search giant’s revenues for the quarter to June rose 1% year on year, from around 26 billion yuan to 26.3 billion yuan ($3.84 billion).

Adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) was 3.4 billion yuan ($489 million) and adjusted EBITDA margin was 13%. 

Research and development (R&D) expenses accrued were 4.7 billion yuan ($690 million), a rise of 17% year on year.

The increased R&D spending follows the trend of Chinese tech companies upping the ante when it comes to innovation as on average, the country’s top 100 internet companies have spent at least 10% of their revenue for R&D.

Baidu’s net income for the quarter was 2.41 billion yuan, which was a 64% drop compared to June last year. While Baidu’s net income has dropped year on year, it is a marked improvement from the quarter to March’s performance, when the company posted its first loss since going public in 2005.

Baidu announced a new, three-year agreement with Intel at the start of the month to collaborate on technology related to its core businesses — namely cloud, AI, autonomous driving, 5G, and edge technologies. Building on 10 years of partnership, the deal is another play for Baidu to try and reshape its business so it can better fit into the current Chinese internet landscape. 

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