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Baidu Inc.'s CFO Henry Hesaid the Chinese company's investment in AI could start generating profits and cash payback in the near term, matching those of its legacy search business.
Baidu's AI revenue — which includes cloud computing and applications — now generates over half of the company's sales, and the finance chief expects the upward trend to continue. He noted in an interview with Bloomberg Television that the profit margin on Baidu's AI revenue could match that of the company's search business in the near term, due to stronger demand for its cloud and chips.
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He also said that investments in new GPU clusters hosting AI services could fully pay for themselves in two to three years, echoing rival Alibaba Group.
Baidu did not immediately respond to Benzinga's request for comment.
Baidu's Challenges in Intense AI Race
Baidu is facing intense competition from bigger Chinese AI rivals including Alibaba, Tencent Holdings, and ByteDance. The company's Ernie AI models have fallen behind open-weight competitors like Alibaba and Moonshot, while traditional advertising revenue is slowly declining amid users visiting AI chatbots like ByteDance's Doubao.
"Our cloud revenue will be at a good level of increasing — and at least faster than industry average in the next few quarters — and our capex spending will be lower than the market's expectation," said He. "So a smarter way, less spending, higher growth."
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Founder Robin Li is hoping that the competitive landscape will shift to AI agents and applications, sparking a race that could drive growth for the company's cloud business. Li is also depending on CFO He to lead the new financial endeavors. On Tuesday, the Beijing-based Baidu gained primary listing status on the Hong Kong Stock Exchange.
Plans for Baidu's AI Chip Unit, Other Assets in the Future
The CFO has also spearheaded plans for an independent listing of Baidu's AI chip unit Kunlunxin, a $5 billion share repurchase program and the company's first-ever dividend policy.
Besides the Kunlunxin IPO, the CFO noted that he is considering capital market options for several of Baidu's other assets, but declined to provide specifics.
Last month, Baidu reported second-quarter revenue of 31.3 billion yuan ($4.62 billion), down 4% year over year and missed the $4.65 billion analyst estimate. Several Wall Street analysts had revised their price targets on the stock following the company's earnings results.
Image via Shutterstock
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