百度 (BIDU) 2025 Q4 法說會逐字稿

Hello, and thank you for standing by for Baidu's fourth quarter and fiscal year 2025 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.

Hello, everyone, and welcome to Baidu's fourth quarter and fiscal year 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 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 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 filings 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.

Hello, everyone. In Q4, Baidu General business total revenue was RMB26.1 billion. Revenue from our core AI-powered business exceeded RMB11 billion, accounting for 43% of Baidu General business revenue. In AI Cloud Infra, subscription-based revenue from AI accelerator infrastructure grew 143% year over year, accelerating further from 128% in Q3. Meanwhile, Apollo Go maintained its robust momentum delivering 3.4 million fully driverless operational rides in the quarter. Total rides increased by over 200% year over year.2025 marked the third year of our journey in GenAi and the pivotal year, where AI became the new core of our portfolio. In 2025, we made substantial progress in scaling AI across our businesses, accelerating AI cloud growth, expanding robotaxi operations with improved unit economics and deepening AI integration into our mobile ecosystem.

Looking at our portfolio through an AI-native lens. Momentum across our core AI-powered businesses continue to build in 2025. AI Cloud Infra gained strong traction through its highly efficient and cost-effective training and inference capabilities. Revenue from AI Cloud Infra reached approximately RMB20 billion in 2025, up 34% year over year, outpacing industry growth.

Our AI application portfolio is among the most comprehensive in the industry, combining AI-empowered flagship products with AI native offerings that unlock entirely new use cases. For the full year 2025, revenue from AI applications exceeded RMB10 billion. Apollo Go achieved a significant landmark. We delivered over 10 million fully driverless operational rides in 2025 alone.

To date, we have provided a total of over 20 million rides to the public cumulatively. With our accelerated global expansion, Apollo Go's footprint has now reached 26 cities worldwide, reinforcing our leadership in autonomous ride-hailing services. Lastly, our AI native marketing services, including digital humans and agents, sustained strong growth with revenue up 110% year over year. Collectively, these results demonstrate AI's growing contribution to Baidu's value creation and our ability to translate AI capabilities into scalable commercial impact.

Now let me share the key highlights of the quarter, starting with our proprietary AI chips. This quarter, we announced the proposed spin-off and separate listing of Kunlunxin after more than a decade of steadfast investment in self-developed AI chips, we are proud to see the market increasingly recognize their value and proven performance. This milestone validates our long-term strategic vision and unlocks new opportunities for value creation.

Our AI chips are built on a proprietary architecture developed in-house from day one. They deliver stable, high-performance AI computing at scale with broad compatibility across different models and frameworks. This enables customers to deploy faster with lower integration costs.

What distinguishes our AI chips is a proven track record of large-scale real-world deployments with leading enterprises across diverse industries, spanning financial services, telecommunications, energy, and Internet sectors. Customers choose our chips for reliable performance, stable supply at scale, exceptional software compatibility, and strong efficiency especially in inference workloads.

Looking ahead, we see significant opportunities for both Baidu and Kunlunxin as AI infrastructure demand continues to accelerate. Next, I will turn to our AI Cloud Infrastructure. Our infrastructure is among the most advanced in China powered by a diverse mix of domestic and international high-performance computing resources. In Q4, subscription-based revenue from AI Accelerator Infrastructure grew 143% year over year, achieving triple-digit growth for the full year 2025.

Importantly, we saw a continued shift toward a more recurring, structurally healthier revenue model. The robust growth was fueled by rapidly expanding enterprise AI adoption. As customers integrate AI into core operations, the unique value of our full stack end-to-end AI architecture becomes increasingly evident by owning and optimizing across all four layers we achieved sustained advantages in stability and cost effectiveness, better addressing enterprises needs for AI deployment.

These advantages are translating into tangible market momentum fueling accelerated adoption of our AI cloud Infra. In Q4, we further broadened our client reach. Leading enterprise clients deepen their partnerships with us, driving increases in both usage and spending. We also saw healthy growth contribution from our mid-tier clients. We continue to strengthen our presence in diverse industries like Internet services, gaming, autonomous driving, and embodied AI, underscoring the versatility of our infrastructure.

Embodied AI, in particular, showed notable momentum. Revenue from this vertical doubled quarter over quarter in Q4, we onboarded a new wave of leading humanoid robotics companies cementing our position as the go-to cloud service provider for China's fast-growing embodied AI industry. Next, I'll cover our foundation model progress, which is a critical part of our AI capabilities.We remain fully committed to advancing our proprietary foundation model, ERNIE. Following the unveil of ERNIE 5.0 last quarter, we launched an updated version in January. As we advance ERNIE, we remain guided by a clear application-driven approach, making ERNIE strongest where it matters most for our portfolio.

To execute this approach more effectively, we recently restructured our model development organization into two dedicated teams. One team advances ERNIE’s state-of-the-art foundation model capabilities, maintaining our technological edge in this fast evolving space. The other team tailors models for specific business needs reducing costs, improving response latency, and optimizing model size and efficiency to ensure our technologies are not just cutting edge, but readily scalable across our businesses. Close collaboration between both teams ensures our technologies stay grounded in real-world needs while our applications benefit from continuous technological advancement.

Now turning to AI applications. This is where we believe AI's greatest value will ultimately reside. We are pioneering AI applications to solve complex real-world problems for both individuals and enterprises. Let me share our progress across multiple key areas, starting with AI-powered search. In Q4, we continued our AI search transformation, pursuing one of the most comprehensive and ambitious transformation globally.

Our focus remains on continuously improving the quality of AI search results while expanding what users can accomplish directly within search.

This quarter, for example, we introduced AI generated infographics into our search results, realizing text-based information where appropriate to make key insights immediately clear and digestible. We've also integrated more MCP capabilities across key scenarios, including e-commerce, healthcare, and local services. This enables actions such as shopping, booking, and healthcare consultation to be completed seamlessly within the search experience.

During the Chinese New Year, we moved quickly to embrace the latest AI agent innovation by integrating OpenClaw, a recently popular open-source agent framework directly into Baidu app with one click access, enabling our users to immediately benefit from cutting-edge agentic AI capabilities with an MAU of around $700 million. We provide easy access to OpenClaw for almost half of the Chinese population.

For ERNIE assistant, which is the AI chatbot integrated across our platform, we enhanced the user experience by introducing broader multimodal capabilities. This improvement have been well received by users driving ERNIE assistance’s MAU to exceed 200 million in December. We are also scaling our AI search API, adoption has accelerated in Q4 and with core volume up over 110% quarter over quarter.

With industry-leading authority, comprehensiveness and newly added multilingual capabilities our AI search API is now opening up broader possibilities for the international market. Next is digital humans, which represent a compelling form of AI application. They combine visual presence, voice, and real-time interaction to create more engaging and effective experiences.

In December 2025, the number of digital humans live streaming on our platform increased nearly 200% year over year. Beyond Baidu's own platforms, our digital human technology is expanding to empower the broader industry. Leading companies have partnered with us including Jingdong, Zuoyebang, and TikTok, validating the performance and efficiency of our digital humans.

On the technology front, we believe our hyper realistic digital human represents the next generation of capabilities. This quarter, production costs declined to roughly one-third of previous quarter levels, bringing industry leading cost performance and positioning this technology for broader adoption.

Another area of progress is Miaoda, our vibe coding platform, which enables users without coding experience to build applications through natural language, including WeChat mini programs, websites, mini games, and more.

Following the Q4 launch of Miaoda's international version, MeDo, users globally have created over 1 million AI applications as of early February, all without writing a single line of code. Looking ahead, we see meaningful opportunities to unlock even greater possibilities in AI application development. Lastly, we are using AI to solve operational problems and drive efficiency gains across the industries.

One example is Yijian, our advanced visual intelligence platform. Yijian enables enterprises to automate operational compliance and safety checks through intelligent visual analysis, well known brands across coffee chains, quick service restaurants, and fine dining are now using Yijian to ensure high standard operations across their thousands of locations.

Another example is FM agent, our self-evolving agent designed to solve complex operational challenges by autonomously reasoning across data, rules, and real-world constraints, it simulates countless scenarios to identifying best solutions. We've seen strong validation both internally through our own cloud resource optimization and externally across industries like manufacturing, energy, finance, and logistics, where efficiency improvement is a universal priority.

On the organizational front, we recently established the Personal Super Intelligence business group or PSIG. PSIG unified Baidu Wenku and Baidu Drive our two flagship consumer-facing AI applications. Even before this organizational integration, the two teams had already collaborated at the product level to deliver innovations like Free Canvas and GenFlow. This new group enables even deeper collaboration going forward as we accelerate the rollout of new applications to foster a robust growth curve, driven by application layer innovation.

Shifting to physical AI, Apollo Go represents our largest AI application in the physical world. 2025 was a year of accelerated scaling for Apollo Go where we reinforced our leadership in operational scale and achieved significant progress in global expansion. We continue to expand fully driverless operations at pace delivering 3.4 million fully driverless operational rides in Q4 with weekly rides peaking at over 300,000. Total rides grew by over 200% year over year. Cumulative rides provided to the public have surpassed 20 million as of February 2026, firmly cementing our position as the world's leading autonomous ride-hailing service provider.

We entered 2026 with momentum across key international markets. In the UK, we advanced our partnerships with Uber and Lyft moving forward with plans to pilot autonomous vehicles in London with testing expected to begin in the first half of 2026. This represents an important step in Apollo Go international expansion, extending our right-hand drive robotaxi capabilities from Hong Kong to another strategically important market. In Switzerland, we initiated testing in St. Gallen following our market entry last quarter.

In the Middle East, we achieved progress in both Abu Dhabi and Dubai. In Abu Dhabi, we launched a fully autonomous ride hailing services on Yas Island in January with Auto Go. In Dubai, we secured the city's first fully driverless testing permit from the road and transport authority. We also announced the next phase of our global partnership with Uber to bring our fully autonomous ride hailing services to Dubai via the Uber platform. These are critical milestones that accelerate our progress across the Emirates.

In Asia, we entered a new market, South Korea. Starting with the Seoul Metropolitan area, further expanding our presence across the Asian region.

Meanwhile, in Hong Kong, we expanded our open road testing into Tsuen Wan and initiated cross-district testing between Airport Island and Tung Chung, bringing us closer to commercial readiness there. As of February 2026, Apollo Go's global footprint reached 26 cities, demonstrating the scalability of our autonomous driving technology across diverse regulatory and operational environments

Looking ahead, we are focused on accelerating expansion to more cities globally while continuously improving operational excellence and unit economics. Our growing experience across diverse markets gives us confidence in our ability to scale further and we expect more cities to achieve positive unit economics over time.

Underpinning this expansion, safety remains our top priority and the foundation of everything we do. Our autonomous ride hailing service. It's the safest globally with our fully driverless vehicles, experience and airbag deployment accident, only once every over 12 million kilometers. As we scale, we will continue strengthening safety standards and ensure sustained reliability.

Ultimately, our mission is to harness AI to transform mobility, making it fundamentally safer, more affordable and more comfortable and improving how billions of people move, work and live. In summary, with AI now firmly integrated across our portfolio, we believe we are well positioned to deliver sustainable value and shape the next phase of the AI era.

With that, let me turn the call over to Haijian He to go through the financial results.

Thank you, Robin, and hello, everyone. We are making progress on our key focus areas. Over the recent quarters, we've enhanced disclosure for greater transparency and driven operational efficiency improvements. This quarter, we took a significant step to unlock value from our strategic AI chip investments through the proposed Kunlunxin spin-off and separate listing a milestone we are particularly pleased with.

We've also announced a new USD5 billion share repurchase program and adopted a dividend policy for the first time. Additionally, we've sharpened our strategic focus on high potential AI applications by forming a PSIG business group, integrating Baidu Wenku and Baidu Drive. These actions reflect our consistent execution and ongoing focus on creating shareholder value.

Looking at Q4 results, we saw positive momentum. Baidu General business total revenue increased 6% quarter over quarter with non-GAAP operating profit, expanding 28% sequentially to RMB2.8 billion, Operating cash flow for Baidu turned positive in Q3 and remained positive in Q4, generating a combined RMB3.9 billion across both quarters.

In terms of our core AI-powered business, in Q4, revenue exceeded RMB11 billion, accounting for 43% of Baidu general business revenue. We are seeing strong momentum across several areas. AI Cloud Infra continues to gain market traction and outpace industry average. Our AI application portfolio is expanding rapidly with strong enterprise adoption. Combining AI Cloud Infra and AI applications, our AI Cloud revenue reached RMB30 billion for the full year 2025. Meanwhile, Apollo Go reinforces its position as a global leader in autonomous ride-hailing with one of the industry's largest footprints and the strongest growth momentum. And AI native marketing services is growing fast. These results demonstrate our progress, and we believe this is just the beginning. We have a robust pipeline of initiatives ahead, and we are confident in our ability to create lasting shareholder value. Now let me walk through the details of our fourth quarter and full year 2025 financial results.

Total revenues in Q4 were RMB32.7 billion, increasing 5% quarter over quarter, primarily due to an increase in Baidu core AI-powered business. Total revenues for the full year 2025 were RMB129.1 billion, decreasing 3% year over year. primarily due to a decrease in legacy business, partially offset by an increase in Baidu core AI-powered business.

Cost of revenues was RMB18.3 billion in Q4, which remained flat quarter over quarter. Cost of revenues was RMB72.4 billion in 2025, increasing 10% year over year, primarily due to an increase in costs related to Baidu core AI-powered business.

Operating expenses were RMB13.0 billion in Q4, increasing 10% quarter over quarter, primarily due to an increase in expected credit losses and a onetime employee severance costs to improve efficiency. Operating expenses were RMB46.3 billion in 2025, increasing 1% year over year.

Impairment of long-lived assets was RMB16.2 billion in 2025, attributable to an impairment loss of core asset group. Operating income was RMB1.5 billion in Q4, and operating margin was 5%. Operating loss was RMB5.8 billion in 2025 and operating loss margin was 5%. Excluding impairment of long-lived assets, operating income was RMB10.4 billion in 2025.

Non-GAAP operating income was RMB3.0 billion in Q4. and non-GAAP operating margin was 9%. Non-GAAP operating income was RMB15.0 billion in 2025, and non-GAAP operating margin was 12%. In Q4, total other income net was RMB1.2 billion compared to RMB1.9 billion last quarter. Income tax expense was RMB1.0 billion compared to income tax benefit of RMB1.8 billion of the quarter.

In 2025, total other income net was RMB12.5 billion compared to RMB7.4 billion in the same period last year. Income tax expense was RMB1.3 billion compared to RMB4.4 billion in the same period last year. In Q4, net income attributable to Baidu was RMB1.8 billion, net margin for Baidu was 5% and diluted earnings per ADS was RMB3.71. Non-GAAP net income attributable to Baidu was RMB3.9 billion, non-GAAP net margin for Baidu was 12%, and non-GAAP diluted earnings per ADS was RMB10.62.

In 2025, net income attributable to Baidu was RMB5.6 billion, net margin for Baidu was 4% and diluted earnings per ADS was RMB11.78, excluding the impact of impairment of long-lived assets. Net income attributable to Baidu was RMB19.4 billion. Non-GAAP net income attributable to Baidu was RMB18.9 billion. Non-GAAP net margin for Baidu was 15%, and non-GAAP diluted earnings per ADS was RMB53.41.

We define total cash and investments as cash, cash equivalents, restricted cash short-term investments, net long-term time deposits and held to mature the investments, and adjusted long-term investments.

As of December 31, 2025, Total cash and investments were RMB294.1 billion. In Q4, operating cash flow was RMB2.6 billion. In 2025, operating cash flow was negative RMB3.0 billion, which remained positive for the past two consecutive quarters. Baidu General business had approximately 29,000 employees as of December 31, 2025.

With that, operator, let's now open the call to questions.

(Operator Instructions) Alicia Yap, Citigroup.

Good evening, Robin, Henry, and Juan. I have a question related to the model. So we have noticed very active model iteration recently. How does management view the current competitive landscape? And then Baidu recently also released updated ERNIE 5.0 and also make some organizational adjustments. So could management discuss the strategic rationale behind these moves and also how the company thinks about the relationship between the model evolution and also the application in your overall AI strategy.

Alicia, this is Robin. We did see very active model releases recently. The market is highly competitive and moving fast. But amid all the competition, we've always believed that applications matter more than models because models ultimately create value through applications. That is why we always take an application-driven approach with ERNIE.

Model improvements are guided by the most valuable and promising use cases. And this has been consistent across every iteration of ERNIE. As I just mentioned, recently, we released the updated version of ERNIE 5.0. At the same time, we've been proactively making organizational changes to stay agile in the fast-moving market. We restructured our model team into different focus areas. One team continues pushing frontier capabilities at the foundation model level to maintain technical leadership.

ERNIE has clear strength in several key areas, such as creative writing, omni-model understanding and instruction following. We are confident we will keep improving ERNIE's performance across key application scenarios. Meanwhile, this high-value application scenarios continuously provide ERNIE with real data and feedback, driving model iteration and making ERNIE better and better. The other team works much closer to specific business needs and application scenarios focused on reducing costs, improving speed and increasing efficiency or leveraging the best available models for specific use cases, all aimed at helping businesses better leverage AI based on their actual needs.

We recognize that model capabilities are broad and application scenarios can be highly diverse. And no single model can lead everywhere. So we fully leverage ERNIE where it has clear strengths, and we are open to using other models where they are better suited. The goal is always to achieve the best application outcomes.

So to sum up, we will continue with our application-driven approach using real application needs to continuously iterate and optimize our models while also keep refining applications themselves to deliver better and better results, ultimately, creating tangible value for users and businesses.

Alex Yao, JPMorgan.

I have one question about the Baidu AI Cloud. We noticed that Baidu AI Cloud revenue delivered strong growth for the full year 2025. Can you elaborate and help us understand the key growth driver behind the robust revenue growth number? And how should we think about the AI cloud revenue growth outlook in 2026?

Thank you, Alex. This is Dou. For 2025, our AI cloud revenue, which includes revenue from AI Cloud Infra and AI applications, reached RMB30 billion. Revenue from AI Cloud Infra grew 34% year over year, outpacing the broader market. Within AI Cloud Infra, subscription-based revenue from AI accelerator, the infrastructure grew 143% year over year in Q4 and has become the primary growth driver, demonstrating strong momentum.

We remain highly confident in sustaining strong growth momentum in 2026. Underpinning our growth is the accelerating enterprise AI adoption. We are seeing a demand growth in both training and inference workloads, and we expect the demand for AI computing to keep expanding, creating significant opportunities ahead.

Baidu's full stack end-to-end AI architecture is a key differentiator in capturing such opportunity. Under the foundation of this architecture is our industry-leading AI infrastructure, which achieves an excellent balance across performance, efficiency, and cost. Our AI infra is powered by a diverse mix of chips. We have built deep expertise in heterogeneous computing and unified scheduling, which enables us to efficiently manage computing resources from different chip vendors and achieve industry-leading performance and efficiency.

In the meanwhile, our proprietary chip capabilities provide a significant competitive advantage. As Robin just mentioned, our self-developed Kunlunxin AI chips deliver strong performance, compatibility, and cost efficiency. They have been deployed at scale with leading enterprise customers across financial services, telecom, energy, and Internet sectors and the market feedback has been very positive. Kunlunxin serves as a key component of our own cloud platforms computing power, playing an important role in our overall AI infra. As AI demand grows, the advantages of our AI infra will become increasingly evident.

Beyond AI infra we just discussed, we are continuously evolving our best-in-class agent infra to help enterprises rapidly build and deploy AI agents at scale. We keep bringing in the latest, most cutting-edge capabilities. For example, we recently launched simplified OpenClaw deployment on Baidu AI Cloud, which streamlines the process so that even users with no coding experience can quickly deploy their own OpenClaw agents.

Then looking into 2026, as enterprise AI deployments deepen further, we are confident that our cloud business will continue to grow faster than the industry. We expect AI Cloud Infra to maintain strong momentum with AI accelerator infrastructure continuing to serve as a core driver, propelling our overall cloud business toward a more sustainable and high-quality growth mode.

Lincoln Kong, GS.

So actually, this quarter, we see this AI-powered business continue to deliver a pretty solid growth. So how does management view the current stage development for those AI-powered business? So when should we expect this share to exceed, say, 50% of the Baidu General Business? And what will be the key driver going forward for the AI-powered business?

Okay. Let me start by sharing how we think about our core AI-powered business. This includes AI cloud infrastructure, AI applications like Baidu Wenku and Baidu Drive and our robotaxi business, Apollo Go, and our AI-native marketing services, including agents and digital humans. AI-powered business organizes our business according to the nature of our products and services, where AI is empowering each to create meaningful customer value and business impact.

In Q4, AI-powered business revenue exceeded RMB11 billion. That's like 43% of Baidu General Business revenue. This percentage has been rapidly increasing over the recent quarters, and AI-powered business is becoming the core driver of our overall revenue growth. Each of our AI-powered businesses has clear strategic positioning and competitive advantage.

First, AI Cloud Infra. We see enterprises scale AI from pilots to production and our full stack end-to-end AI capabilities enable strong performance at competitive cost. AI Cloud Infra revenue grew faster than the industry average in 2025 with subscription-based AI accelerator infrastructure revenue accelerating sharply in Q4.

And second, it's AI applications. We've always believed AI's ultimate value will settle at the application layer, and we built one of China's most comprehensive AI application portfolios. As AI capabilities continue to evolve and new use cases emerge, we see significant expansion potential in this business.

And then third is the robotaxi business, Apollo Go. Apollo Go is scaling rapidly while expanding internationally. We lead globally in operating scale, safety record, efficiency, and cost structure. And the fourth is AI native marketing services like agents and digital humans. They improved engagement and conversion, and we're seeing strong market adoption with great potential ahead.

So looking to the mid- to long term, as enterprise AI deployment deepens, monetization capabilities of AI applications improve and physical AI applications such as autonomous driving continue to expand, and we're confident in the growth trajectory of our AI-powered business.

This AI-powered business aren't isolated. They continuously reinforce each other through our full stack capabilities. And based on current visibility, we believe our core AI-powered business will become the majority of Baidu General Business in the foreseeable future.

Wei Xiong.

Could management elaborate on the framework that you use to allocate capital, including shareholder returns, organic investment and potential strategic opportunities? And also, could management comment on the long-term strategic positioning of Kunlunxin within the Baidu Group?

This is Henry. I believe many of you may have noticed our recent series of initiatives. These include enhancing our disclosures, improving operational efficiency, optimizing our organizational structure, advancing the proposed Kunlunxin spin-off and separate listing and also announcing our new share repurchase program and the first dividend policy. And recently, we're also reforming the PSIG, the Personal Super Intelligent Group business group, integrating Baidu Wenku and Baidu Drive. Altogether, these moves reflect a coherent execution framework, demonstrating our improved management execution and ongoing commitment to creating shareholder value.

I think take our new share repurchase program as one example. We are very focused on providing clear and sustainable returns to shareholders. So in the recent, in February, the Board has approved a new USD5 billion share repurchase program, which we plan to execute on a regular basis in a very disciplined and transparent manner. We are also introducing Baidu first dividend policy. We believe the introduction of the policy alongside with a sizable buyback program will further strengthen our shareholder return profile and attract a broader range of investors, thereby further diversifying our investor base.

As we mentioned, the proposed spin-off and a separate listing of Kunlunxin is another good example. We are making very good progress of the listing process. Kunlunxin is a result of over a decade of investment and represents a critical infrastructure component of our full-stack AI capabilities. We believe this spin-off and a separate listing will receive strong market recognition and unlock significant value for Baidu as a group. So looking ahead, we firmly believe the company has tremendous value, and we will continue unlocking it through various initiatives.

We remain committed to deliver sustainable and consistent returns to our shareholders. So more initiatives will follow in due course. So stay tuned with us. Thank you.

Gary Yu, Morgan Stanley.

My question is on robotaxi. First of all, congratulations on the robotaxi expansion into more countries, especially to my hometown Hong Kong. Can you share your overseas strategy in 2026? And what are your key competitive advantages there? And also with Waymo recently valued at $126 billion, how is management thinking about unlocking Apollo Go's value? Would you consider a spin-off?

Gary, as I mentioned last quarter, I believe robotaxi has reached a tipping point globally. Through continuous delivery of safe autonomous drives and positive word of mouth, we're seeing more countries and regions creating supportive environment for robotaxi operations. We believe the industry will accelerate in 2026. Apollo Go is a clear global leader in this space. We've completed over 20 million cumulative rides.

At peak period, our weekly fully driverless rides exceeded 300,000. To date, Apollo Go fleets have accumulated more than 300 million autonomous kilometers, including over 190 million fully driverless autonomous kilometers with an outstanding safety record. And we continue advancing our industry-leading technology to make rides safer and more comfortable. We're also accelerating international expansion to capture global opportunities. Today, our global footprint spans 26 cities across different continents, covering both left-hand and right-hand drive robotaxi market.

Our autonomous driving system works reliably anywhere across different traffic patterns and different urban environments. Notably, very few players have entered right-hand drive robotaxi market, while we've already established a presence and are making rapid progress. Moreover, we have a fundamental cost advantage. RT6 is the world's first purpose-built production vehicle designed from the ground up for Level 4 autonomous driving. At under USD30,000 per vehicle, RT6 offers the industry's best cost structure and combined with our leading operational efficiency, this enables us to achieve the lowest cost per mile globally while maintaining superior safety.

We were the first to achieve UE breakeven in Wuhan in late 2024. And as you know, most major cities have higher ride-hailing prices than Wuhan. To accelerate global expansion, we are leveraging diverse strategic partnerships. For example, we are collaborating with Uber and Lyft in London to launch this year and in Dubai with Uber also. These partnerships drive faster, more efficient market expansion.

We see Apollo Go as a strategic growth engine with significant long-term potential. Many major cities are short of human drivers. More supply via robotaxi service not only offer safer rides, but also stimulate ride-hailing demand, therefore, add tax revenue to the government. It also releases precious land from parking spaces and provide additional monetization opportunities for these real estate assets.

Our focus is on three areas: first, aggressively scale up safe and comfortable operations by deploying more vehicles. Second, continuously improving unit economics with the goal of achieving UE breakeven in more cities this year. Third, expanding with flexible business models, both domestically and internationally.

As for strategic options, we will remain flexible and evaluate the best path that maximizes long-term shareholder returns. And of course, our focus is always on execution and sustainable growth. We believe the autonomous ride-hailing sector as a whole remains undervalued.

Over time, we expect valuations across the sector to better reflect the transformative potential of this technology, which creates meaningful upside opportunity for Apollo Go.

Miranda Lang, Bank of America Securities.

Wish you a happy year of hope. So my question is about competition. We have seen that the consumer-facing AI competition is intensifying recently, especially during the Chinese New Year. How do you assess the current competitive dynamics? Where do you see Baidu's AI2C products such as the ERNIE Assistant, differentiation and also positioning in this market? And lastly, how to think about the path to monetization?

This is Julius. The AI2C product market is highly competitive. We have seen some competitors adopt very aggressive market strategies to rapidly scale their user base in the past Chinese New Year. However, as technology and products evolve rapidly, we still believe our core strategy should remain grounded in actual user needs. We are highly committed to continuously enhancing our existing products and services capabilities through AI innovations to better serve our users.

In our flagship consumer-facing products, like Baidu app today, we have built a ERNIE Assistant to strengthen our service capabilities across the entire user journey, from information seeking to providing solutions and completing tasks. On information seeking, we have significantly enhanced our users assess information through ERNIE Assistant. For example, we have improved the answer accuracy and relevance through RAG, and ERNIE Assistant maintains low error rates with minimal hallucinations, delivering the highly trustworthy content to users. We have also integrated the multilingual AI Search API capabilities that can enable the users to assess the broad information sources during conversations, improving the information richness and usability. And especially for scenarios like travel planning, which is quite helpful.

And in December, ERNIE Assistant's MAU surpassed 200 million and with conversation rounds and engagements growing quite fast. For past complexion, we are integrating MCP agents to connect users with tools and real-word services. This quarter alone, we're adding nearly 100 service capabilities, especially in healthcare, travel, education and e-commerce. For example, through the Baidu Health MCP integrated into ERNIE Assistant, users can assess a range of healthcare capabilities, spending online to offline services. In e-commerce, our MCP module saw a very strong GMV growth quarter-over-quarter.

Meanwhile, we are taking a different approach with the stand-alone ERNIE app, our positioning as a platform for innovation and experimentation. Our earlier multi-model AI features have gained good traction with the young audiences. And more recently, we have added AI capabilities focused on the workplace productivity, tapping into ERNIE's ability to handle the complex tasks in professional settings. We are seeing the promising early signals in these productivity scenarios. We take a measured approach to monetize the AI tools and products, prioritizing the product excellence and the user experiences.

Monetization will follow naturally as the products mature. Thank you for your question.

Ellie Jiang, Macquarie.

My question is mostly focusing on the AI investment. How do you think about the AI-related CapEx over the next 12 to 24 months? How should we think about the return profile of these AI investments and the expected impact on the ROIC over time? Broadly speaking, where do you see further efficiency opportunities to support margin and cash flow improvements in the future?

This is Henry. First of all, on CapEx and AI investment, since we have launched early in March of 2023, we have invested over RMB100 billion in AI. Going forward, we will continue to maintain this level of investment density. Second, we are very conscious about returns and understand investors' focus on the return on capital invested. That's why we have work to improve our financial performance, and we have delivered good results on key metrics over the past few quarters.

For example, in Q4, gross profit for Baidu grew double digits sequentially and non-GAAP operating income for Baidu increase about 35% quarter-over-quarter. We also performed better on the margin profile, both on gross margin and operating margin increasing sequentially. Importantly, operating cash flow for Baidu turned positive in Q3 and remained positive in Q4. With the second half, operating cash flow reached nearly RMB4 billion. Free cash flow for Baidu also turned positive in Q4.

Thirdly, we have also found and explored alternate ways of supporting our financial needs including, for example, operational and financing leasing as well as we have access to the low-cost interest banking borrowing. For example, some of these bank borrowings and the leasing facilities carry the interest rates as low as below 2%. Though these approaches help us maintain a healthy long-term financing structure while sustaining our AI investments and support our business growth.

So in summary, we will continue to maintain our AI investment density, while balancing investor focus on profitability and return timelines. We believe that even with significant AI investment, our operating cash flow will remain positive going forward as well. Thank you.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.