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Market Research Report

Webscale Playbook - Baidu: R&D Binge to Continue as Baidu Banks on Long-Term Bets in AI and Autonomous Vehicles for Competitive Edge

Published by MTN Consulting, LLC Product code 756468
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Webscale Playbook - Baidu: R&D Binge to Continue as Baidu Banks on Long-Term Bets in AI and Autonomous Vehicles for Competitive Edge
Published: December 14, 2018 Content info:
Description

Baidu, often referred to as “China's Google”, is embarking on a new journey to pursue growth outside its core search and advertising business. That's vital as the online advertising business is maturing, yet Baidu continues to rely heavily on it (80% of 2017 revenues). Adding to the woes is the increased rivalry from local peers, Alibaba and Tencent, in the core advertising and online content segments, tied with macro-economic risks arising from rigid ad-related policies/regulations and US-China trade war. These factors have thumped Baidu's 4Q18 topline guidance. Fortunately, Baidu realizes its position, and is already channeling greater focus on newer sustainable markets that include AI (DuerOS-powered smart devices, smart cities, blockchain) and autonomous vehicles (“Apollo” program, driverless vehicles). The company is also on a non-core divestiture spree aimed at freeing up money and resources for these newer markets. As Baidu builds its portfolio of new markets, the company's R&D outlays have held steady at around 15% of revenues since 2015.

Below are a few highlights from the report:

  • Baidu has been spending more on R&D than capex, as it ramps up its pursuits in AI and connected cars. Capex spend, currently 7% of revenues, is likely to remain well below 10% as Baidu prioritizes research activities and relies on partners for much of its cloud infra
  • Baidu's open-source platform for autonomous vehicles, Apollo, is key to its long-term success as it builds out an extensive web of partners for the platform; that includes more than 100 auto and tech firms, such as Ford, Microsoft, NVIDIA, Intel, and Bosch.
  • Baidu is also developing its own AI chip (Kunlun) and building cloud capabilities to support its AI-driven businesses, particularly autonomous vehicles
Table of Contents
Product Code: GNI-14122018-1

Table of Contents

  • Latest earnings takeaways
  • Revenue analysis
  • Capex & R&D: Spend analysis
  • Baidu's project “Apollo”
  • Baidu's funding in AV startups
  • Other key spending avenues
  • Key technology relationships
  • Baidu's network strategy
  • APPENDIX 1
  • APPENDIX 2

List of Figures & Charts

  • Baidu Revenues: 2Q17 - 3Q18
  • YoY Growth Rate (CAPEX vs OPEX): 2Q17 - 3Q18
  • Profitability Margins: 2Q17 - 3Q18
  • Revenues (Annualized & Single Quarter), & YoY Growth
  • FY2017 Revenue Split (MTN Consulting estimates*)
  • Annualized Capex and R&D, % Revenues
  • Baidu's annualized share of WNO network & IT capex
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