Ellie Jiang

Ellie Jiang from Macquarie inquired about Baidu's AI-related CapEx over the next 12-24 months, the return profile of these AI investments, expected impact on ROIC, and opportunities for efficiency to support future margin and cash flow improvements.

Answer

Baidu CFO Henry He stated that Baidu has invested over RMB 100 billion in AI since March 2023 and will maintain this investment density. He highlighted improved financial performance in Q4, including double-digit sequential gross profit growth, 35% sequential non-GAAP operating income increase, and positive operating cash flow in Q3 and Q4 (nearly CNY 4 billion in H2). He also mentioned alternative financing methods like operational/financing leasing and low-cost bank borrowings (below 2% interest) to maintain a healthy long-term financing structure. He affirmed that operating cash flow would remain positive despite significant AI investment.

Ellie Jiang asked about Baidu's AI-related CapEx over the next 12-24 months, the return profile of these AI investments, their expected impact on ROIC, and opportunities for efficiency to support future margin and cash flow improvements.

Answer

Henry He, CFO of Baidu, stated that Baidu has invested over RMB 100 billion in AI since March 2023 and plans to maintain this investment density. He highlighted improved financial performance, including double-digit sequential gross profit growth and a 35% quarter-over-quarter increase in non-GAAP operating income in Q4. He noted that operating cash flow turned positive in Q3 and remained positive in Q4, with free cash flow also positive in Q4, and mentioned exploring alternative financing methods like low-cost leasing and bank borrowings to support investments while balancing profitability.

Ellie Jiang asked about the outlook for operating expenditure for the coming fourth quarter and for 2026, given that Q3 operating expenditure was slightly lower than expected.

Answer

Cindy Wang, Chief Financial Officer, explained that Trip.com Group maintains disciplined investment in sales and marketing, adjusting spending based on market maturity and channel characteristics. She noted that personnel expenses are increasing due to global expansion, while Q-o-Q OpEx increases reflect seasonal factors. For the global holiday season, marketing investments will step up, potentially raising the marketing ratio sequentially, with a long-term focus on improving efficiency through direct mobile traffic, cross-selling, and customer loyalty.

Ellie Jiang from Macquarie asked about the outlook for operating expenditure for the fourth quarter and 2026, considering that Q3 operating expenditure came in slightly lower than expectations.

Answer

CFO Cindy Wang outlined a disciplined approach to investment, adjusting sales and marketing based on market maturity and channel characteristics. She mentioned expanding global presence and maintaining high hiring standards for marginal cost efficiency. The quarter-over-quarter increase in operating expenses reflected seasonal factors in China, with marketing ratio potentially rising sequentially in Q4 due to global holidays. Long-term, the focus remains on improving efficiency through direct mobile traffic growth, cross-selling, and strengthening customer loyalty.

Ellie Jiang from Macquarie asked about the current domestic competitive landscape, changes in competition from rivals' membership programs, and the impact on Trip.com's business.

Answer

CEO Jane Sun characterized the domestic market competition as rationalized, with Trip.com focusing on its core strengths. She emphasized the company's strong loyalty program for consumers and its ability to help partners differentiate customers. Sun highlighted that 80% of revenue comes from existing customers, underscoring the success of their membership strategy.

Ellie Jiang of Macquarie inquired about the opportunities in the China inbound travel market, the company's strategy to capture this market, and the revenue contribution of inbound travel to the Trip.com brand.

Answer

CFO Xiaofan Wang identified inbound travel as a significant, RMB 1 trillion opportunity, noting that China is actively addressing entry barriers for foreign visitors. She stated that Trip.com is well-positioned with its one-stop app, with inbound bookings growing about 200% year-over-year and now contributing over 25% to the Trip.com brand's overall business.

Ellie Jiang from Macquarie Group inquired about TME's long-term positioning, the expected evolution of its revenue mix, and its ultimate role in the entertainment value chain.

Answer

A moderator for management reiterated the 'one body, two wings' strategy (platform + content). They expect online music (subscriptions and ads) to remain the core revenue and profit driver, with advertising projected to grow faster than subscriptions. While social entertainment has stabilized, new initiatives like offline performances, the fan economy, long-form audio, and international expansion are seen as future growth accelerators.

Ellie Jiang from Macquarie Group asked about Tencent Music's long-term positioning, including the expected evolution of its revenue mix and its role in the broader entertainment value chain.

Answer

Management reiterated their 'one body, two wings' strategy (platform plus content). They stated that online music will remain the core source of revenue and profit, with advertising revenue expected to grow even faster. While social entertainment revenue has stabilized, new drivers like offline performances and the fan economy will contribute to growth. The focus remains on the existing model while exploring new areas like long-form audio and international expansion.

Ellie Jiang of Macquarie inquired about the progress of the SVIP program, asking for key operating metrics, user retention data, and the long-term potential for ARPPU expansion.

Answer

An executive expressed satisfaction with SVIP's progress, highlighting that both its penetration ratio and ARPPU show strong growth momentum. They confirmed that SVIP is a primary driver of overall ARPPU growth and that both paying users and ARPPU saw sequential growth in the quarter. However, specific retention metrics were not provided.

Ellie Jiang asked about the impact of macro softness on the cloud business mix and questioned the key drivers behind the GMV reacceleration for Taobao and Tmall, as well as trends in product return rates.

Answer

CEO Eddie Wu countered the idea of soft demand, stating enterprise AI budgets are significantly higher this year. He attributed GMV growth to strategic investments in user experience and supply chain optimization. CFO Toby Xu added that while return rates are an industry trend, Alibaba's is slightly below average and a good return experience is improving customer retention and Net Promoter Scores.