As to the business models you just asked, I think it’s still at its very early stage, and it’s evolving. Though we have our preference, but we are pretty open and would like to take any effort to speed up the growth of generative AI. So in addition to providing AI computing infrastructure to our customers, we also consider charging customers for the usage of ERNIE and ERNIE Bot or using our AI applications such as [Indiscernible], Robin just mentioned. And also, we can charge our customers for retraining or operating their own models on our platform or we can deploy the foundation models to our customers’ private cloud on the project basis. So we expect the revenue generated from such new opportunity to be gradual, but we build the long-term potential is [Indiscernible].
So we’ll continue to invest in ERNIE and ERNIE bot to serve our customers well for the long-term. That’s it, Gary.
Operator: The next question comes from Lincoln Kong with Goldman Sachs. Please go ahead.
Lincoln Kong: Thank you, management for taking the question and congrats on the [Technical Difficulty] quarter. So my question is about the cloud business. So could management help us understand sort of the main reason for the revenue slowdown for cloud this quarter? And when do we expect the revenue to pick up accelerate again? When we’re looking ahead into the second-half of our entire year of 2023. How is the revenue growth trajectory expected to play out? And what factors will be driving that? And also on the profitability side, I’m also curious whether this profit breakeven on a non-GAAP operating level is sustainable? And what’s the current trend for the AI cloud profitability?
Dou Shen: Okay. Thank you for the question. I’ll take it. So cloud revenue grew up 5% year-over-year in Q2, and we continue to generate profit on the non-GAAP operating level. It means that our business is becoming healthier, you know, laying a solid foundation for sustainable growth in the future. The growth rate was mainly dragged by government-related projects, in which early took a longer time to recover after the pandemic. But many enterprise related products in the key verticals like manufacturing, utilities and internet service has demonstrated quite solid growth in Q2. As I just mentioned before, we see strong interest from existing and new customers in Generative AI, so while some of them directly leverage ERNIE or ERNIE Bot to enhance their products to improve their operational efficiency.
So some of them actually choose our AI infrastructure as the foundation for their models and applications though it may take a little while to see significant revenue contribution, but this opens us a very new space for our cloud business where we’re already in a leading position. So on the profit side, we believe we can keep generating operating profit from AI Cloud as we did in the previous quarters. So this indicates that actually our business is becoming increasingly healthy. But we are going to keep standardize our AI solutions, that can effectively address AI critical pinpoints and then replicate them from one project to another, which will further grow the margin and profit.
Operator: The next question comes from Kenneth Fong with Credit Suisse. Please go ahead.
Kenneth Fong: Hi, good evening management. Thank you for taking my questions and congrats on the solid quarter results. I have a question regarding the generative AI, regarding the recent introduced interim measures to regulate generative AI service by the government. Could you provide insight into whether this suggests an imminent authorization of the large language models. Additionally, do you have a projected time line for the rollout of the applications utilizing these models? Thank you.
Robin Li: Thank you for your question, Ken. We’re seeing the government continue to support for tech innovation, including AI and foundation models. I think a good sign of this is that the new guidelines and specifications that came out in mid-July about how to use generating AI technology and related services in China. This is new version, and this version went effective, I think, in August 15, compared to the previous version, this version you can probably tell, it’s more of co-innovation than regulation. We are still waiting for the green light for large-scale rollout of ERNIE Bot. For its use in the consumer-facing acts. But as I said before, the government has increasingly recognized ERNIE and ERNIE Bot, which we believe provides a good foundation for the event release of ERNIE Bot on a large scale.
Generative AI is pretty new and it’s understandable that people might have concerns about things like user privacy, IP protection, AI ethics, so there should be certain regulatory requirements in place. And Baidu, we have accumulated extensive experience in providing appropriate information to the vast amount of Internet users. And we are a leader in not only AI technology for commercial purposes, but also using the AI for good. In fact, we are working closely with the regulators and other organizations to push the divestment and a proper usage of generative AI. So we believe we are well positioned to benefit from this opportunity and contribute to this mega trend of generative AI in China. So while we don’t have an exact date for everything, but the trend is very promising, and we are quite optimistic of the future of a better regulatory environment.
Operator: The next question comes from Wei Xiong with UBS. Please go ahead.
Wei Xiong: Hey, good evening management. Thank you for taking my questions and congrats on the solid results. My question is also related to the foundation model. How can we assess Baidu’s foundation model’s performance comparing to other Chinese peers? And also related to that, when we think about industry-specific models versus foundation models, how the balance between these two will shape up the broader AI landscape in the future? And now we have more companies offering or focusing on models tailored to specific industries. So how does management perceive the landscape in terms of opportunities and competition. So what are our competitive edges? Thank you.
