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What’s Come of Baidu’s Research and Development Spending

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Dec. 14 2018, Updated 9:00 a.m. ET

The race for AI patents

At The Wall Street Journal‘s D.Live technology conference last year, Baidu (BIDU) CEO Robin Li said that the company spends ~15% of its annual revenue on research and development, with almost the entire budget going to AI initiatives. And what has come out of that? The top AI patent applicant in China. Forbes, citing the Patent Protection Association of China, reported that Baidu has filed 2,368 AI patent applications. In comparison, Microsoft (MSFT) has filed 1,648 AI patent applications, Tencent (TCEHY) has filed 1,168, and Samsung (SSNLF) has filed 1,047.

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Baidu’s AI work spans several fields

Baidu’s AI initiatives cover several areas, including speech recognition and autonomous driving. Baidu has built a digital voice assistant, DuerOS, which has been adopted in more than 100 million devices, including smart speakers. The company has also built a self-driving shuttle bus, Apolong, which it planned to start commercializing in China this year and export to Japan next year. Additionally, Baidu has partnered with Ford Motor (F) and Volvo on self-driving programs, including a ride-hailing service expected to launch in China next year.

Revenue rose 27% in the most recent quarter

Baidu’s revenue rose to $4.1 billion in the third quarter, representing a 27% YoY (year-over-year) increase. Meanwhile, Google parent Alphabet (GOOGL) and Yandex (YNDX) grew their revenue by 21% and 39% YoY, respectively. Baidu, Alphabet, and Yandex are now primarily funded by advertising money, but they are working to diversify their revenue streams.

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