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Baidu Warns of Challenges for Online Ad Business – The Wall Street Journal

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Robin Li, co-founder and chief executive of Baidu, speaks at the company’s conference in Beijing on Nov. 1, 2018.

Photo:

Giulia Marchi/Bloomberg News

Updated May 16, 2019 5:47 p.m. ET

Baidu
Inc.

BIDU 0.79%

warned of fallout from the slowing Chinese economy and swung to a loss in the latest period as spending rose.

The Beijing-based internet-search company expects its online-marketing business, which sells advertising to a range of companies, to face a challenging environment in the near term despite Chinese government policies to support smaller enterprises, Baidu finance chief Herman Yu said in prepared remarks Thursday.

In the first quarter, that business reported revenue growth of 3% compared with last year. Gains from retail and business-service customers were offset by weaker performance from health care, online-gaming and financial services, the company said.

The online-marketing business accounted for 73% of the company’s revenue in the first quarter.

Overall, Baidu reported revenue of 24.12 billion yuan ($3.59 billion) in the first quarter, slightly less than what analysts expected, according to Refinitiv, but in line with its prior forecast.

Total operating costs jumped 53% to 25.06 billion yuan ($3.73 billion), as the company spent on content for its video-streaming service, iQiyi Inc., marketing related to the Lunar New Year in February and personnel.

Baidu reported a first-quarter net loss of 327 million yuan ($49 million). After adjustments, Baidu reported a profit of 2.77 yuan (41 cents) per American depositary receipt, less than what analysts expected.

Baidu’s ADRs fell 9.1% in after-hours trading Thursday. The company said its board authorized a new, $1 billion share-repurchase program, effective until July 1, 2020.

The company forecast second-quarter revenue between 25.1 billion yuan and 26.6 billion yuan ($3.74 billion and $3.96 billion), representing a drop of 3% on the low end and a 2% increase on the high end of that range. The weaker outlook is a shift from recent years, when Baidu reported robust revenue gains.

With the Chinese government targeting gross-domestic-product growth to slow to 6% to 6.5% this year and the country in the midst of a trade fight with the U.S., investors have been scrutinizing how China’s large technology companies are faring.

Baidu competitors

Tencent Holdings
Ltd.

and

Alibaba Group Holding
Ltd.

on Wednesday reported strong results, despite the slower growth in China.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

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