Baidu Inc. forecast quarterly sales that missed estimates as China’s biggest search-engine provider expands into delivery services and movie ticketing amid a weakening domestic economy. Shares fell in late U.S. trading.
Third-quarter revenue will be 18.17 billion yuan ($2.93 billion) to 18.58 billion yuan, the company said, missing analysts’ estimates for 18.79 billion yuan. Earnings for the quarter ended June 30 also missed estimates.
Baidu will boost investment in services such as digital wallets and video streaming as it competes with Alibaba Group Holding Ltd. and Tencent Holdings Ltd. for the attentions of China’s 668 million Internet users. Baidu founder Robin Li also is pushing a catalog of new products to engage smartphone users and attract more advertisers.
“Baidu’s investing in new business areas such as O2O and online video, which are more crowded and competitive spaces, and which have much lower margins than Baidu’s core search business,” Michelle Ma, a Hong Kong-based analyst at Bloomberg Intelligence, said, referring to online-to-offline.
China’s economy is on course for its slowest full-year expansion in 25 years. Baidu earns virtually all of its revenue in China.
Baidu shares fell as much as 9.5 percent to $178.86 after U.S. markets closed, and were down 6.3 percent at $185.20 during the Asian day.
Baidu is spending more to diversify into mobile and online-to-offline businesses such as hardware, the Nuomi group-buying service and mobile wallets. Those investments pit it against other members of China’s so-called BAT triumvirate -- Alibaba and Tencent.
“This is a whole new level of competition, that BAT all want to dominate the future ecosystems,” Guo Chenggang, an analyst at brokerage ITG in Hong Kong, said in an e-mail.
The company’s second-quarter net income climbed 3.3 percent to 3.66 billion yuan, missing the 3.9 billion-yuan average of analyst estimates.
Second-quarter revenue rose 38 percent to 16.6 billion yuan, compared with the company’s April forecast of 16.365 billion yuan to 16.75 billion yuan. Mobile accounted for 50 percent of sales, in line with the prior quarter, Baidu said.
Active users of its mobile wallet climbed by 9 million to reach 35 million in June, Li, the chief executive officer, said in a conference call Tuesday. Revenue for its IQiyi service climbed to 1 billion yuan during the second quarter, he said.
Baidu is also said to be in talks to buy a new stake in the local unit of car-booking provider Uber Technologies Inc., adding to its investment in the company’s global operations. Baidu last month sold $1.25 billion of debt to fund Chinese operations and said it will invest 20 billion yuan over three years into Nuomi.