Baidu Q2 results beat estimates, but overshadowed by iQIYI probe

The Logo of Baidu in Beijing. /VCG

Chinese search engine giant Baidu Inc posted quarterly revenue a notch ahead of estimates, but its shares slid in extended trade after its streaming service iQIYI said it was being probed by the U.S. Securities and Exchange Commission.

Baidu's second-quarter revenue fell by 1 percent to 26.0 billion yuan (3.8 billion U.S. dollars) from the same period a year earlier but was better than an average analyst estimates of 25.7 billion yuan (3.7 billion U.S. dollars).

It forecast third-quarter revenue of 26.3 billion yuan (3.78 billion U.S. dollars) to 28.7 billion yuan (4.13 billion U.S. dollars), in line with estimates and which compares with 28.0 billion yuan (4.03 billion U.S. dollars) for the same quarter a year ago.

But the results were overshadowed by iQIYI's disclosure of the investigation. Shares in iQIYI, a Netflix-like video-streaming service, plunged by as much as 19 percent while Baidu shares dropped by 5.5 percent in after-hours trade. Both are listed on the Nasdaq.

iQIYI said in a statement it was cooperating with the SEC which was seeking financial and operating records dating from January 1, 2018, as well as documents related to acquisitions and investments identified in a report issued by short-seller firm Wolfpack Research in April.

The company said it had hired professional advisers to conduct an internal review into certain of the key allegations.

Wolfpack accused iQIYI of inflating user numbers, revenue and the prices it pays for content.

The incident comes at a time of escalating China-U.S. trade tensions when Washington threatened to

delist

Chinese companies.

In the second quarter, iQiyi's online advertising revenue declined by 28 percent year on year, according to Baidu's earnings report.

"Having an independent set of eyes reviewing the situation is meant to put allegations to rest," said Baidu Chief Financial Officer Herman Yu. Baidu owns 56 percent of iQIYI and commands more than 90 percent of voting power on its board.

Baidu's revenue from advertising remains under pressure as big businesses in industries such as travel and financial services continue to pull back on ad spending.

Revenue from its online marketing services, which includes search, news feeds and video apps, fell by 8 percent to 17.7 billion yuan (2.55 billion U.S. dollars) in the second quarter.

(With input from Reuters)