By Tracy Qu and Ben Otto

Chinese search-engine giant Baidu reported a drop in quarterly profit but beat top- and bottom-line estimates, helped by stable online marketing revenue and rising sales from its AI Cloud business.

The Beijing-based company said Thursday that net profit in the first quarter fell 6.5% from a year earlier to 5.45 billion yuan ($754.9 million), which topped the CNY4.11 billion expected by analysts in a FactSet poll. Operating profit was higher, but the bottom line was hurt by a decline in fair-value gains from long-term investments.

Adjusted net profit rose 22% to CNY7.01 billion, handily beating analysts' expectations for CNY5.64 billion. The widely tracked metric excludes the effects of share-based compensation expenses, fair-value changes in long-term investments, and disposal gains and losses, among other things.

Revenue rose 1.2% to CNY31.51 billion, just above analysts' estimate of CNY31.22 billion.

Baidu said sales from online-marketing services, which make up more than half of overall revenue, rose 2.9%. Baidu's core non-online marketing revenue rose about 6%, mainly driven by its AI Cloud business, while revenue from the company's iQIYI video-streaming service fell about 5%.

Once considered one of China's shiniest technology giants alongside Alibaba and Tencent, Baidu has seen its core advertising revenue growth slow in recent years, leading it to search for new growth drivers in fields such as self-driving cars, cloud computing and artificial intelligence.

The company in April said users of its Ernie Bot, China's most popular ChatGPT-style bot, had doubled in recent months to more than 200 million. The chatbot, launched in March 2023, competes with many large-language models in China, including Alibaba's Tongyi Qianwen and Tencent's Hunyuan.

Baidu said Thursday that it is working to make its Ernie family of models cheaper and more efficient, saying the launch of several lightweight LLMs in the first quarter had already made Ernie more affordable.

Alibaba and Tencent earlier this week reported single-digit revenue growth in the quarter ended March. Alibaba's adjusted profit dropped 11%, while Tencent reported adjusted profit growth of 54%.

Write to Tracy Qu at and Ben Otto at

(END) Dow Jones Newswires

05-16-24 0653ET