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Baidu forecasts higher Q2 sales, surpassing analysts' estimates

Beijing

BAIDU forecasts second-quarter sales above analysts' estimates as advertisers flock to its news aggregation service and its Netflix-style video service attracted more subscribers.

China's most popular search engine predicted revenue of 24.91 billion yuan to 26.19 billion yuan (S$5.2 billion to S$5.5 billion) in the three months ending in June, beating the 24.3 billion yuan average of estimates. That forecast followed better-than-projected first-quarter sales as the company sustains a bounce-back from a dismal 2017.

Baidu's American depository receipts jumped 5.6 per cent in extended trading in New York.

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The forecast is a confidence-booster for Baidu as it enters a critical year after selling or spinning off margin-eroding businesses such as food delivery.

The moves are designed to streamline the company and reduce losses so it can focus on artificial intelligence products from driverless cars to digital assistants.

One of those spinoffs, the newly listed streaming service iQiyi Inc, also reported results for the first time and gave a sales outlook that surpassed projections.

Chief executive officer Yu Gong said its goal is for a third of its movies and shows to come from in-house production within five years, generating up to a quarter of traffic: a move it says will slash costs by averting a bidding war against rivals like Tencent Video.

"It looks fairly solid, and on the margin the numbers were better. But it doesn't change our evolved view that they have weaknesses in core business," said Kirk Boodry, an analyst at New Street Research.

"The overall growth in content costs was slower than full year guidance would suggest, so that's going to step up."

Delivering growth is vital to reassuring shareholders in the intervening years before its AI products yield substantial profits.

Baidu posted first quarter sales of 20.9 billion yuan compared with the 20.2 billion yuan that analysts had predicted.

Net income was 6.7 billion yuan, also beating expectations. BLOOMBERG