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Baidu’s Sales Drop Amid Scrutiny Into Health Ads

February 23, 2017

Views Inside Baidu Inc. HeadquartersViews Inside Baidu Inc. Headquarters

Baidu reported a second straight drop in quarterly revenue as regulatory scrutiny into healthcare and related advertisements continued to take a toll on the Chinese internet search giant.

The company’s revenue fell 2.6% to 18.21 billion yuan ($2.65 billion) in the fourth quarter ended Dec. 31 from 18.70 billion yuan a year earlier.

Analysts on average had expected revenue of 18.23 billion yuan, according to Thomson Reuters I/B/E/S.

The drop, however, was within the 17.84-18.38 billion yuan range the company had previously forecast.

The revenue slowdown comes as Baidu rides out a public and regulatory backlash triggered by the death of a 21-year-old student who underwent an experimental cancer treatment that he found using the company’s search engine.

Analysts estimate that healthcare accounts for about 20-30% of Baidu’s search revenue, which represents more than 80% of the company’s total sales.

Net income fell 83.3% to 4.13 billion yuan.

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However, Baidu’s U.S.-listed shares rose 2.4% after the bell on Thursday as the company’s adjusted profit came well above analysts’ estimate.

The company earned $6.49 per share, excluding items, while analysts were expecting $6.07.

“We look forward to 2017 as a time of recovery and growth,” chief financial officer Jennifer Li said in a statement.

The company’s online marketing revenue also fell 8.2% to 16.17 billion yuan.