Baidu Reports Loss Tied to Investment in Travel Company

Baidu Inc.

reported a loss in the third quarter tied to a write-down on its investment in a travel company, but the search engine showed early signs of recovering from a brutal first half as its revenue beat expectations.

Once known as the Google of China, Baidu has been trailing tech companies such as social-media and gaming behemoth

Tencent Holdings Ltd.

and e-commerce giant

Alibaba Group Holding Ltd.

, which both made the leap to smartphones more nimbly. Baidu has been trying to shore up its bread-and-butter search-advertising business while it looks for areas for expansion such as artificial intelligence and driverless cars.

On Wednesday, the Beijing-based company reported a loss of 6.4 billion yuan (about $900 million) in the third quarter, compared with a profit of 12.4 billion yuan a year earlier. The results were dragged down by a noncash impairment loss of 8.9 billion yuan on its equity stake in

Trip.com Group Ltd.

, a Shanghai-based travel-services provider that has seen its shares fall.

Revenue jumped 28.1 billion yuan for the three months ended Sept. 30, flat compared with a year ago and above the 27.6 billion yuan estimated by analysts polled by FactSet. In its fourth quarter, Baidu said revenue is likely to improve, forecasting a range from a loss of 1% to growth of 6%.

“Baidu’s business is starting to see some turning point,” said Raymond Feng, director of research at Pacific Epoch in Shanghai. “People tend to believe that it reached the bottom after so many negative impacts.”

Baidu’s core business of advertising, which relies heavily on Chinese companies in areas such as autos and retail, is considered a bellwether for the health of the country’s private sector. Although daily active users on the main Baidu app have grown 25% to 189 million compared with a year before, it hasn’t given a significant boost to the company’s bottom line. Chief Executive

Robin Li

attributed that to China’s slower economic growth and tighter restrictions on the health-care industry, traditionally a heavy advertiser on Baidu.

“As we see the macro environment stabilizing, we do see revenue eventually catching up with traffic,” Mr. Li said in a Wednesday call with analysts.

The company has been trying to diversify its business in areas related to artificial intelligence, including smart speakers and autonomous driving. Baidu’s research-and-development expenses rose 20% year over year, while total operating costs grew 8%.

In September, Baidu launched a pilot program in the city of Changsha with a fleet of 45 cars operated by its Apollo autonomous-driving system.

Its video-streaming platform

iQiyi

saw subscribers jump 31% to 105.8 million. That bolstered a segment called “other” that also includes cloud services and smart devices, which had revenue growth of 34% to 7.6 billion yuan.

Write to Shan Li at shan.li@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

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