Baidu Inc. predicted quarterly revenue below analysts’ estimates, reflecting the impact of the deadly coronavirus outbreak on China’s internet search leader.

The company forecast sales of 21 billion to 22.9 billion yuan (US$3 billion to US$3.3 billion) for the March quarter, compared with the average analysts’ projection for 23.4 billion yuan. That prediction came after Baidu had reported better-than-expected revenue for the quarter ending in December, when ad demand stabilized and pressure from competitors eased.

Its U.S.-traded shares slid 1.6 per cent in extended trading.

Once the runaway leader in Chinese desktop search, Baidu has struggled to stay out front in the mobile era after upstarts like ByteDance Inc. lured users and advertisers away to rival apps. In addition to a weakening home economy, Baidu is also grappling with the uncertainty of the coronavirus outbreak, which will further dent ad sales.

To offset stalling growth, Baidu has looked to improve its bottom line especially by tightening content costs related to its Netflix-style iQiyi site. Longer term, the company is investing gains from its core search and news services into divisions like driverless cars and smart speakers.Baidu’s shares rallied after the company reported preliminary revenue for the December quarter that beat the highest of analysts’ estimates, but that gain’s mostly been erased since the epidemic triggered a broader selloff of Chinese stocks. The company has been surpassed in market value by rivals like Meituan Dianping and NetEase Inc. after shedding more than US$11 billion last year.

What Bloomberg Intelligence says:

Intense competition from other channels of information discovery is likely to continue unabated. The company’s attempts to build its own content ecosystem for organic user traffic may keep expenses elevated. The profit contributions of Apollo, its autonomous-driving platform, and DuerOS, its conversational AI platform, are likely to remain immaterial in the medium term.