Chinese Internet search company Baidu.com Inc beat forecasts by more than doubling its quarterly profit, but its shares fell 4 percent as its profit guidance fell short of some investors' expectations.
Exploding demand for online advertising in the world's second largest Internet market fuelled third-quarter earnings at Baidu, which is often referred to as China's Google.
The company said fourth-quarter revenue would rise around 13-16 percent from the previous three months, in line with analyst forecasts,
The market expectation is too high, said Elinor Leung, Hong Kong-based analyst at CLSA.
Baidu shares, which ended down 0.5 percent in New York at $334.30, fell more than 4 percent in after-hours trade. The stock has more than tripled in price this year.
The fourth quarter is generally a slow quarter and the guidance is basically in line with our expectations -- but market expectations are rather high so I'm not surprised to see a correction in its shares, she added.
Baidu, which dominates China's Web search market and competes against Google Inc, said its net income for the third quarter rose to 181.7 million yuan, or $24.2 million, compared with 85.3 million yuan a year earlier.
That amounted to 5.23 yuan a diluted share, or 70 cents, versus 2.46 yuan per share, or 31 cents.
Excluding share-based compensation expenses, Baidu earned 5.38 yuan per share, or 72 cents, for this year's third quarter. Analysts, on average, were looking for a profit of 5.25 yuan, or 70 cents, per share.
The company, whose online advertising customers grew by 11.6 percent from the last quarter, has beaten analysts' revenue expectations in every quarter since its 2005 initial public offering.
Third-quarter revenue rose 108 percent to 496.5 million yuan, or $66.3 million, compared with an average analyst forecast of $65 million, according to Reuters Estimates.
The company said fourth-quarter revenue was expected in a range from 560 million yuan to 575 million yuan, or $74.7 million to $76.7 million -- roughly in line with analyst predictions.
We will continue to enhance our product offerings, invest in key business segments and improve the overall user experience, as well as explore strategic partnerships that bring value to our users, Shawn Wang, Baidu's chief financial officer, said in a statement.
During the earnings conference call on Friday, company executives declined to elaborate on potential acquisitions.
Baidu recently entered the consumer e-commerce market, and is building up its direct sales team and has started work on a campus, which it expects to be completed in early 2009.
Baidu's share price gain has been fueled by a booming Chinese economy, soaring demand for online advertising ahead of the 2008 Beijing Olympics, and market-share gains against foreign and domestic rivals.
Expectations for a strong market debut for Chinese e-commerce company Alibaba.com later this year has also lifted Chinese tech-related shares.
China is the world's second-largest Internet market after the United States, with over 162 million Web users. Baidu dominated the country's Web search market in the third quarter with a 61.5 percent share, according to research firm Analysys International.
Google followed with a 22.5 percent share and Yahoo China came third with a 10.6 percent share.
(Additional reporting by Eric Auchard)