Revenues of China-based search service provider Baidu (Nasdaq: BIDU) rose sharply in the first quarter of 2019. Earnings, meanwhile, dropped owing to an increase in expenses. The bottom line also missed the estimates and the stock fell sharply Thursday evening.

Supported by strong contributions from both the business segments, first-quarter net revenues climbed 15% year-over-year to RMB24.1 billion ($3.59 billion) and came in above Wall Street’s projection. Revenues from Baidu Core moved up 8% and those from iQIYI climbed 43%.

At the end of March 2019, the company had 174 million daily active users, up 28% from the year-ago period.

Adjusted earnings, meanwhile, fell sharply to RMB2.77 per ADS ($0.41 per ADS), and missed the estimates. On an unadjusted basis, the company posted a net loss of RMB327 million ($49 million) or RMB0.98 per ADS ($0.15 per ADS), compared to earnings of RMB18.68 per ADS a year earlier. Total operating expenses surged 53% annually to RMB25.1 billion ($3.73 billion) during the three-month period.

Total operating expenses surged 53% annually to RMB25.1 billion during the three-month period

Investments in non-core areas like cloud and content, in response to the slowdown in the search service business in the Chinese market, has been negatively impacting the company’s bottom-line performance. The other challenges are the slowdown in the Chinese economy and growing competition.

Robin Li, CEO of Baidu, said, “Looking ahead, we are quite excited about the opportunities to significantly improve content and service discovery through in-app search and increase customer ROI with our entrance into CRM, to deepen our offering to our marketing customers.”

For the second quarter, the management expects revenues to be between $3.74 billion and $3.96 billion, representing a 3% decrease to 2% increase year-over-year.

iQiyi Inc (IQ), the video streaming arm of Baidu reported a 43% increase in first-quarter revenue to RMB 7 billion ($1 billion), helped by a 58% increase in subscriber base. Analysts had projected revenue of just $1.03 billion in Q1. At the end of the first quarter, iQiyi had 96.8 million subscribers, of which over 98.6% were paying members.

Also see: Baidu Q4 2018 Earnings Conference Call Transcript

Last month, Google’s parent Alphabet (GOOG) reported a 17% increase in first-quarter revenues to $36.3 billion, which however missed the estimates. Excluding one-time charges, earnings came in at $11.90 per share.

Baidu’s stock has declined progressively in recent months and is currently trading at a four-year low. The shares dropped nearly 40% over the past twelve months and 6% since the beginning of the year. The stock lost about 10% Thursday after the earnings report.

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