Updated at 11:01 am EST
Baidu (BIDU) - Get Free Report shares slumped lower Tuesday after the China-based tech giant posted a smaller-than-expected decline in second quarter revenues as cloud sales offset persistent weakness in advertising.
After a solid bounce in pre-market trading, the stock was pressured by a report from Reuters that suggested Baidu's China-based rival, Alibaba Group Holding (BABA) - Get Free Report, as well as other U.S.-listed firms have been selected for audit inspections by the Public Company Accounting Oversight Board.
The move would follow an agreement reached last week between Washington and Beijing that would give U.S. watchdogs access to more information tied to China-based stocks that are listed on American exchanges.
Baidu, often referred to as the Google (GOOGL) - Get Free Report of China, posted third quarter earnings of 1.49 Chinese yuan per share, topping Street forecasts of 1.43, with sales falling 5.4% from last year to a Street-beating 29.65 billion yuan ($4.4 billion).
Revenues from the group's AI-powered Cloud division were up 31% from last year, Baidu said, while revenues at Baidu Core were down 4% to 23.2 billion as marketing spending slump amid China's ongoing struggle to contain its Covid infection rates.
"Despite a challenging macro environment caused by Covid-19, Baidu Core generated RMB23.2 billion in revenues in the second quarter, while Baidu AI Cloud revenues maintained rapid growth momentum of 31% year over year and 10% quarter over quarter," said co-founder and CEO Robin Li. "
Baidu's U.S.-listed shares were marked 6.95% lower in early Tuesday trading following the earnings release to change hands at $137.15 each.
The group's earnings come amid a testing period for China-based stocks listed in the U.S., following a move by U.S. lawmakers and securities regulators to remove them from American exchanges for failing to meet U.S. audit standards.
Late last month, Alibaba, Asia's most-valuable tech company, unveiled plans to pursue a primary stock listing in Hong Kong that could offer it an exit from U.S. markets.
Alibaba said it's planning to list shares on the Stock Connect market in Hong Kong, a format that will allow for easier access from investors in mainland China. Hong Kong Stock Exchange officials altered their listing rules earlier this year to make it easier for companies to acquire a dual primary listing, as opposed to the secondary listing that Alibaba currently uses.