Baidu posts its first loss in 15 years as China’s slowdown hits online advertising

China’s economic slowdown is taking its toll on one of the country’s biggest tech companies.

Search engine Baidu (BIDU) reported a netloss of 327 million yuan ($47 million) for the three months to March due to a slump in its main online advertising business.

That was the company’s first loss since it went public in 2005, and compared with a profit of 6.7 billion yuan during the same period last year.

Baidu’s stock price plunged more than 10%in premarket trading, wiping nearly $5.8 billion off its market value.

China's key economic indicators showed a slump even as it gears up for a renewed trade war with the United States.

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CEO Robin Li said the sharp drop in earnings was due in part to China’s broader economic slowdown and increased government scrutiny of online content, which had hurt the company’s core business. Online marketing accounted for 73% of Baidu’s quarterly revenue of $3.6 billion.

“Although the Chinese government has announced many economic policies to bolster the economy … we are taking a cautious view that online marketing in the near term will face a more challenging environment,” Li said during an earnings call.

China’s economic growth has slumped to a near three-decade low in recent months, as the country grapples with an escalating trade war against the United States and tries to rein in high levels of debt.

DONGGUAN, CHINA - APRIL 25: The Huawei logo is seen on the side of the main building at the company's production campus on April 25, 2019 in Dongguan, near Shenzhen, China. Huawei is Chinas most valuable technology brand, and sells more telecommunications equipment than any other company in the world, with annual revenue topping $100 billion U.S. Headquartered in the southern city of Shenzhen, considered Chinas Silicon Valley, Huawei has more than 180,000 employees worldwide, with nearly half of them engaged in research and development. In 2018, the company overtook Apple Inc. as the second largest manufacturer of smartphones in the world behind Samsung Electronics, a milestone that has made Huawei a source of national pride in China. While commercially successful and a dominant player in 5G, or fifth-generation networking technology, Huawei has faced political headwinds and allegations that its equipment includes so-called backdoors that the U.S. government perceives as a national security. U.S. authorities are also seeking the extradition of Huaweis Chief Financial Officer, Meng Wanzhou, to stand trial in the U.S. on fraud charges. Meng is currently under house arrest in Canada, though Huawei maintains the U.S. case against her is purely political. Despite the U.S. campaign against the company, Huawei is determined to lead the global charge toward adopting 5G wireless networks. It has hired experts from foreign rivals, and invested heavily in R&D to patent key technologies to boost Chinese influence. (Photo by Kevin Frayer/Getty Images)

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Baidu is trying to broaden out its sources of revenue beyond its core search business, investing billions in areas like artificial intelligence and self-driving vehicles.

The company announced Thursday that the head of its main search business, Hailong Xiang, had resigned after 14 years at the company. Baidu named its vice president of mobile products as his successor, saying the mobile and search businesses would now be combined into one.

The company’s disappointing performance was in contrast to its two main Chinese tech competitors, Tencent (TCEHY) and Alibaba (BABA), both of which reported strong earnings earlier this week.