Baidu Inc. delivered a conservative outlook for the current quarter as a resurgent pandemic outbreak in China overshadowed the internet search company's push into newer arenas like cloud and smart devices.

Revenue for the three months ended June climbed 20% from a year earlier to 31.35 billion yuan (US$4.8 billion), compared with the 30.9 billion yuan of estimates.

The company predicted sales of 30.6 billion yuan to 33.5 billion yuan for the September quarter, versus the 33.1 billion yuan seen by analysts, saying that the recent increase in infections across large parts of China left business visibility “limited.”

Baidu swung to a net loss of 583 million yuan in the second quarter, after marking down the value of its stake in Kuaishou Technology.

Shares of the livestreaming giant sank 28% in the quarter and are currently trading below its initial public offering price, as China’s tech crackdown expands beyond e-commerce and antitrust to online content.

Baidu’s stock dropped 3.2% in New York trading. On Thursday, executives fielded questions on regulatory uncertainties from data security to the scrapping of tax incentives.

When asked about the possibility of more state control over private-company data, founder Robin Li said he hasn’t heard anything “that’s very abrupt” or “adverse” to business operations.

Chief Financial Officer Herman Yu, who’s moving into a new role as chief strategy officer, predicted government incentives like tax breaks will shift from older consumer internet businesses to high-tech areas like electric vehicles and artificial intelligence, after Alibaba Group Holding Ltd. was said to have recently warned investors of fewer tax breaks for the industry.

What Bloomberg Intelligence Says: Baidu’s below-consensus 3Q sales outlook appears prudent given rising risks to its core online advertising business from the spread of the delta variant of Covid-19, even as the business performed strongly in the second quarter.

Strength in artificial intelligence, cloud and other new business segments may remain through 2H and beyond after 2Q’s 80% year-on-year growth, but at just 16% of total revenue, the heavy investment required to sustain this expansion may keep weighing on profits.

Baidu swings to net loss of 583m yuan, adopts conservative view of current quarter