By Ankur Banerjee and Paul Carsten
(Reuters) - China's Baidu Inc <BIDU.O>, the country's long-dominant Internet search firm, turned in a slightly better-than-expected fourth quarter, but is now grappling with a protracted slowdown in revenue growth - one that the company expects to continue.
Baidu said revenue, driven by advertising spending, grew 33 percent to 18.70 billion yuan ($2.86 billion). That beat the 31.9 percent rise expected by analysts, but was still Baidu's slowest quarterly growth for over seven years as room for expansion in its core Internet search business decreases.
Baidu is investing heavily in developing new services to adapt to China's embrace of smartphones and technology leaps in artificial intelligence. But it warned it expects revenue growth to slow further in the first quarter, to 27.8-32.5 percent, excluding divestments.
Having fallen 16 percent since the beginning of the year, Baidu's above-forecast performance was enough to send shares up about 11 percent to $175.00 in New York after-hours trading.
The clock is ticking, however, for Baidu, similar in many ways to Google with search as its bread and butter, to turn its new tech investments into meaningful business. Spending on businesses like delivery, online deals and video services pulled operating margins down 30.8 percentage points.
Baidu's first-quarter revenue growth percentage forecast strips out the impact of excluding online travel business Qunar Cayman Islands Ltd <QUNR.O>, divested last October.
With gains from that deal included in fourth-quarter accounts, the income attributable to Baidu rocketed to 24.71 billion yuan, or 70.92 yuan per American depositary share (ADS), from 3.24 billion yuan, or 9.03 yuan per ADS.
Excluding net gains recognized in the Qunar deal, the company earned 7.61 yuan per ADS.
(Reporting by Ankur Banerjee in BENGALURU and Paul Carsten in BEIJING; Editing by Maju Samuel and Kenneth Maxwell)