(Reuters) – Chinese search engine huge Baidu Inc posted quarterly earnings a notch ahead of estimates, but its shares slid in prolonged trade just after its streaming service iQIYI reported it was remaining probed by the U.S. Securities and Exchange Fee.

FILE Photograph: A worker putting on a encounter mask cleans the ground, close to a Baidu AI robotic which demonstrates a facial area mask on its display screen, at Baidu’s headquarters in Beijing, next the novel coronavirus disease (COVID-19) outbreak, China May possibly 18, 2020. REUTERS/Tingshu Wang

Baidu’s next-quarter profits fell 1% to 26. billion yuan ($3.8 billion) from the very same period a year earlier but was superior than an regular analyst estimate of 25.7 billion yuan.

It forecast third-quarter revenue of 26.3 billion yuan to 28.7 billion yuan, in line with estimates and which compares with 28. billion yuan for the similar quarter a yr ago.

But the results have been overshadowed by iQIYI’s disclosure of the investigation. Shares in iQIYI, a Netflix-like movie-streaming assistance, plunged as a lot as 19% although Baidu shares dropped 5.5% in soon after-hrs trade. Each are mentioned on the Nasdaq.

iQIYI explained in a assertion it was cooperating with the SEC which was looking for economic and operating information dating from Jan. 1, 2018, as perfectly as documents related to acquisitions and investments determined in a report issued by quick-seller organization Wolfpack Investigate in April.

It mentioned it could not predict the timing, outcome or repercussions of the probe and experienced employed experienced advisers to conduct an inside evaluate.

Wolfpack accused iQIYI of inflating user figures, income and the costs it pays for content.

The SEC investigation comes at a time when Washington has threatened to delist Chinese companies that do not satisfy U.S. accounting specifications amid escalating tensions in between the world’s two most significant economies.

Baidu Main Economical Officer Herman Yu informed a meeting connect with the corporation was not able to remark instantly on iQiyi’s probe but added the issue could possibly get lengthier than standard to solve due to the COVID-19 pandemic.

“Having an impartial set of eyes reviewing the condition is meant to place allegations to rest,” Yu explained. Baidu owns 56% of iQIYI and commands more than 90% of voting electric power on its board.

Baidu CEO Robin Li explained he expects geopolitical tensions to convey about “hiccups” for its organization but that potential clients for its synthetic intelligence division intended the firm was “cautiously optimistic” about the second half.

Baidu’s earnings from promoting continues to be under tension as huge corporations in industries this sort of as travel and financial expert services continue to pull again on advertisement paying out.

Profits from its on line promoting products and services, which consists of research, news feeds and video clip applications, fell 8% to 17.7 billion yuan in the 2nd quarter.

Reporting by Ayanti Bera in Bengaluru, Yingzhi Yang in Beijing and Brenda Goh in Shanghai Editing by Edwina Gibbs