Investing.com-- Baidu Inc (HK: 9888 ) (NASDAQ: BIDU ) shares fell in Hong Kong trade on Thursday as concerns over slowing advertising revenue offset an otherwise strong earnings print for the first quarter, with particular focus on the internet giant’s AI prospects.

Baidu’s HK shares fell 3.3% to HK$83.30 by the midday break, compared to a 0.6% drop in the Hang Seng index. Losses in Baidu also came amid broader weakness in the technology sector.

The company clocked stronger-than-expected earnings for the first quarter, with total revenue rising 3% to 42.45 billion yuan ($4.50 billion), higher than Reuters estimates of 30.9 billion yuan.

But revenue from its online ads business- still the company’s biggest earner- fell 6% to 17.31 billion yuan, also missing estimates of 17.39 billion yuan.

While revenue from Baidu’s cloud unit improved and helped offset weakness in ads, analysts at Citi and Goldman Sachs warned that declining ad revenue and a shift towards AI stood to increase costs and pressure Baidu’s profit margin.

Both Citi and GS trimmed their price targets on Baidu, with Citi stating that investments in AI and disruptions in search engine advertising will weigh on Baidu’s core operating margin in the coming quarters.

Still, both brokerages maintained their Buy ratings on Baidu, with GS stating that a rosier outlook for Baidu’s cloud business- which is at the heart of the company’s AI ambitions- would offset a bulk of the expected weakness in ads.

GS sees Baidu’s cloud unit maintaining at least 25% growth in the second quarter, vastly outpacing its peers.

Baidu’s AI offerings were boosted by heightened increase in Chinese AI after the release of DeepSeek in January. Baidu has since regularly updated its AI models and also plans to turn its AI open source.