Shares of Baidu (BIDU) slipped in New York after The Intercept reported that Google (GOOGL ) intends to launch a censored search engine in China. The news comes a day after the Chinese internet search provider reported better than expected quarterly earnings.

INTERCEPT REPORT: The Intercept reported this morning that Alphabet's Google plans to launch a censored search engine in China. According to people familiar with the matter, the project, which is code-named Dragonfly, has been underway since spring of last year and accelerated after a meeting in December between Google Chief Executive Officer Sundar Pichai and a top Chinese government official. The censored search engine will "blacklist websites and search terms about human rights, democracy, religion, and peaceful protest," according to The Intercept.

BAIDU EARNINGS: The report comes a day after Baidu reported second-quarter adjusted earnings per share of $3.18 on revenue of $3.93B, compared to analysts' estimates of $2.62 and $4.03B, respectively. Of note, the company said that mobile revenue in the quarter represented 77% of total net revenues and that it continues to increase investments in AI-powered businesses. Baidu also provided an outlook for the third quarter, guiding for Q3 revenue in the range of $4.02B-$4.23B. Analysts currently expect the company to report Q3 revenue of $4.41B.

STREET RESEARCH: Following the earnings report, Benchmark analyst Fawne Jiang backed a Buy rating and $300 price target on Baidu, saying that the company reported both upside to its Q2 results and Q3 revenue guidance on "solid" performance from the core ad business and iQiyi (IQ). The analyst, who noted that her firm is turning more constructive on the company's transformation to an AI-first company, said that Baidu remains in the early inning of its multi-year AI growth story. Jiang noted that while elevated content and traffic cost could weigh on margins in the near term, she expects a partial offset from the leverage of divesting non-core businesses.

PRICE ACTION: In afternoon trading, Baidu shares trading in New York are down 7.3% to $229.18.