China's search engine giant Baidu Inc beat quarterly revenue estimates on Tuesday, underpinned by growth in its cloud business, even as it reported its first year-on-year quarterly revenue contraction in two years.

Total revenue shrank by 5 percent to 29.65 billion yuan ($4.3 billion) in the second quarter, compared with analysts' average estimate of 29.30 billion yuan, according to Refinitiv data.

U.S.-listed shares of the company rose 3.2 percent in premarket trading.

Even as Baidu's core advertising sales continue to be soft, customers are signing up for its cloud services – a key area of growth globally – as demand for internet applications increases.

Revenue at Baidu's AI Cloud unit grew 31 percent year-on-year in the quarter.

Baidu has also been doubling down on self-driving technologies, in which it has heavily invested over the past five years.

It started to charge fees for its self-driving taxi service Apollo Go on open roads last year. Apollo Go operated 287,000 rides over the quarter and has so far accumulated a total of more than one million rides.

The Beijing-based company posted a net profit of 3.64 billion yuan, or 1.49 yuan per American Depository Share (ADS).

Earlier this month, Alibaba Group reported its first-ever flat quarterly revenue and Tencent Holdings posted its first-ever quarterly revenue decline.

(Source: Reuters with edits)