Baidu (NASDAQ:BIDU) will release its quarterly report on Wednesday, and investors are hoping for a nice recovery to what's been a rough patch for the Chinese search giant. As competition has reared its ugly head for the first time in a while, shareholders have had to deal with the prospect of slower growth for Baidu earnings going forward.

Despite the competitive threats to its business, Baidu remains the dominant player in Chinese search, and even with overall growth in the Chinese economy slowing, there's plenty of room for the Internet space to keep getting more important to the emerging-market nation. Let's take an early look at what's been happening with Baidu over the past quarter and what we're likely to see in its report.

Stats on Baidu

Analyst EPS Estimate

$1.21

Change From Year-Ago EPS

(2.4%)

Revenue Estimate

$1.20 billion

Change From Year-Ago Revenue

39%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Baidu earnings give investors a nice surprise this quarter?
In recent months, analysts have gotten more pessimistic about the prospects for Baidu earnings, cutting their estimates for the June quarter by $0.13 and reducing their full-year 2013 and 2014 consensus by three to four times that figure. Yet the stock has rebounded from some substantial losses earlier in the year, bouncing more than 25% from its mid-April levels.

The causes of Baidu's woes earlier this year reveal just how high expectations are for the company. In its first quarter, Baidu grew its revenue by 40%, with profits rising 9%. But the stock fell sharply in response because those figures weren't enough to keep up with what analysts had projected, despite the fact that Baidu projected a big recovery in sales for the second quarter.

Most of the fears that investors have come from Baidu's rising competition. Traditionally, Baidu's partnership with SINA (NASDAQ:SINA) Weibo has given the search star useful social information to augment its services. But with rival Alibaba having taken an 18% stake in Weibo three months ago, that partnership could be in danger if Alibaba's use of Weibo information leads Baidu customers to advertise less. Meanwhile, the gains for Qihoo 360 (NYSE:QIHU) have continued, with the stock having almost quadrupled in the past year as the upstart company has achieved a 15.6% search market share. With its browser having about 25% market share, Qihoo's growth prospects might be slowing down, but the network effects could continue eating away at Baidu's leading position in the market.

To respond, Baidu has been working hard to get into the mobile space. Last week, the company announced a $1.9 billion bid for mobile-app marketplace company 91 Wireless. With 10 billion app downloads, 91 Wireless should help Baidu address the concerns that its desktop dominance hasn't translated to the mobile side of the business as much as investors would like.

In the Baidu earnings report, watch to see if the company can defy some analyst forecasts of much narrower profit margins resulting from Qihoo competition. The stock price shows that investors think Baidu can still win big if it can demonstrate its ability to grow despite the competitive threat, but the search giant will have a bigger fight on its hands than it has had to deal with in the past.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Baidu and SINA. The Motley Fool owns shares of Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.