You've crossed into Redemption City, Baidu (NASDAQ:BIDU). China's leading online search engine saw its shares soar higher last night after trouncing market expectations -- and a few dragons -- along the way.

First-quarter revenues more than doubled to $35.7 million. Things got even better on the way to the bottom line, with earnings soaring 143% higher to hit $0.32 per share. Back out stock-based compensation charges, as analysts tend to do in setting their bottom-line targets, and the company earned $0.37 a share. Wall Street was expecting adjusted earnings of $0.33 per share on $34.4 million in total quarterly revenues.

Analysts had better hurry and catch up in the current quarter, too. They were perched at the $44.3 million mark in revenues, and the company's projected top-line range is for $48.9 million to $50.2 million.

And since I've got you here, let's go ahead and see how Baidu slayed those dragons.

Dragon No. 1: The Internet market in China is slowing
How can a nation with an economy growing at more than a 10% annualized clip be slowing? China's restrictive government may not be happy about the Internet -- particularly the growth of addictive online fantasy games -- but you don't become Japan's top trading partner by junking servers for typewriters.

The fear of this dragon was probably fueled by the ratings drop of leading Chinese sites on's website earlier this year. Baidu fell from being the world's fourth most visited site to seventh. SINA (NASDAQ:SINA) also dropped three slots to clock in at No. 13.

However, the first quarter is a seasonally sleepy one in China; things tend to slow to a halt during the country's New Year's celebration. Even the fallout from the crackdown on opening new Internet cafes will be eventually offset by healthier per-capita income, which will make home-based connectivity a reality to more than just 10% of the population.

Dragon No. 2: Going into Japan will be a costly mistake
Baidu announced back in December its intentions to enter the Japanese search-engine market. Investors seemed to like the idea at first, but then they got nervous. How can an outsider with a modest $15 million investment commitment make a difference in Japan in the long run? Will the investment crunch margins in the near term?

Well, the company didn't spend that much in the quarter that ended in March, but the company still earned $0.37 a share on an adjusted basis after spending the equivalent of $0.04 per share in expenses in Japan.

Baidu may never amount to more than a bit player in Japan. It's a tough market. Even eBay (NASDAQ:EBAY) ran away when Yahoo! (NASDAQ:YHOO) became too powerful after teaming up with Softbank to launch its auction site there. However, Baidu's cost-effective approach is the right way to go. In Japan, advertisers pay a lot more to reach a wealthier Japanese audience, and it would be a shame if Baidu weren't there to cash in with China's trading partner. Investors who feared Baidu's entry into Japan can now begin to see it as gravy.

Dragon No. 3: Baidu is too vulnerable and pricey
As fast as Google (NASDAQ:GOOG) is growing, it's not leaving a mark on Baidu's dominance in China. Even if that situation changes over time, China's Internet market is growing so large that big gains can be had with thinner slices.

Before the after-hours run that sent shares racing nearly 20% higher, Baidu was trading at 37 times next year's profit estimates. Keep in mind that Baidu has beaten these Wall Street targets in six of its first seven quarters as a public company. Also keep in mind that as lofty a multiple as 37 may seem, the company is actually growing significantly faster than that multiple would suggest.

Tricky local market? Tough global expansion? Expensive stock? That's not the Baidu that I know.

Baidu is a selection in the Rule Breakers growth-stock newsletter service. eBay, SINA, and Yahoo! are Motley Fool Stock Advisor recommendations. Find out why with free 30-day subscription offers to either service.

Longtime Fool contributor Rick Munarriz has been to mainland China just once, but he's longing to brush up on Mandarin and make another go at it in the future. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.