Baidu Inc has reported better-than-expected growth in fourth-quarter revenue, as it worked to link up more of its users with merchants.

Nasdaq-listed Baidu said revenue between October and December rose 33.1 percent to 18.7 billion yuan ($2.89 billion), well ahead of the 16.32 billion yuan expected by analysts polled by Thomson Reuters.

It also reported a profit of 24.71 billion yuan in the fourth quarter, up 663 percent year-on-year, though much of that came from gains recognized as a result of its exchange of Qunar Cayman Islands Ltd shares with Ctrip.com International Ltd.

The strong numbers sent its shares in the United States racing 11 percent higher to $176 in after-hours trading on Friday.

Robin Li, chairman and chief executive officer of the Beijing-based company, said it has been extending its reach into so-called "transactions services", which provides its online users with bricks-and-mortar services, such as movie tickets and restaurant coupons.

He said even as China's overall growth slows, the country's services and consumption are still growing.

"These related verticals are supported by the government's Internet Plus initiative and hold tremendous potential," Li said in the conference call, discussing its financial report.

"Internet Plus is going to push more traditional businesses into partnering with Internet companies, and Baidu will be able to thrive based on this trend."

The company's core search business still contributes the majority of revenue, but the transactions services' contribution is growing strongly.

The latest figures showed gross merchandise value generated through its online-to-offline related services, including Baidu Nuomi, Baidu Takeout Delivery and Baidu Wallet, was worth 14.7 billion yuan in the quarter, a 397 percent increase.

Group-buying subsidiary Nuomi had managed to team up with more than 1 million merchants by the end of 2015, Li said, more than double the number it had at the start of the year.

Baidu announced in June it planned to invest 20 billion yuan in Nuomi over the next three years, a decision which spooked Wall Street at the time, prompting a sharp fall in its share price.

Its development of the O2O business is considered expensive, especially as Nuomi is up against rivals backed by Internet giants Tencent Holdings Ltd and Alibaba Group Holding Ltd.

Some of the margins on Nuomi's high-frequency services - such as movie ticketing - are thin, but Li said Baidu will ultimately benefit from further integration of its still-seemingly diversified but interdependent business units.

Yan Honghui, an analyst with Beijing-based Internet consultancy Analysys International, said newly merged Meituan-Dianping, China's largest 020 company that offers a range of services, including group buying, restaurant reviews, selling movie tickets and food delivery, was Baidu's most obvious rival.

mengjing@chinadaily.com.cn