Sohu.com (SOHU) Q4 2025 Earnings Call Transcript

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DATE

Monday, February 9, 2026 at 7:30 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Charles Zhang
• Chief Financial Officer — Joanna Lv
• President and COO, Changyou.com — Yaobin Wang

TAKEAWAYS

• Total Revenue -- $142 million, reflecting a 6% increase year over year and a 21% decrease sequentially.
• Marketing Services Revenue -- $17 million, down 10% year over year but up 25% sequentially.
• Online Game Revenue -- $120 million, up 10% year over year and down 26% sequentially.
• GAAP Net Income -- $123 million, including a $285 million reversal of Changyou withholding income tax accrual; compares to a $21 million net loss in the prior year's Q4, and $9 million net income for the preceding quarter in 2025.
• Non-GAAP Net Income -- $261 million, including the tax reversal; compares to a $15 million net loss in the same period last year and $9 million net income in the previous quarter.
• Annual Total Revenue -- $584 million for the full year, down 2% year over year.
• Annual Marketing Services Revenue -- $60 million, representing an 18% year-over-year decline.
• Annual Online Game Revenue -- $506 million, up 1% year over year.
• Annual GAAP Net Income -- $394 million, compared with a $100 million net loss in 2024, driven by the withholding tax reversal.
• Annual Non-GAAP Net Income -- $234 million, versus $83 million net loss in 2024.
• Annual Non-GAAP Net Income (Excluding Tax Reversal) -- $51 million loss, a 40% improvement from 2024.
• Social Media Segment Quarterly Revenue -- $21 million, a decrease from $24 million in the prior year’s quarter.
• Social Media Segment Quarterly Operating Loss -- $72 million, widened from $69 million the previous year.
• Social Media Full-Year Revenue -- $75 million, down from $91 million in 2024.
• Social Media Full-Year Operating Loss -- $283 million, slightly improved from $287 million in 2024.
• Changyou Segment Quarterly Revenue -- $121 million, up from $111 million a year earlier.
• Changyou Segment Quarterly Operating Profit -- $45 million, down from $48 million last year.
• Changyou Full-Year Revenue -- $509 million, marginally higher than $506 million in 2024.
• Changyou Full-Year Operating Profit -- $238 million, up from $196 million in 2024.
• Share Repurchase Program -- 8,100,000 ADS purchased at approximately $150 million total, with one-third of the program remaining.
• Q1 2026 Marketing Services Revenue Guidance -- $10 million to $11 million, representing a projected annual decrease of 20%-27% and sequential decrease of 35%-41%.
• Q1 2026 Online Game Revenue Guidance -- $123 million to $130 million, representing a possible annual decline of 4% to an annual increase of 5%, and a sequential decrease of 6% to a sequential increase of 2%.
• Q1 2026 Net Loss Guidance -- GAAP and Non-GAAP net loss estimated between $10 million and $20 million, reflecting a narrower projected loss relative to prior quarters.
• Advertising Revenue Mix -- Charles Zhang said, "There is some improvement in the auto sector. There's a higher percentage of the overall revenue split... the auto industry is doing better than the IT and other FMCG."
• Q4 Marketing Outperformance -- Charles Zhang attributed it to "innovative marketing solutions based on KOL or influencer marketing, online events, offline events, live streaming... we are getting the advertising and brand marketing dollars," noting no single one-off event drove results.
• Gaming Pipeline -- Yaobin Wang said, "We have a card-based RPG based on IP... expected to launch in 2026 or early 2027... several mini-program video games in development."
• AI in Gaming -- Yaobin Wang stated, "Pushing the application of AI, especially in terms of the creation of game design plans, is essential for the production of the gaming industry."

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RISKS

• Q1 2026 forecast reflects sequential and annual declines in marketing services revenue, specifically projected at 20%-27% year over year and 35%-41% sequentially.
• Net loss guidance for Q1 2026 indicates continued negative profitability, with GAAP and non-GAAP net losses projected between $10 million and $20 million.
• Charles Zhang commented that "The macroeconomic situation is still similar, not very good, with a lot of uncertainties," and that "Traditional advertising on those media channels is not working now."

SUMMARY

Sohu.com Limited (NASDAQ:SOHU) reported total revenue of $142 million, driven by stronger-than-expected marketing services performance and consistent online game revenues within expectations. The company’s significant GAAP net income and non-GAAP net income for the quarter reflect the large $285 million reversal of previously accrued Changyou withholding income tax, fundamentally altering the net income profile for both the quarter and full year. Sequentially, both total and online game revenues declined sharply, and marketing services revenue guidance for the next quarter points to considerable year over year and sequential pressure. Management highlighted improvements in advertising contributions from the auto sector and an ongoing strategic shift to innovative, event-based and influencer-oriented marketing approaches, as well as further investment in high-engagement game content. Guidance for the next quarter included a narrowed net loss range, alongside acknowledgment of ongoing macroeconomic headwinds and weak seasonal demand due to Chinese New Year’s timing.

• The company disclosed further progress in its share repurchase program, having bought 8,100,000 ADS at a total cost of $150 million, with one-third remaining to be completed.
• The gaming business is focusing on launching new expansion packs for established titles and expects future releases of a card-based RPG and several mini-program games, but the timing is driven by ongoing development and test results.
• Yaobin Wang noted active adoption of AI in the gaming division’s game design plans, describing it as "essential for the production of the gaming industry."
• Social media platform operating losses increased on a quarterly basis, but the segment’s annual operating loss showed a slight improvement over the prior year.

INDUSTRY GLOSSARY

• ADS (American Depositary Shares): Equity shares of a non-U.S. company issued through a U.S. depositary bank, allowing trading on U.S. exchanges as a proxy for local shares.
• KOL (Key Opinion Leader): Influencer or individual with authority and audience reach, often leveraged for digital marketing and event-driven campaigns in China.
• MMORPG (Massively Multiplayer Online Role-Playing Game): A type of online video game that accommodates large numbers of players interacting in a persistent virtual world.
• FMCG (Fast-Moving Consumer Goods): Low-cost products that sell quickly such as food, beverages, and other consumables.

Full Conference Call Transcript

Charles Zhang: Thanks, Huang Pu, and thank you everyone for joining our call. In 2025, our marketing services revenues exceeded our previous guidance, while online game revenues were in line with our expectations. Our non-GAAP bottom line performance, excluding the impact of the Changyou withholding income tax reversal, came in at the high end of our prior guidance. For our social media platform, we continue to improve our products and algorithms to address user needs and enhance their experiences across different scenarios. We continue to host a variety of innovative events, which generated abundant premium content, quickly promoted user engagement, and enabled us to capture more monetization opportunities.

For our online games, we remain committed to long-term operational excellence and continue to deliver high-quality content updates and compelling experiences to our players. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For 2025, the total revenue was $142 million, up 6% year-over-year and down 21% quarter-over-quarter. Marketing services revenues were $17 million, down 10% year-over-year and up 25% quarter-over-quarter. Online game revenues were $120 million, up 10% year-over-year and down 26% quarter-over-quarter.

After giving effect to the reversal of previously accrued withholding income tax of approximately $285 million related to Changyou, GAAP net income attributable to Sohu.com Limited was $123 million, compared with a net loss of $21 million in the fourth quarter of last year, meaning 2024, and net income of $9 million in 2025. After giving effect to the above-mentioned reversal of the withholding income tax, non-GAAP net income attributable to Sohu.com Limited was $261 million, compared with a net loss of $15 million in 2024 and a net income of $9 million in 2025. For the full year of 2025, total revenues were $584 million, down 2% compared with 2024.

Marketing services revenues were $60 million, down 18% compared with 2024. Online games revenues were $506 million, up 1% compared with 2024. GAAP net income attributable to Sohu.com Limited was $394 million, compared with a net loss of $100 million in 2024. Non-GAAP net income attributable to Sohu.com Limited was $234 million, compared with a net loss of $83 million in 2024. Excluding the reversal of accrued income tax, the 2025 income is a $51 million loss, a 40% improvement over 2024. So now I will go through our key businesses in more detail. First, our social media platform. We continue to refine our products and enhance algorithms to address diverse user needs in various scenarios.

Through a mix of vibrant offline and online events across various verticals, we continue to attract and retain a large number of users, especially younger generations. Through spontaneous and active connections and communication, we consistently improve the user experience and boosted user engagement, further strengthening the stickiness on our platform. With the above efforts, we were able to cultivate a healthy platform ecosystem with an active social atmosphere. For example, in the first quarter of 2025, we successfully hosted the year's most eye-catching final for the 2025 Sohu K-Pop Dancing Award and the 2025 Sohu Video Chinese Traditional Custom Awards.

These events received widespread praise, sparked enthusiastic interaction among participants and audiences, and drove extensive discussions and disseminations across multiple social media platforms. These initiatives further consolidated our position as the most influential and preferred platform in these areas and boosted the vigorous development of the platform. During the quarter, we also continued to host traditional signature events such as the 2025 Sogou Fashion Awards and the 2025 Sohu Finance Annual Forum. These events not only garnered significant attention but also contributed to the continuous enhancement of our brand influence. Additionally, we held a Halloween-themed American TV series party during the Sohu Video American TV Series Month 2025, which brought audiences lots of high-quality American movies.

We have on the TV series, we also continue to steadily expand our content library with American dramas as well as other attractive TV series, original dramas, and short dramas to consistently drive traffic for our platform. For Sohu's fourth anniversary, we have a physics class, you know, I myself teach. We have conducted more than 270 live broadcasts, over 30 offline classes, and 270 online classes, multiple university seminars, and published three books. It has continuously made physics more engaging for the general public while attracting lots of leading professional broadcasters in a variety of fields of knowledge on our platform.

With this highly regarded IP, we were able to further reinforce our reputation in the field of knowledge and science-based related live broadcasts and demonstrate our commitment to being a socially responsible media platform. On the monetization side, we deeply integrated advertisers to meet with the above-mentioned events and customized the marketing content. We also actively explore more monetization opportunities leveraging our deep understanding of the market. Through the dissemination of our premium content related to events, we facilitated advertisers' brand marketing while promoting the monetization value we offer. Now let me turn to our online game business. During the quarter, our online game business performed well, with revenues in line with our expectations.

With fewer launches of the in-game promotional activities for TLBB PC and a net decline of our new PC game TLBB Return, online game revenues decreased on a sequential basis. In our PC game business, we raised the player level cap for regular TLBB PC, which effectively boosted user engagement. Meanwhile, we rolled out a new character development system for TLBB Vantage, providing players with fresh goals and a more engaging experience. Moving on to TLBB Return, we introduced its first new plan and continuously refined the game based on player feedback. In our mobile game businesses, we launched featured content centered on a return to classics and streamlined the gameplay for the legacy TLBB Mobile.

This effectively boosted player engagement and the willingness to pay, leading to a sequential revenue increase. Next quarter, we will continue to launch expansion packs and content updates for the TLBB series and other titles to keep players engaged. Looking ahead, we remain committed to our top game strategy, user-centric approach, and will continue to deliver high-quality games to players. In terms of game development, we will adhere to sound methodologies and systematic R&D processes while planning the integration of new technology to enhance efficiency and product success rate. Regarding our pipeline, we are actively working to unlock the potential of our TLBB IP.

Meanwhile, as we maintain our core competitiveness in MMORPG, we will continue to diversify our portfolio with multiple types of games and expanded product offerings with global appeal. Now I'd like to give an update on the ongoing share repurchase program. As of February 5, 2026, Sohu.com Limited had purchased 8,100,000 ADS for the aggregate cost of approximately $150 million. So we still have one-third to go to finish this part of the share repurchase. With that, I will now turn the call over to Joanna Lv.

Joanna Lv: Thank you, Charles. I will now walk you through the key financials of our major segments for the fourth quarter and full year of 2025. All numbers are on a non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our website. For the social media platform, quarterly revenues were $21 million compared with $24 million in the same quarter last year. Quarterly operating loss was $72 million compared with an operating loss of $69 million in the same quarter last year. For the full year 2025, revenues were $75 million compared with $91 million in 2024. The full-year operating loss was $283 million compared with an operating loss of $287 million in 2024.

For Changyou, quarterly revenues were $121 million compared with $111 million in the same quarter last year. Quarterly operating profit was $45 million compared with an operating profit of $48 million in the same quarter last year. For the full year 2025, revenues were $509 million compared with $506 million in 2024. The full-year operating profit was $238 million compared with an operating profit of $196 million in 2024. For 2026, we expect marketing service revenues to be between $10 million and $11 million. This implies an annual decrease of 20% to 27% and a sequential decrease of 35% to 41%. Online game revenues are expected to be between $130 million and $123 million.

This implies an annual decrease of 4% to an annual increase of 5% and a sequential decrease of 6% to a sequential increase of 2%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited are expected to be between $10 million and $20 million. This forecast reflects management's current and preliminary view, which is subject to substantial uncertainty. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

Operator: Thank you, management. To ask a question, please dial *1 and wait for your turn. To cancel your request, you can press *1 again. Our first question comes from the line of Thomas Chong of Jefferies. Please go ahead.

Thomas Chong: Hi. Good evening. Thanks, management, for taking my question. My first question is about advertising. When I look at the Q1 advertising guidance, it seems relatively soft on a sequential basis compared to historical Q1. So I just want to get some color. Is it due to macro uncertainties? And can we talk about the trend for categories like Auto and IT sectors in Q1? Also, on the gaming guidance, because when I look at the Q1 revenue guidance on gaming, it seems like a negative or positive 1-2. I just want to see what really drives the high end or the low end of the guidance and the trend we are seeing now. That's my first question.

My second question is about AI. Given that, I think there's a lot of industry discussion in overseas markets regarding whether AI will disrupt the online gaming sector. Just want to get some thoughts from management about whether AI is a possibility tool in gaming, or are we actually seeing AI may disrupt the sector in the long term? Thank you.

Charles Zhang: Okay, Thomas. The first question is about advertising. The question about Q1 and softness, right? So I think it's mainly due to the seasonality because this year, Chinese New Year is kind of late. I mean, two weeks late in February. So, you know, companies are not getting a lot of things done in January or February. The overall macroeconomic situation remains similar to Q4. So that's why. And then the next is about gaming, right? For gaming revenue. Yeah.

Yaobin Wang: Since we will have no new game launching in the first quarter, the level of the revenue of the first quarter depends on the existing game's performance, including such as the performance of the new content and activities that we will launch in the first quarter for TLBB PC, TLBB Return, and Legacy TLBB Mobile. So far, the performance is basically in line with our expectation. Regarding AI, we think pushing the application of AI, especially in terms of the creation of game design plans, is essential for the production of the gaming industry. Thank you.

Thomas Chong: Thank you. May I quickly also ask a follow-up question back to advertising? Charles, may I ask about how we are actually seeing the trend for different advertising categories such as auto and IT sectors? I remember in the last earnings call, we were actually seeing some softness. I'm not sure if there's any improvement for auto and IT sectors. Thank you.

Charles Zhang: Yeah. There is some improvement in the auto sector. There's a higher percentage of the overall revenue split. So, yeah, because, yeah, the auto industry is doing better than the IT and other FMCG. They have a higher percentage of the total pie. I mean, the overall revenue.

Thomas Chong: Thank you. This is for Q4, right? We are talking about.

Charles Zhang: Yeah. Q4. Yes.

Thomas Chong: Got it. Thank you, Charles. Thank you. I will go back to the queue.

Charles Zhang: Okay. Welcome.

Operator: Thank you for the question. One moment for the next question. Our next question comes from the line of Alicia Yap of Citi. Please go ahead.

Alicia Yap: Hello. Thank you. Good evening, management. Thanks for taking my questions. I have a few questions. First, I wanted to follow up on the first quarter guidance and also the 4Q. Was there any one-off revenue that was recognized in the 4Q that led to the outperformance in the fourth quarter? Any special ad campaign by any industry vertical that outperformed during the quarter? Second question is on gaming. Can management share with us the game pipeline and also the major expansion pack that you plan to release for the remaining of 2026? So that we can better assess the game revenue trend for the next three quarters.

Lastly, on your guidance, the net loss guidance seems like this quarter, the $10 million to $20 million net loss that you've guided is a much smaller number than previously. Usually, the loss is around the $20 million to $30 million range. Any particular reasons why the loss is narrower than previous quarters? Also, should we expect this trend to be consistent for the remaining of 2026? Thank you.

Charles Zhang: So your first question is about understanding why Q4 had growth, right? And then Q1 has softness. You were thinking that there are reasons for this. Right?

Alicia Yap: That's right. That's why Q4 is stronger than your guidance. Right? Any particular special events that happened in Q4?

Charles Zhang: Oh, I think Q4, we are just doing better overall. The Q1 softness or the Q1 lower forecast is purely due to the Chinese New Year's delayed timing this year. Chinese New Year is, you know, like, February 16. Right? So it's more than two weeks late than last year. So that, you know, advertisers, they just do not have much going on. Only after the Chinese New Year, after February and into March, they come back to work and start to plan for the year to add marketing campaigns. So it's purely due to Chinese New Year that our advertising is not doing that well in Q1, even compared with last year's first quarter, 2025.

But the Q4 is not because there was a major event; it's just that we are doing better. The macroeconomic situation is still similar, not very good, with a lot of uncertainties. But we are just seeing a shift in the advertising industry. Traditional advertising on those media channels is not working now. People are not spending much on that, on brand marketing. But instead, we have innovative marketing solutions based on KOL or influencer marketing, online events, offline events, live streaming, all these that are consistent with our product development side, our user social media. So we have these innovative marketing solutions that differentiate us from others. So we are getting the advertising and brand marketing dollars.

Especially in Q4, we had some major events, some offline events that attracted advertisers. Online KOL accounts and live streaming, all these things. So we are entering into a new age of marketing and social media time. So I hope I answered your question.

Alicia Yap: Yes, you did. Thank you.

Charles Zhang: So next, regarding the game pipeline.

Yaobin Wang: First, regarding the game pipeline, we have a card-based RPG based on IP. It's a mobile game mixed with a hardpoint game. It is expected to launch in 2026 or early 2027, subject to its development process and testing results. Meanwhile, we also have several mini-program video games in development. We will decide if we will launch the games or when to launch the games based on their development and testing results. For the existing games, we will launch expansion packs in a similar cadence as previous years. As for the revenue trend for this coming quarter, we cannot forecast the trend right now.

It depends on the performance of the expansion pack of our older games and also depends on whether we can launch new games and their performance. Thank you.

Charles Zhang: Thank you. So for 2026, we have a loss, and the average loss is similar, right? Ten or twenty million.

Operator: Thank you for the questions. With that, that concludes the conference call for today. Thank you all for participating. You may now disconnect your line.

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