Q1 2026 Sohu.com Earnings Results Conference Call

Ladies and gentlemen, thank you for standing by, and good day. Thank you for joining Sohu's first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mood. After management's prepared remarks, there will be question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. And I'd like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu. Please go ahead.

Thank you, Operator. Thank you for joining us to discuss Sohu's fourth quarter, 2026 results. On the call, Chairman and Chief Executive Officer, Dr. Charles Zhang, CEO of General Liu, and the Vice President of Finance, James Stone. Also, with us, Chang Yu CEO of Wen Chen and the CEO of Yao Ming Wang. Before Mattel begins their prepared remarks, I would like to remind you of the coming CFR statement in connection with today's conference hall. Except for the historical information contained herein, the matters discussed may contain full-written statements. These statements are based on current plans, estimates, and projections. Therefore, you should not place any relations on the line somewhere. We caution you that a number of important factors could cause actors out to differ materially from those containing any following statements. For more information about the potential risks and uncertainty, please refer to the Congress findings with the Securities and Exchange Commission, including the most recently report I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Thanks, Huangpu, and thank you, everyone, for joining our call. In the first quarter of 2026, our marketing service revenue, online game revenue, and the bottom line performance all exceeded our previous guidance. For the social media platform, we continue to focus on promoting a healthy and vibrant atmosphere on our platform with a series of differentiated events. At the same time, we kept refining our products to cater to users' needs, leveraging our unique events and brand influence. We were able to explore new monetization opportunities. For our online games, we delivered another solid quarter, given by a wealth of high-quality content and targeted operational refinements that resonated with our diverse diverse player base. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the first quarter of 2026, total revenues were $141 million, up 4% year-over-year, and down 1% quarter-over-quarter. Marketing services revenues were $13 million, dollars, down 8 percent year-over-year, and 26 percent quarter-over-quarter. Online game revenues were $125 million, up 6 percent year-over-year, and 3 percent quarter-over-quarter. Net loss attributable to social.com Limited was $4 million, compared with a net income of $182 million in the first quarter of 2025, and a net income of $423 million in the fourth quarter of 2025. Nodgap net loss attributable to Zoltacom Limited was $4 million loss in $4 million loss, compared with a net loss of $16 million in the first quarter of 2025 and a net income of $261 million in the fourth quarter of 2025. Now, I'll go through our key demonstrates in more detail. First, the social media platform. In the first quarter of 2026, we continue to integrate resources in-depth and upgrade our products with cutting-edge technologies. We offer users various practical and easy-using functions to optimize the user experience, enhance user engagement, and further promote dissemination of content. At the same time, we kept focusing on promoting a vigorous atmosphere in our community and fostering a prosperous platform ecosystem. Benefiting from unique offline events, we helped to provide users with plenty of interaction opportunities, improve their social engagement, and generate abundant premium content that was widely spread over the Internet. In March, for example, in March, we successfully held the 18th social news marathon in Hong Kong and the offline seminar of our physics class in Hong Kong. Each season marathon attracted active participation by celebrities and broadcasters nationwide, greatly promoting social interaction on our platform. Meanwhile, the child physics class made its debut at the Hong Kong University of Science and Technology, bringing in-depth physics knowledge to the public. Both events were well received by audiences, thereby creating a strong synergy between our flagship IPs and further extending our brand influence. In April, we hosted the 2026 Spring Convention of Sohu Video Influencers, for example, which has been held biannually for the past three years. We invited celebrities and gathered influencers from various fields, including verticals popular with young users, such as and verticals in professional fields, such as science and health. The convention created a chance for broadcasters to interact in person, promoting content generation and dissemination, and doing genuine social connections. During the quarter, we also launched the 2026 Sohu Hip Hop Dancing Festival competition throughout the year, and also the 2026 Handful Chinese Cosmic Model competition, which also the year-long event. We further consolidate our influence and appeal in these areas. We continue to combine offline events with online interactions and upgrade our profile and the standard of our competition. In these efforts, we garnered widespread attention and attracted someone into a guest with a shared interest to participate and interact on our platform. We continue to leverage our unique content and live broadcasting technology while exploring new business opportunities. We provide targeted marketing solutions for advertisers through our innovative and customized events and campaigns, et cetera. As the J6 class IP is the derivative, we continue to grow in influence, effectively grow traffic to the platform, and continue to unlock monetization potential. Next, turning to our online game business. During the quarter, our online game business performed well, with revenues exceeding our prior guidance. In our PC game business, we roll out various holiday events around the Chinese New Year and the Valentine's Day, as well as promotional events for the regular PLBDPC, which helps sustain stable player engagement. Apart from holiday events, we also introduced a new plan for TLBB vintage, which boosted player enthusiasm. Meanwhile, we continue to update and refine TLBB return to ensure its long-term vitality. Turning to our mobile side, the mobile game business, we launched an expansion pack for legacy TLBB Mobile to celebrate the Chinese New Year, along with diverse online and offline events. The revenue for this game stays largely stable on a sequential basis. Next quarter, we will continue to launch expansion packs and content updates for the TLBB series and other titles to further keep players engaged. Looking ahead, we will remain committed to our top-game strategy. On the product development front, we will stay anchored in a user-centric approach and adhere to a systematic R&D processes while driving the implementation of new technologies to enhance efficiency and product success rate. Regarding our pipeline, we seek to further unlock the potential of our TLBB IT. Meanwhile, as we maintain our competitive edge in the MMORPGs, we will continue to diversify our portfolio with multiple types of games and expand our product offerings with global appeal. Now, I'd like to provide an update on the ongoing shared repurchase program. As of May 13, 2026, SOHU has repurchased 8.7 million ADS from an aggregated cost of approximately $116 million. With that, I'll turn now the call to Seabo Drennan.

Thank you, Charles. I will now walk you through the key financials of our major segments for the first quarter of 2026. All the numbers on a non-GAP basis, you may find a reconciliation of non-GAP to GAP measures on our IR website. For Soho Media's platform, quarterly revenues were $16 million, compared with $70 million in the same quarter last year. Quarterly operating loss was $70 million, flat with the same quarter last year. For Chang-Yong, quarterly revenue, $125 million, compared with $118 million in the same quarter last year, quarterly operating profit, $66 million, compared with operating profit, $55 million in the same quarter last year. For the second quarter of 2026, we expect marketing services revenue to be between $30 million and $40 million. This implies a new decrease of 10% to 17% and a sequential increase of 4% to 11%. online gain revenue to be between $104 million and $114 million. This implies annual decrease of 2% to an annual increase of 8% and a sequential decrease of 8% to 17%. Both land gap and gap net loss, attributable to SoCo.com Limited, to be between $50 million and $25 million. This forecast reflects SoCo's management current under preliminary review, which is subject to substantial uncertainty. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

Thank you. If you wish to ask a question now, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. We will now take our first question and our first question comes from the line of Thomas Chong at Jefferies. Please ask your question, Thomas. Your line is open.

Hi. Thanks, management, for taking my question. I have a couple of questions. I think first is on our marketing services, on our advertising revenue. Can management comment about how we should think about the advertising outlook in second half and full year? And in particular, we are going soon to have a World Cup. Would this be a big positive to our advertising revenue in Q2 and Q3. And my second question is about the gaming business. Can we comment about the quarter-to-date performance so far we are seeing in Q2? Is it more likely to hit the low end or the high end of the revenue guidance? And my third question is about the earnings outlook. Given our solid performance in Q1, and we are expecting the losses to widen sequentially in Q2, I'm just wondering, is this a conservative assumption? And should we use Q2 as a benchmark to project Q3 and Q4 bottom line?

Okay, Thomas. So the first question about marketing services, you're right. Q2 forecast, as Joanna just said, is going to be 13, right, 13 to 14 minutes, about 7% sequential growth compared with the Q1. First of all, the overall economy situation is kind of in the downturn, right, in the economic situation, and the adversaries tend to be cautious in spending. We are able to maintain some growth because we have our unique and differentiated marketing solutions and events, especially we can take advantage of our, you know, going to the network and also influencers and also some IPs like my own IP and the, you know, the offline events like the K-pop competition and so we have a quite unique, you know, tailor-made or customized marketing based on what's available in our own, you know, platform and also its activities. So your next question is about the overall year load or outlook, or just the Q2, I think it would be similar, right, last year, about the game, right? The game, so the first quarter is good, and then the second half, you want to see that second half, you know, is that a low end or a half end, right? Thomas想问一下

我们Q2目前来 游戏业务 Q2目前来看表现怎么样 然后我们Gadance是比较 可能是偏向高点 从高的点还是低点 比较可能性比较大

目前来看 Q2游戏业务 目前是符合我们的预期的 那收入高低 主要还是看我们天龙系列游戏 在二季度推出的内容和活动 是不是能够买到用户的需要

所以预期二季度收入肯定是会自然下滑的

So far the performance of the second quarter is largely in line with our expectation

从目前来看应该是符合预期

但是那个二季度 因为我们跟一季度相比的 拉收和促销活动比较少一点

and the level of revenue will largely depend on the performance of the content and activities we plan to roll out for our TLBG series games to see whether they can satisfy users' needs. So far, we believe it is in line with our expectations. Also, as we plan to roll out fewer promotional and revenue boosting activities in the second quarter, so we expect our gaming revenue to experience a natural decline.

So we gave TLBG return, right? That was in Q1 and Q3 graduate decline, right, in the return, Q2 return, yes.

That's what gave me.

So you have third question, Thomas, earning our look. Oh, yes.

Yes, on the bottom line, because Q1, we are better than expected, but Q2, we are seeing sequential widening of the losses. So just want to see if Q2 is a benchmark for Q3 and Q4. Thank you. Thank you, Charles.

I think this year Q2 and Q3 will be similar to last year because on the blocking service side, on the platform side, we are basically, you know, about the same. We're still working on our server network and make sure that we have a larger user base so that we can have an update, but now still we're maintaining a stable and end-of-packing So the Q2 result or the earnings drop compared with Q1, mainly because of gaming's revenue cover, right? It's much less than Q1, as we just described.

Got it. Thank you.

Thank you. We will now take our next question from the line of Alicia Yupp, SET. Please ask your question, Alicia. your line is open.

Hello. Good evening. Good afternoon, management. Thanks for taking my questions. I have two follow-ups on the earlier questions. So, I guess, you know, you mentioned on, I think, the second quarter, obviously, the guidance. It is a bit, you know, weaker than I expected in terms of the sequential trend that typically we would see from the 1Q to 2Q, even though sequentially it's growth. But then I think the year-over-year decline, it seems to be worse than the first quarter year-over-year decline. I'm just wondering, is the macro getting even weaker than what you have previously expected, let's say, compared to, you know, five months ago in the beginning of the year. So, yeah, any colors you can share with, you know, overall the macro outlook, is that worse than what you had previously expected? And then on the operating loss, I just wanted to make sure I did not hear it wrong. for this 1Q, the marketing ad business, if the operating loss was $17 million. I just wanted to double-check on that because I think our revenue is only like $14 million or $15 million, but then we are losing $17 million. So it seems like the expense is a double of the revenue. So I just wanted to make sure I heard it correctly. each, and then if so, then where were the money spent? Is it mostly on the product development, or is it on the user acquisition? Thank you.

So first, let's answer your last question about the what? You have a question about the loss, the amount of spending in Q1, what number you're talking about, which one?

Oh, this is 17 million, the OP loss for the ad system.

17 million, or loss, or loss of what? We don't have a 17 million loss.

Yeah, the operating loss.

Operating loss. 17 million operating loss in QA. Just a second.

Show me the platform, the operating loss in QA is 17 million.

17.

17. Yeah.

I mean, it's similar, right, to the previous, yeah?

Like with the same quarter in the last quarter.

Yeah, it's similar to previous quarters.

Okay.

You have a question about the money we spent?

Yeah, yeah.

We didn't spend more money just as we did before, the previous quarters. Mostly to, I think, well, we don't, it's either on user acquisition or on product development. So it's all together because we are building, actually we have three social network products. One is the video, we don't have the wheel and also have the social news app and also will also turn that into a, you know, the Shi Dien Tien, so, and also for each of the products, especially for the, so, we have, you know, we do spend some money on the user acquisition and also the team, you know, the cost, and also product development. So, it's similar to previous quarters, it's until we, you know, do the really, until we have a really successful product that, you know, I would say, explode into a much larger scale. The, now the, and also considering the microexamatic situation, so the advertising dollars will not be able to cover the cost that we are, you know, incurred, you know, incurred in So similar, $70 million a quarter.

OK.

And then the revenue, the guidance, is that worse than you expected?

That's because the bankruptcy fund is continuing, right? It's worse than last year because of the auto car companies there. Because of the competition and the low margin of their, you know, so we are more cautious And we have to come up with really unique, you know, events or optimities like, you know, so like for example, I have to myself, I have to, you know, to apply, you know, this physics class IP to try to explain, you know, how to say it, give lectures about their products and the machines and the engines and also the cars, why the cars are better. So it's, and also sometimes the online users, our users, influencers to have a forum, whatever. But we have to have a differentiated unique opportunity to have an marketing solution offered to them so that they can, but compared with a few years ago, a few years ago, they were just, you know, it's an easy decision to spend a month to edit that, but now it's very difficult.

Just lastly, to follow up, can you share with us, I know you mentioned auto is one of the industry verticals probably are cutting back the ad budgets. Any Any other vertical that you're actually seeing is also facing more cautious ad budget?

It's across the board. All companies, basically, because just the Chinese consumers are spending less, consumers are spending less. That's why those companies are not making money or not making good money. That's why they are actually reduced, because there's an ad reduction, which is $100,000. They're also IT, FMCG, and all across the board.

Maybe just lastly, in terms of the first quarter on your advertising revenue contribution by industry vertical, if you can rank them by the contribution percentage?

19%. Auto industry, 19%. IT services like home appliances and electronics, and that's 19%. And FMCG, 14%. I see.

Okay, very helpful.

Yes, the IT sector, there's some good sign in the IT sector because the traditional home appliances, now because of the IT AI, they're all turning into an AI product with, you know, intelligence. So that's the, we have seen a lot of new kind of products that tend to market to the market, you know. So that's why, like, for example, I went to the Shanghai AWE, the annual AWE, and see a lot of new traditional home products, home appliance electronics with, you know, in Chinese color, AI, turning, you know, really a lot of, you know, with a lot of that, some opportunity.

I see, I see. And then, so that is, we are seeing, you know, decent budget. And then in terms of, you know, in the second quarter, Should we also rank, maybe you are seeing more updates from the IT, and then maybe FNCG is also okay, but then weaker in auto? Is that fair to assume that on the second quarter?

Yeah, the second quarter, the auto, right.

Yeah, auto is a fierce competition, yes.

And also the electric vehicle, you know, it's a more beneficial electric vehicle into the market share. And yeah, I would say it's similar, right? The auto industry is graduating, right? And now they're all trying to, you know, export more to the European market or to the Middle East, right? So, basically, the consumption, you know, consuming power is really a problem. People are not spending money. It's too saturated, right? Because people are paying their mortgage. That's why they don't have money to spend, right? They're all paying the housing mortgage. That's a major, that's mostly the biggest problem with the Chinese economy. So people all have debt and have to pay back their, to pay their mortgage. So they don't have time, they don't have the money to spend on other things.

Okay. Okay. Thank you so much, Charles. Thanks for sharing.

Okay. Thank you. As a reminder, please press star 11 on your telephone keypad if you wish to ask a question. I am showing no further questions. And with that, we conclude our conference call for today. Thank you for your participation. You may now disconnect your lines.