Sohu.com Limited (SOHU) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu. Please go ahead. .

Thanks, [indiscernible]. Thank you for joining us to discuss Sohu's third quarter 2026 results. On the call are Chairman and the Chief Officer, Dr. Charles Zhang; CFO, Yanfeng Lv; and Vice President of Finance also with us are [indiscernible] . Before Martin begins their prepared remarks, I would like to remind you of the safe harbor statement in connection with today's conference call. Recent for the historical information contained herein, the matters discussed on this call may contain forward-looking statements. These believes are based on current plans, estimates and projections. Therefore, you should not place undue on these statements involve here risks and uncertainties, that a number of important factors could cause actual results to differ materially from those containing any following statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission, including the most -- with that, I will now turn the call over to Dr. Charles Zhang, please proceed. .

Thanks, Jono, and thank you to everyone for joining our call. In the third quarter of 2026, our marketing services revenues hit the high end of our guidance. Well, both our online game revenues and our bottom line performance were in line with our expectations. For the Sohu social media platform, we continue to strengthen its social features through numerous iconic events fostering genuine connections among users and boosting active user interactions across multiple verticals. We also kept leveraging our integrated product metrics with innovative and copied marketing solutions to a monetization potential for our customers, for our clients, -- for -- in games, we continue to introduce fresh content to sustain player interest while offering tailored gameplay experiences to meet evolving player needs. . Before going through each business, as in more detail, let me first give you a quick overview of our financial performance. Please be advised that this release relates to continuing operations on -- for the third quarter 2026, total revenues were $133 million, down 26% year-over-year and 2% quarter-over-quarter. Marketing Services revenues were $15 million, up 10% year-over-year and down 2% quarter-over-quarter. On game revenues, $114 million, down 30% year-over-year and 2% quarter-over-quarter. GAAP net loss attributable to Sohu.com $15 million compared with a net income of $9 million in the third quarter of 2025 and net income of $27 in the second quarter of this year. Non-GAAP and net loss attributable to compete for those of $15 million compared with the net income of $9 million in the third quarter of last year and net income of $500,000 in the second quarter of this year. Now go through our key businesses in detail. First, Sohu social media platform. We continue to refine our products and technologies to enhance to the experience across various scenarios, promote the generation and distribution of premium content and strengthen the social features of our platform. We hosted a diverse online offline events which effectively is a vibrant interactions among users across multiple verticals and further supporting the trading element of the social ecosystem of our platform. For example, in September 2026, auto convention Sohu with the influencer 2-milligram to in Beijing with genuine social networking at its core, we invited celebrities and broadcasters in diverse verticals ranging from popular interests to professional fuels. We provided them with opportunities to share ideas and build social connections, which greatly enhanced interaction engagement in our platform. The convention was well received by broadcasters and users, and we continue to expand our brand influence for the promoted authentic social connections among our leaders. -- this quarter, we continued with the 2026 in bar. 2026 Hinode of competition when we aromatase with higher professional standards and a better international outlook, both competitions to large numbers of US worldwide to participate and interact, both online and offline earning wide spread recognition. They become significant event that not only consistently generate premium content, but to stimulate social connections and talking our platform, in addition to venting we proactively expanded into other online interest communities and foster a vibrant and dynamic on our platform. More in October, we launched the Sohu Video American TV series Man during which we presented audiences with the right selection of classic TV dramas, films and the barite shows. At the end of October, we hosted its highlight event the Halloween American TV series Cosway party, bringing online and offline participants and exclusive combat combined in rich lineup of our premium content covering various topics with lively social interactions. Earlier in November, on statistics class market fixed anniversary since it's launched in 2021, it has a broadcast around 300 live sessions and conducting 40 off-line seminars featuring in-depth explanation of civic principles and advanced discussions on services together with Charles English as these 2 IPs are persistently seminate professional knowledge and news events to the public, bringing them closer to science and tonnage developments. We have attracted a large number of professional broadcasters encouraged well to contribute and connect on our platform, further strengthening our unique advantage in knowledge and science we live broadcasting. Benefiting from our long-standing brand influence and profile understanding of the market, we were able to precisely identify types needs with customized marketing solutions and help them to expand their brand invents, leveraging our distinctive and differentiated IPs, we gained high reignition from advertisers and secure more other planning dollars. Next, turning to game business. During the quarter, our online game business performed well, with growing in line with our prior guidance. In our game business, we launched best in the content and game play for regular TLBB PC and TLBB Vantage. We also introduced game content for a regular PC designed to deliver a more streamlined and low-pressure gameplay experience, which effectively promote improved later engagement. In addition, we rolled out crossover content of TLBB return, generating excitement among users, players moving out to our mobile game business, we launched new expansion pack in festival events for legacy TLBB mobile, helping maintain stable player engagement. Next quarter, we will continue to release expansion paths and content updates for the TLBB series and other titles to keep players engaged. Looking ahead, we will remain committed to our top game strategy on the product development front, we will continue to optimize our R&D processes implement advanced technologies and enhance the R&D or R&D capabilities through continuous expectation and realization, striving to bring more high-quality games to players. Regarding our pipeline, we seek to further unlock the potential of our TLBB IP. Meanwhile, as we can maintain our competitive act in -- for RTGs, we will keep diversifying our portfolio with multiple game and expanding our product offering with global appeal. Now I would like to provide an update on the ongoing share repurchase program. As of November 5, 2026, this year, Sohu has repurchased $10 million -- $10.1 million -- $10 million shares for an aggregate cost of approximately $134 million. With that, I will now turn the call over to Yanfeng Lv?

Thank you, Charles. I will now walk you through the key financials of our major segments for third quarter of 2026. All numbers on a non-GAAP basis -- you may find a reconciliation of non-GAAP to GAAP measures on our IR website. For Sohu social media platform, quarterly revenues were $19 million, compared with $70 million in the same quarter last year. Quarterly operating loss was $74 million compared with operating of $71 million in the same quarter last year. For Changyou, quarterly revenues, $150 million compared with $163 million in the same quarter last year. Quarterly operating profit was $59 million compared with operating profit of $88 million in the same quarter last year. For the fourth quarter of 2026, we expect markets revenues to be between $30 million and $40 million. This implies annual decrease of 18% to 24% and a sequential decrease of 6% to 13%. Online game revenues should be between $111 million and $121 million. This implies annual decrease of 8% to an annual increase of 1% and a sequential decrease of 3% to a sequential increase of 6%. We both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $17 million and $27 million. This forecast reflects Sohu 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 Instructions] And our first question comes from the line of Thomas Chong at Jefferies.

I have 3 questions. The first question is about the marketing services. We are actually seeing brand advertising revenue in Q3 is in line with guidance. When we look into the Q4 brand advertising methane guidance, even present a softness on sequential and also softness on a year-on-year basis. Are we actually seeing the advertising sentiment getting worse so far quarter-to-date? And how should we think about the 2027 outlook. So that's on the advertising side. And then my other question is on the gaming side. How should we think about the impact coming from AI, short drama a gaming sector and Chango? And my final question is about the buyback. How should we think about the share buyback going forward? If I remember correctly, the buyback program will be ended very soon. So we have any new plans on that front?

Okay, Thomas. So your three question, I will answer the first 1 and the third one, and then [indiscernible] to know answer the second one. So the first 1 is about the advertising, right? So in Q3, the advertising and marketing services are in line. Well, in Q4, it seems kind of soft, right? It doesn't -- it does not mean that there's any trend of the marketing, the -- same or stable, it's just that the -- some of these project just happened to concentrate in Q3 instead of Q4. So in Q4, some of the projects are less products in Q4. As we are -- we have this kilometer marketing services that depend on those kind of events and projects. So it's just -- and also in Q4, there's the strong double11 events seems not as robust by the previous year. The e-commerce side. So yes, it's kind of -- sort of in Q4 advertise kind of soft or weak. And then about 2027. So since we have a relatively small base of the advertising or the market service numbers. The -- it's not that significant. So whether in 2027, we'll gain growth or really depends on whether the -- depend on the success of our Sohu network that we have been as been recently announced that we are really. Working on this sort of network. So if we have a rapid growth of our societies, we expect advertising and market services to grow faster. The third question about buyback, we finished with that 100 buyback program, we've been about $134 million and still $60 million for that. We'll continue to finish that. And until when we finish so we have -- we're closing more now we have -- we still don't have a plan to have the program to buy back yet. Okay. Second is around gaming questions to [indiscernible].

[Foreign Language] there is some level of competition between short dramas and the gaming because by nature, they are all aiming at the entertainment of users' time .

[Foreign Language].

We can feel the trend from the user research that we have done in recent years. And to deal with that, we've made a lot of adjustments and new versions of our games to -- the main focus is to make them lighter weight and to reduce the time burden of the users and which turned out to be effective.

[Foreign Language] .

There is still a difference between AI drama and gaming because they offer players offer users different experiences. .

[Foreign Language] .

Dramas offers the users passive and a single person, the experience within only a single person. .

[Foreign Language] well, gaming offers players interactive and multiplayer experiences. .

So we believe there is some level of competition, but AI drama will not take place gaming -- all right. .

We will move to our next question nd our next question comes from the line of Alicia Yap at Citigroup. .