Sohu.com (SOHU) Q3 2026 Earnings Call Transcript

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DATE

Monday, Nov. 9, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Dr. Charles Zhang
• Chief Financial Officer - Joanna Lv
• Vice President of Finance - James Deng
• Changyou Chief Executive Officer - Dewen Chen
• Changyou Chief Financial Officer - Yaobin Wang
• Investor Relations Director - Huang Pu

TAKEAWAYS

• Total Revenues -- $133 million, representing a 26% decrease year over year due to lower contributions from the online game segment.
• Online Game Revenues -- $114 million, falling 30% year over year reflecting natural declines in older titles and a high comparison base from the previous year.
• Marketing Services Revenues -- $15 million, increasing 10% year over year driven by the performance of the social media platform's integrated product matrix.
• GAAP Net Loss -- $15 million, compared to a net income of $9 million in the third quarter of 2025.
• Non-GAAP Net Loss -- $15 million, compared to a net income of $9 million in the third quarter of 2025.
• Cash and Investments -- $1.2 billion, as of Sept. 30, 2026, consisting of cash, short-term investments, and long-term time deposits.
• Cost of Revenues -- $32 million, a 9% decrease year over year.
• Operating Expenses -- $120 million, down 9% year over year driven by lower salary and benefits expenses and reduced marketing spend.
• PC Game MAU -- 2.6 million, a 4% decrease year over year attributed to the natural decline of mature titles like TLBB PC.
• PC Game APA -- 1.0 million, an 8% decrease year over year.
• Mobile Game MAU -- 1.4 million, a 24% decrease year over year.
• Mobile Game APA -- 0.2 million, a 25% decrease year over year.
• Marketing Services Guidance -- $13 million to $14 million for the fourth quarter, implying an annual decrease of 18% to 24% and a sequential decrease of 6% to 13%.
• Online Game Guidance -- $111 million to $121 million for the fourth quarter, representing an annual change of negative 8% to positive 1%.
• Net Loss Guidance -- $17 million to $27 million for the fourth quarter.
• Auto Advertising Contribution -- 42% of total marketing services revenue in the third quarter, representing an increase in the sector's share.
• FMCG Advertising Contribution -- 17% of total marketing services revenue in the third quarter.
• IT Advertising Contribution -- 12% of total marketing services revenue in the third quarter.
• Share Repurchase Program -- 10.1 million ADS shares repurchased for approximately $134 million as of Nov. 5, 2026.

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RISKS

• Zhang stated, "In Q4, advertising is kind of soft or weak," noting that seasonal e-commerce activity was less intensive than in previous years.
• Chen stated that AI dramas compete for entertainment time, with users spending "more than 2 hours a day" on that format.

SUMMARY

Sohu.com Limited (NASDAQ:SOHU) reported a 26% year-over-year decline in total revenue, primarily driven by a 30% contraction in its online gaming segment as mature titles experienced natural declines. Management noted that marketing services revenue reached the high end of its guidance range, growing 10% year over year through creative marketing solutions and iconic social media events. The company reported a net loss of $15 million for the quarter and expects further losses in the fourth quarter as e-commerce advertising sentiment appears weaker than in prior years. Despite these headwinds, the company maintains a liquidity position of $1.2 billion in cash and investments and is focused on evolving its social media ecosystem through professional knowledge broadcasting and influencer-driven content.

• Management is transitioning games to "lighter weight" formats to reduce user time burdens and address competition from short-form video content.
• The company marked the fifth anniversary of "Tao's Physics Class," an IP that has completed approximately 300 live sessions to support professional knowledge broadcasting.
• CEO Zhang stated, "Leveraging our distinctive and differentiated IPs, we gained high recognition from advertisers and secured more advertising dollars."
• Management noted that advertising models are evolving into comprehensive marketing services including live streaming, offline events, and viral circulation.
• The company has approximately $16 million remaining in its current $150 million share repurchase authorization as of early Nov. 2026.

INDUSTRY GLOSSARY

• TLBB: Tian Long Ba Bu, a primary massively multiplayer online role-playing game intellectual property for the company.
• MAU: Monthly Active User accounts, defined as registered accounts logged into a game at least once during a month.
• APA: Active Paying Accounts, defined as accounts from which game points are utilized at least once during a quarter.
• Non-GAAP: A financial measure that excludes share-based compensation expense to provide an alternative view of operating performance.
• ADS: American Depositary Share, where each share represents one ordinary share of the company.

Full Conference Call Transcript

Operator: 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.

Pu Huang: Thanks. Thank you for joining us to discuss Sohu's third quarter 2026 results. On the call are Chairman and Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and Vice President of Finance, James Deng. Also with us are Changyou's CEO, Dewen Chen; and CFO, Yaobin Wang. Before management begins their prepared remarks, I would like to remind you of the safe harbor statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed on this call may contain forward-looking statements. These statements are based on current plans, estimates and projections. Therefore, you should not place undue reliance on them. Forward-looking statements involve inherent risks and uncertainties.

We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking 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 recent annual report on Form 20-F. With that, I would like to turn the call over to Dr. Charles Zhang. Charles, please proceed.

Charles Zhang: Thanks, Huang Pu, and thank you for everyone for joining our call. In the third quarter of 2026, our marketing services revenues hit the high end of our guidance, while 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 matrix with innovative and customized marketing solutions to unlock monetization potentials for our customers, for our clients.

For online 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 unit 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 only. 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. Online game revenues, $114 million, down 30% year-over-year and 2% quarter-over-quarter.

GAAP net loss attributable to Sohu.com Limited $15 million compared with a net income of $9 million in the third quarter of 2025 and net income of $200,000 in the second quarter of this year. Non-GAAP net loss attributable to Sohu.com Limited was also $15 million compared with a 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 I'll go through our key businesses in more detail. First, Sohu social media platform. We continue to refine our products and technologies to enhance user experience across various scenarios, promote the generation and distribution of premium content and to strengthen the social features of our platform.

We hosted diverse online and offline events, which effectively sparked vibrant interactions among users across multiple verticals and further supported the striving development of the social ecosystem of our platform. For example, in September 2026, Autumn Convention of Sohu Video Influencers [Foreign Language] took place in Beijing. With genuine social networking at its core, we invited celebrities and broadcasters in diverse verticals ranging from popular interest to professional fields, we provided them with opportunities to share ideas and build social connections, which greatly enhanced user interaction engagement in our platform. The convention was well received by broadcasters and users and continue to expand our brand influence further promote and deepen authentic social connections among our users.

Also in this quarter, we continued with the 2026 Dancing Festival, [Foreign Language] and 2026 Hanfu Model Competition, [Foreign Language] with higher professional standards and a broader international outlook. Both competitions drew large numbers of enthusiasts worldwide to participate and interact both online and offline earning widespread recognition. They have become signature events that not only consistently generate premium content, but also stimulate social connections and vitality in our platform. In addition to Dance and Hanfu, we proactively expanded into other online interest communities and fostered a vibrant and dynamic atmosphere on our platform.

Moreover, in October, we launched the Sohu Video American TV Series Month, [Foreign Language] during which we presented audiences with a wide selection of classic TV dramas, films and variety shows. At the end of October, we hosted its highlight event, the Halloween American TV Series Cosplay Party, bringing online and offline participants an exclusive carnival that combined a rich lineup of our premium content covering various topics with lively social interactions. Earlier this November, Tao's Physics Class marked its fifth anniversary since its launch in 2021. It has broadcast around 300 live sessions and conducted nearly 40 offline seminars featuring in-depth explanations of physics principles and advanced discussions with well-known physicists.

Together with Charles' English Class, these 2 IPs have persistently disseminated professional knowledge and news events to the public, bringing them closer to science and cutting-edge developments. We have attracted a large number of professional broadcasters and encourage them to contribute and connect on our platform, further strengthening our unique competitive advantage in knowledge and science-related live broadcasting. Benefiting from our long-standing brand influence and profound understanding of the market, we were able to precisely identify and meet advertisers' needs with customized marketing solutions and help them to expand their brand influence. Leveraging our distinctive and differentiated IPs, we gained high recognition from advertisers and secured more advertising dollars. Next, turning to our online game business.

During the quarter, our online game business performed well with revenues in line with our prior guidance. In our PC game business, we launched the Qixi Festival themed content and gameplay for regular TLBB PC and TLBB Vintage. We also introduced game content for regular TLBB PC designed to deliver a more streamlined low-pressure gameplay experience, which effectively promote improved player engagement. In addition, we rolled out crossover content of TLBB Return, generating excitement among users and players. Moving on to our mobile game business, we launched new expansion packs and festival events for Legacy TLBB Mobile, helping maintain stable player engagement.

Next quarter, we will continue to release expansion packs 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 our R&D capabilities through continuous experimentation and validation, 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 edge in MMORPGs, we will keep diversifying our portfolio with multiple games [indiscernible] and expanding our product offering with global appeal.

Now I'd like to provide an update on our ongoing share repurchase program. As of November 5, 2026, this year, Sohu has repurchased 10.1 million ADS shares for an aggregate cost of approximately $134 million. With that, I will now turn the call over to our CFO, Joanna. Joanna, please.

Joanna Lv: Thank you, Charles. I will now walk you through the key financials of our major segments for the third quarter of 2026. All numbers are 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 [ $17 ] million in the same quarter last year. Quarterly operating loss was $74 million compared with an operating loss 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 an operating profit of $88 million in the same quarter last year. For the fourth quarter of 2026, we expect marketing service revenues to be between $30 million and $40 million. This implies an annual decrease of 18% to 24% and a sequential decrease of 6% to 13%. Online game revenues to be between $111 million and $121 million. This implies an annual decrease of 8% to an annual increase of 1% and a sequential decrease of 3% to a sequential increase of 6%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $17 million and $27 million.

This forecast reflects Sohu's 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: And our first question comes from the line of Thomas Chong at Jefferies.

Thomas Chong: 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 revenue guidance, it represents 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 to the gaming sector and Changyou? And my final question is about the share buyback.

How should we think about the share buyback going forward? If I remember correctly, the buyback program will be ended very soon. So do we have any new plans on that front?

Charles Zhang: Okay, Thomas. So your 3 questions, I will answer the first one and the third one, and then Changyou's people will answer the second one. So the first one is about the advertising, right? So in Q3, the advertising and marketing services are in line, while in Q4, it seems kind of soft, right? It does not mean that there's any trend of the marketing -- it remains the same or stable. It's just that some of these projects just happened to concentrate in Q3 instead of Q4. So in Q4, some of the project were less -- less projects in Q4 as we have these tailor-made marketing services that depend on those kind of events and projects.

So it's just -- and also in Q4, this year, the Double 11 events seem not as robust as previous years on the e-commerce side. So yes, that kind of -- so in Q4, advertising is kind of soft or weak. And then about 2027, so since we have a relatively small base of the advertising or the marketing service numbers, it's not that significant. So whether in 2027, we will gain growth or really depends on whether -- depend on the success of our social network that we have recently announced that we are really working on. So if we have a rapid growth of our social network user base, we expect advertising and marketing services to grow faster.

The third question about buyback, we finished with that $150 million buyback program, we've done about $134 million and still $16 million left. We'll continue to finish that. And until when we finish soon, we'll think more. Now we still don't have a plan to have a new program to buy back yet. All right. Okay. Second question gaming income question...

Dewen Chen: [Interpreted] 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. 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 for our games. The main focus is to make them lighter weight and to reduce the time burden of the users, which turned out to be effective. There is still a difference between AI drama and gaming because they offer users different experiences. AI dramas offer the users passive and single-person experiences. While gaming offers players interactive and multiplayer experiences.

So we believe there is some level of competition, but AI drama will not take the place of gaming. Thank you.

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

Alicis a Yap: I have a couple of follow-ups. First is, can you elaborate a little bit in terms of the impact of the short drama to the gaming? Do you think this is just the beginning of potentially more impact that could be coming? And second is that, how do you describe in terms of the competition or the negative impact that we are seeing from the gamers? Is it more as the time spent? Or is it more that the gamers are now becoming less interested in playing games, but they're just more attracted because the content on the short dramas is more interesting? Or it's just more the casual users are being attracted away?

So if any more details about how you have been observing this impact would be helpful. And then second is that, wanted to follow up on the advertising. Can you remind us a little bit why during 4Q and the Singles Day but Sohu is not beneficial? And also, if you could give us the breakdown on the third quarter in terms of the verticals that contribute to your advertising revenue in the third quarter in terms of the ranking?

Charles Zhang: First question is still about the impact of the AI, right, AI short drama, on gaming business or others...

Alicis a Yap: Gaming.

Charles Zhang: Gaming, yes...

Alicis a Yap: On gaming. Like short drama. Yes. I think just now management mentioned short drama has some impact. So we just wanted to know a little bit more detail about what you have observed for your gamers.

Charles Zhang: [Foreign Language] That what you are asking?

Joanna Lv: [Foreign Language] Is that is what Charles just mentioned the question you asked, Alicia?

Alicis a Yap: No so I didn't [Foreign Language] .

Dewen Chen: [Foreign Language].

Joanna Lv: I'll translate the answers. As for whether it impacts the casual or the hardcore games, well, to be honest, we are not sure. But intuitively, I think the AI dramas impact them both, and it will be a long-term impact. But we believe the impact won't be much harder because for now, the average daily time that users for AI drama spend is almost 2 hours a day.

Dewen Chen: More than 2 hours.

Joanna Lv: More than 2 hours a day. So we don't think there is still much space for that to grow. Meanwhile, we believe, as we just said before, AI drama and gaming provide with users different experiences. They impact each other and AI dramas will take the time of users' gaming time, but they cannot take the place of each other. So in the longer term, we believe they will coexist, yes.

Charles Zhang: [Foreign Language].

Alicis a Yap: [Foreign Language].

Charles Zhang: [Foreign Language].

Alicis a Yap: [Foreign Language].

Charles Zhang: [Foreign Language] .

Alicis a Yap: [Foreign Language].

Charles Zhang: [Foreign Language]. All right. Your question about the advertising, about the category, right?

Alicis a Yap: Yes.

Charles Zhang: Actually, we see an increase in the auto industry now in Q3 having 42% of the total, and FMCG decreased a little bit to 17%, and IT 12%. And as I explained earlier, Q4 is soft because the base is small, so you see the kind of swing, right, up and down. It depends on some number of projects. Marketing projects move from Q4 to Q3 across the deadline, then you have a better Q3 than Q4, right? So it happened to be that there are some large projects that happened in Q3. And then that's why Q3 has been better and Q4 is soft.

But it's also -- saying demonstrating that actually, we changed the name for advertising to so-called marketing services revenue because currently with the self media and the social media and the landscape of the Chinese Internet, the traditional advertising [Foreign Language] advertising campaign is becoming less and less. While people with this slow economy and advertisers are very cautious, they always want to maximize their dollars and maximize the marketing effect of their dollar amount. So they actually favor our this evolvement of our advertising marketing solutions from a more comprehensive, multidimensional, I would call each solutions like projects with offline events, with live streaming, with KOLs, with discussion forums, and also the viral spread or circulation on the Internet.

So it's kind of more creative marketing than the previous hardcore advertising. So that's actually why we're doing better or best. So that's why we can maintain basically still a lower small base, but still stable or sometimes even some growth in advertising. And I hope -- I think as our social network, if we are successful or we will continue to be successful to build up our social media network and to gain again, with the rapid growth of the user base, we expect these kind of marketing services -- will be more popular and trending higher.

Operator: 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.

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