Sohu Q4 2025 Earnings Call - $285M Changyou Tax Reversal Masks Weak Ad Business

Conference Operator: Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu’s fourth quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After management prepared remarks, there will be a question and answer session. Today’s conference call is being recorded. If you have any objections, you may disconnect at this time. I’ll 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.

Huang Pu, Investor Relations Director, Sohu: Thanks, operator. Thank you for joining us to discuss Sohu’s fourth quarter 2025 results. I want to call our Chairman and Chief Executive Officer, Dr. Charles Zhang, CFO Jenny Li, and Vice President of Finance, John Stone. Also with us are Changyou, CEO Wen Chen, and CFO Bing Wang. Before management begins their prepared remarks, I would like to remind you of the commentary hub statement in connection with today’s conference call. Except for the historical information contained herein, the matters discussed on the call may contain forward-looking statements. These statements are based on current plans, estimates, and projections, and therefore you should not place undue reliance on them. Forward-looking statements involve in key 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 will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Thanks, Huang Pu, and thank you everyone for joining our call. In the fourth quarter of 2025, our marketing services revenues exceeded our previous guidance, while our online game revenues were in line with our expectations. Our non-GAAP bottom line performance, excluding the impact of the Chang Yu withholding income tax reversal, came in at the high end of our prior guidance. For Sohu 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, greatly 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 the fourth quarter of 2025, the total revenue $142 million, up 6% year-over-year and down 21% quarter-over-quarter. Marketing services revenues $17 million, down 10% year-over-year, up 25% quarter-over-quarter. Online game revenues $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 $223 million, compared with a net loss of $21 million in the fourth quarter of last year, I mean, 2024, and net income of $9 million in the third quarter of 2025. After giving effect to the above-mentioned reversal of the withholding income tax, non-GAAP net income attributable to Sohu.com Limited $261 million, compared with a net loss of $15 million in the fourth quarter of 2024, and a net income of $9 million in the third quarter of 2025.

For the full year of 2025, total revenues $584 million, down 2% compared with the compared with 2024. Marketing services revenues $60 million, down 18% compared with 2024. Online games revenues five $506 million, up 1% compared with 2024. GAAP net income attributable to Sohu.com Limited $394 million, compared with a net loss of a $100 million in 2024. Non-GAAP net income attributable to Sohu.com Limited $234 million, compared with a net loss of $83 million in 2024. Yeah, excluding the reversal you know accrued income tax the 2025 net non-GAAP net income is $51 million dollar loss, right? $51 million dollar loss, a 40% improvement over 2024.

Yeah. So now I will go through our key businesses in more detail. First, Sohu 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 large number of users, especially younger generations. Through spontaneous and active connections and communication, we consistently improved the user experience and boosted user engagement, further strengthening this 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 finals for the 2025 Sohu Hip-Hop Dancing Awards, and 2025 Sohu Video Chinese Traditional Costume Awards.

These events received widespread praise, sparked enthusiastic interaction among participants and the audience, 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, continued to host the traditional signature events such as the 2025 Sohu Fashion Awards and 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, and the fourth quarter of 2025, which brought audiences with lots of high-quality American movies we have... and TV series.

We also continued to steadily expand our content library with American dramas, as well as other attractive TV series, original dramas, and folk dramas, to consistently drive traffic to our platform. Marking its fourth anniversary, the Physics Class, you know, I myself teach, has conducted more than 270 live broadcasts, over 30 offline classes, and 270 online classes, multiple university seminars, and published 3 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’ needs with the above mentioned events and customized the marketing content. We also actively explored more monetization opportunities, leveraging our deep understanding of the market. Through the dissemination of our premium content related to the 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 natural decline of our new PC game, TLBB Return, online game revenues decreased on a sequential basis. In our PC game business, we raised a player level cap for regular TLBB PC, which effectively boosted user engagement.

Meanwhile, we rolled out a new character development system for TLBB Vintage, providing players with fresh goals and a more engaging experience. Moving on to our TLBB Return, we introduced its first new clan 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 driving the integration of our new technologies to enhance efficiency and product success rate. Regarding our pipeline, we’re actively working to unlock the potential of our TLBB IP. Meanwhile, as we maintain our core competitiveness in MMORPGs, we’ll 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 had purchased 8.1 million ADS for the aggregate cost of approximately $106 million. So we still have one-third to go to finish this repurchase. With that, I will now turn the call over to Diana.

Diana, CFO, Sohu: 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 on a non-GAAP basis. You may find the reconciliation non-GAAP to GAAP measures on our IR website. For 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 operating loss $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 $287 million in 2024.

For Changyou, quarterly revenue $121 million, compared with $111 million in the same quarter last year. Quarterly operating profit was $45 million, compared with operating profit $38 million in the same quarter last year. For the full year, 2025, revenue $509 million, compared with $506 million in 2024. The full year operating profit was $238 million, compared with operating profit $196 million in 2024. For the first quarter of 2026, we expect marketing service revenues to be between $10 million and $11 million. This implies annual decrease of 20%-27%, and a sequential decrease of 35%-41%.

Online game revenues to be between $113 million and $123 million. This implies 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, to be between $10 million and $20 million. This forecast reflects Sohu management’s current and preliminary review, which is subject to substantial uncertainty. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

Conference Operator: Thank you, management. As a reminder, to ask question, please dial star one one and wait for your name to be announced. To cancel the request, you can press star one one again. Our first question comes from the line of Thomas Chong of Jefferies. Please go ahead.

Thomas Chong, Analyst, Jefferies: 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 it is 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? And also on the gaming guidance, because when I look at the Q1 revenue guidance on gaming, is seeing like a negative or positive Q-on-Q. And 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. So that’s my first question.

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

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Okay, Thomas. The first question is about advertising. Your question about the Q1 softness, right? So I think it’s mainly due to the seasonality, because this year’s Chinese New Year is kind of late, I mean, two weeks late. It’s like in the middle of February. So, you know, companies, you know, not getting a lot of things done in January or February. The overall macroeconomic situation, well, remained similar to Q4, so that’s why. Then the next question is about gaming, right? So gaming revenue. Yeah. Q1. Yeah.

Diana, CFO, Sohu: Um,

: ...齐全的所有在一季度推出的内容和活动的效果如何。然后目前看来，游戏业务基本符合预期。

Wen Chen, Changyou CEO, Changyou: Since we will have no new game launching in the first quarter, so 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 like the TLBB Mobile. And so far, the performance is basically in line with our expectation. 下面一个是 AI 的。长期来看，管理层是不是觉得，AI 会给游戏行业带来一些颠覆性的，发展？

: 我觉得是的。反正从畅游的角度，我们是一直在希望通过AI主要来做优秀的策划方案的角色。因为这个我觉得应该是游戏业务最重要的一个工作内容。

Wen Chen, Changyou CEO, Changyou: We think so. We’ve been pushing the application of AI, especially, in terms of the creation of game design plan, which we think is the essential thing for the content production of game industry. That’s all. Thank you.

Thomas Chong, Analyst, Jefferies: Hi. 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 are actually seeing some softness. I’m not sure if there’s any improvement for auto and IT sectors. Thank you.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Yeah, there is some improvement in the auto sector. With a higher percentage of the overall revenue split. So yeah, because. Yeah, there is so auto in the auto industry is doing better than IT and other FMCG. Have a higher percentage of the total overall time. I mean, the revenue.

Thomas Chong, Analyst, Jefferies: Thank you. Thank you. This is Q4 we are talking about?

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Yeah, Q4, yes.

Thomas Chong, Analyst, Jefferies: Oh, got it. Thank you, Charles. Thank you. I will go back to the queue.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Okay, you’re welcome. Mm-hmm.

Conference 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, Analyst, Citi: Hello, thank you. Good evening, management. Thanks for taking my questions. I have a few questions. First is that I wanted to follow up on the first quarter guidance and also the Q4. So was there any one-off revenue that were recognized in the Q4 that lead to the outperformance in the fourth quarter? So any special ad campaign by any industry vertical that you know outperforms during the Q4? And then second question is, can management... 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?

And then last question is on your guidance, the net loss guidance. Seems like this quarter, the $10 million-$20 million net loss that you’ve guided, is a much smaller, number than, previously. Usually the loss is around $20 million-$30 million range. So any particular reasons why the loss is narrower than previous quarter? And also, should we expect this trend to trend be consistent for the remaining, of 2026? Thank you.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: So your first question is about, you’re trying to understand why the Q4 there’s a growth, right? And then the Q1, there’s softness for the advertising, right? You were thinking that-

Alicia Yap, Analyst, Citi: Yeah, why Q-

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Marketing campaign. Yeah.

Alicia Yap, Analyst, Citi: That’s right. That’s so why Q4 is stronger than your guidance, right? And then any particular special events that happened in Q4?

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: No, I think the Q4, I think we are doing just doing better overall. The Q1 softness or the Q1 lower, you know, forecast is purely due to the Chinese New Year’s, delayed the Chinese New Year this year. Chinese New Year is, you know, like February 16, right? So it’s like more than 2 weeks late than last year. So that, you know, advertisers, you know, they just don’t have much thing, you know, they only after the Chinese New Year on the, after February and into March, they come back to work and start to you know, plan for the years to add the marketing campaign, right? So it’s purely due to Chinese New Year that our advertising are not doing that well in Q1.

Even compared, this is not, even compared with last, last, you know, first quarter, first quarter of 2025. Q4 is not because we’re, there’s a major—it’s just like we’re, we’re just doing better, well, the macroeconomic situation is still similar, not, you know, it’s still not very good and a lot of uncertainties. We are just, through, there’s some basically, a change or shift of advertising, you know, advertising industry, that the traditional advertising on those media channels, those so-called Ningbo, is not working now. People are not spending much on that, on the brand mark—brand,

But instead, you know, we have this innovative marketing solutions, like based on some, you know, KOL or influencer or the online, you know, and a, you know, viral, you know, some event, offline event, live streaming, all this, that actually consistent with our products development side, our user social media platform. So we have this innovative marketing solutions that differentiate us from others, from the, you know, so that we are getting additional brand marketing, you know, our, I mean, the spending. So we’re just especially like in Q4, we have some major events, offline events that attract advertisers.

And online, you know, online KOL accounts and those, it’s live streaming, all these things. So it’s really, we are entering into a new age of marketing in the social media time. So I hope I answered your question.

Alicia Yap, Analyst, Citi: Okay, great.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Uh.

Alicia Yap, Analyst, Citi: Yes. Yes, you did. Thank you.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: So next, you are going second.

Wen Chen, Changyou CEO, Changyou: First, regarding the game pipeline, we have our card-based RPG based on Xiaomi IP. It’s a mobile game mid through mid through platform game. It is expected to launch by the end of 2026 or early 2027, subject to its development process and the testing results. Meanwhile, we also have several new programs, new games in development, and we will decide if we will launch the games or when to launch the games based on their development and their testing results. For the existing games, we will launch expansion packs, similar in a similar cadence as previous years.

As for the revenue trend for this upcoming quarter, we can’t forecast the trend right now, and it depends on the performance of the expansion pack of our older games, and also depends on whether we can launch new games, and the new games performance. Thank you.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: Thank you for the year 2026, the average loss is similar, right?

Wen Chen, Changyou CEO, Changyou: Yes.

Dr. Charles Zhang, Chairman and Chief Executive Officer, Sohu: 10 or 29 or something, so.

Conference Operator: Last question. 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.

Hmm.