Sohu.com Limited Q1 FY2026 earnings call

• Social Media Platform

• Continued product upgrades with cutting-edge technology, adding practical functions to improve user experience, engagement, and content dissemination. Maintained focus on cultivating a healthy, vibrant community ecosystem.
• Held multiple high-profile offline and online events to drive user interaction and premium content generation, including the 18th Social News Marathon in Hong Kong, the Power Physics Lab offline seminar at HKUST, the 2026 Sohu Video Influencers Spring Convention, the year-long 2026 Sohu K-pop Dancing Festival and 2026 Hanzhou Modern Competition. These events strengthened flagship IPs, expanded brand influence, and created new monetization opportunities.
• Leverages unique content, live broadcasting technology, and customized event-based marketing solutions to unlock advertising monetization potential for advertisers.
• Spending on the social media segment remains consistent with prior quarters, covering user acquisition, team costs, and product development across Sohu's social product portfolio, including Sohu Videos, Sohu News, and Huyou.

• Online Game Business

• Delivered a solid Q1 2026 performance with revenue exceeding prior guidance, driven by high-quality content and targeted operational improvements that resonated with players.
• For PC games: rolled out seasonal holiday events for Chinese New Year and Valentine's Day, plus regular promotions for TLBB PC to sustain stable player engagement; launched a new plan for TLBB Vantage that boosted player enthusiasm, and continued updates for TLBB Returns to maintain long-term vitality.
• For mobile games: launched a Chinese New Year expansion pack for Legacy TLBB Mobile alongside combined online-offline events, with opening performance remaining stable sequentially.
• Long-term strategy remains focused on a top-game approach: maintains a user-centric product development framework, follows systematic R&D processes, and integrates new technologies to improve efficiency and product success rates. It will continue to unlock the potential of the TLBB IP, maintain its competitive edge in the MMORPG category, diversify its game portfolio, and develop products with global appeal.

• Share Repurchase

• As of May 13, 2026, SOHU has repurchased 8.7 million ADS for an aggregate cost of approximately $116 million.

For Q1 2026, total company revenue was $141 million, up 4% year-over-year (YoY) and down 1% quarter-over-quarter (QoQ). 1. Social Media Platform (Marketing Services): Revenues were $16 million, down from $17 million YoY. It recorded an operating loss of $17 million (corrected later to $70 million operating loss), flat YoY. Revenue contribution to total Q1 2026 revenue is 11.3%. 2. Online Games (Changyong): Revenues were $125 million, down from $180 million YoY, but up 6% YoY against a prior period misstatement and up 3% QoQ. Operating profit was $66 million, up from $55 million YoY. Revenue contribution to total Q1 2026 revenue is 88.7%. Net loss attributable to SOHO.com Limited was $4 million in Q1 2026, compared to a $182 million net income in Q1 2025 and $423 million net income in Q4 2025.

• For Q2 2026, management projects marketing services revenue between $30 million and $40 million, representing a 10% to 17% YoY decrease and a 4% to 11% QoQ increase. • Online game revenue is projected between $104 million and $140 million for Q2 2026, ranging from a 2% YoY decrease to an 8% YoY increase, and an 8% to 17% QoQ decrease, due to planned lower promotional activity in the quarter. • GAAP and non-GAAP net loss attributable to SOHU.com Limited is projected between $15 million and $25 million for Q2 2026. • Full-year advertising revenue is expected to be broadly similar to 2025 levels, with Q2 and Q3 performance expected to align with 2025 patterns.

• Macroeconomic weakness has dampened Chinese consumer spending, driven by high mortgage debt and saturated domestic demand, leading to broad-based advertiser spending cuts across all major verticals, including auto, FMCG, and IT services. • The auto vertical faces particularly intense competition and compressed margins, leading to deeper advertiser spending caution that has negatively impacted marketing services revenue more than expected. • All forward-looking guidance is subject to substantial macro and operational uncertainty. • The social media platform segment continues to operate at a loss, as advertising revenue is insufficient to cover ongoing investment in product development and user acquisition, and profitability will not be achieved until the segment scales to a much larger size.

Q: Thomas Chong (Jefferies) asked for the full-year and H2 2026 advertising outlook, the impact of the upcoming World Cup on Q2/Q3 advertising revenue, Q2 2026 gaming performance guidance relative to the stated range, and whether the projected sequential Q2 loss widening is conservative and usable as a benchmark for H2 2026. / A: Management noted broad macroeconomic weakness has made advertisers cautious, but SOHU's unique differentiated event-based marketing solutions will support small sequential growth in Q2 2026, with full-year advertising expected to be similar to 2025. Q2 gaming performance is currently in line with expectations, with the projected sequential decline driven by planned lower promotional activity, not underperformance. Q2 and Q3 earnings are expected to follow 2025 patterns, with the wider Q2 loss driven by lower non-operating gains rather than core operational weakness.

Q: Alicia Yap (CT) asked if the larger-than-expected YoY advertising decline in Q2 2026 guidance reflects worse-than-expected macro deterioration, and confirmed the Q1 2026 social media segment operating loss figure and where the segment's spending is allocated. / A: Management corrected the initial $17 million operating loss misstatement to $70 million, which matches prior quarter spending levels. Spending is allocated consistently to user acquisition, team compensation, and product development across SOHU's social product portfolio, and the segment will remain loss-making until it achieves large-scale traction. The weaker YoY advertising outlook does reflect broader macro weakness, as soft consumer spending has led to across-the-board advertiser budget cuts.

Q: Alicia Yap asked which additional industry verticals are seeing advertising budget cuts, the Q1 2026 advertising revenue split by vertical, and if Q2 2026 will see stronger performance from IT and weaker from auto. / A: Management confirmed budget cuts are broad-based across all verticals driven by weak consumer consumption, with auto particularly weak due to fierce electric vehicle market competition. IT/home appliances is the largest vertical contributing 19% of Q1 advertising revenue, followed by FMCG at 14%, with growth in IT from new AI-enabled smart home devices presenting incremental advertising opportunities. Q2 2026 trends will align with this broader pattern.