Sohu.com Limited Q2 FY2026 earnings call

• Social Media Platform • Continued product refinement, technology upgrades, and enhanced cross-scenario user experience and engagement. Leveraged online-offline activity synergy to boost user interactions, premium content generation, and expand genuine user social connections to build a healthy social ecosystem. • Hosted multiple differentiated themed events to attract young users, including the 2026 Sohu Video Influencers Spring Convention, annual K-pop dancing festival, Hanfu costume model competition, campus dance outreach, outdoor explorer salute, and World Cup watch parties, which drove rapid growth of online interest clubs and generated cross-platform viral spread. • Held the 2026 SOHU Annual Science and Technology Conference with cross-sector expert dialogues, maintained leading market share in knowledge and science live content via core IPs including Charles Zhang's Physics Class, provided Gaokao exam preparation content, ran public science outreach, and celebrated the 10th anniversary of Charles Zhang's English Class which has produced over 2,000 live broadcasts to drive platform traffic. • Developed tailored marketing solutions for advertisers that integrate organic content placement with platform IP and events, unlocking additional monetization potential.

• Online Game Business • Q2 2026 performance beat prior guidance. For PC games, launched crossover content with the Feng Yun wuxia comic franchise for both standard and vintage versions of TLBB, added a new character development system for standard TLBB, and released new gameplay content for TLBB: Return to improve player experience. For mobile games, launched an anniversary expansion pack and in-game promotions for Legacy TLBB Mobile, driving higher player engagement and keeping revenue stable sequentially.

• Share Repurchase Program • As of August 6, 2026, SOHU has repurchased 9.4 million ADS for an aggregate cost of ~$124 million. The board of directors authorized an open-ended extension of the program until the full $150 million authorized repurchase amount is reached.

Total company revenue in Q2 2026 was $136 million, up 7% year-over-year (YoY) and down 4% quarter-over-quarter (QoQ). GAAP net income attributable to SOHU was $200 thousand, compared to a $20 million net loss in Q2 2025 and a $4 million net loss in Q1 2026; non-GAAP net income was $500 thousand, compared to a $20 million net loss Q2 2025 and a $4 million net loss Q1 2026, driven by a $13 million reversal of prior uncertain tax positions.

1. Social Media Platform (Marketing Services): Q2 2026 revenue was $19 million (flat YoY), with an operating loss of $71 million (compared to a $69 million operating loss in Q2 2025. Marketing services revenue specifically was $15 million, down 3% YoY and up 21% QoQ, accounting for ~11% of total company revenue.

2. Changyou (Online Games): Q2 2026 revenue was $117 million, up 9.3% YoY (from $107 million in Q2 2025), accounting for ~86% of total company revenue. Operating profit was $56 million, up from $51 million operating profit in Q2 2025. Online game revenue specifically was $116 million, up 10% YoY and down 7% QoQ.

• For Q3 2026, marketing services revenue is expected to be between $14 million and $15 million, representing 3% to 10% YoY growth and a 1% to 8% sequential decrease from Q2 2026.
• Online game revenue for Q3 2026 is projected to be between $105 million and $115 million (corrected from original transcript typo 150, consistent with 29%-35% YoY decrease), representing a 29% to 35% YoY decrease and a 1% to 10% sequential decrease from Q2 2026.
• Both GAAP and non-GAAP net loss attributable to SOHU is expected to be between $23 million and $30 million.
• All guidance reflects management's current preliminary view and is subject to substantial uncertainty.

• Forward-looking statements in the call are subject to material risks and uncertainties that could cause actual results to differ materially from projections, with key risk factors detailed in SOHU's filings with the U.S. Securities and Exchange Commission, including its most recent annual report.
• Broad macroeconomic weakness has led to highly cautious advertiser spending across all major categories (auto, FMCG, IT), creating ongoing headwinds for advertising revenue growth.
• Mature existing game titles are expected to experience natural sequential revenue decline after outperforming expectations in Q2 2026.
• Daily trading volume limitations prevented SOHU from completing its $150 million share repurchase program by its original November 2026 expiration date.

Q: What is SOHU's updated outlook for advertising in H2 2026, including category trends and the impact of the World Cup? What is the current quarter-to-date performance of the TLBB game series relative to guidance? / A: Management says overall macroeconomic conditions remain weak, and advertisers still maintain highly cautious spending across all major categories: auto accounts for 33% of advertising revenue, FMCG 20%, and IT 17%, all of which are seeing reduced spending. SOHU beat Q2 advertising guidance due to its unique integrated online-offline influencer marketing solutions that align with current advertiser demand for viral distribution, driving sequential growth from Q1. The World Cup activities are primarily for user acquisition, with negligible impact on advertising revenue. For TLBB, performance through the first two months of Q3 is in line with management expectations, though final results will depend on upcoming unlaunched content updates that are difficult to forecast. (637 characters)

Q: What is the rationale for extending the share repurchase program to open-ended status, and does Q3's expected positive YoY advertising growth signal the start of a sustained positive trend after years of decline? / A: The extension is solely because daily trading volume limitations mean SOHU cannot complete the full $150 million repurchase by the original November 2026 expiration, leaving $26 million remaining to repurchase. For advertising, while macro conditions and cautious spending remain weak, SOHU has achieved growth against a low base thanks to its unique marketing solutions that advertisers prefer, making Q3's expected positive growth the first potential sign of a sustained positive trend after a long period of decline. (552 characters)

Q: Why does Q3 gaming guidance call for sequential decline when 3Q is typically a seasonally stronger quarter for the industry, after SOHU beat Q2 gaming guidance? / A: SOHU's Q2 outperformance was driven by better-than-expected results from older mature titles including the TLBB PC franchise, where newly launched expansion packs resonated very well with players and exceeded internal forecasts. Following this strong quarter, management expects natural sequential revenue decline for these older mature games, which is a normal trend for long-operated titles, leading to the Q3 guidance for a sequential drop. (441 characters)