Sohu.com posts 19% revenue growth in Q3 2025, driven by online games and positive net income amid challenging ad market

OPERATOR - (00:01:15)

Ladies and Gentlemen, thank you for standing by and good evening. Thank you for joining Sohu.com’s third quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After Management's 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 would now like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu.com. Please go ahead.

Huang Pu - Investor Relations Director - (00:01:51)

Thanks Operator thank you for joining us to discuss Sohu.com’s third quarter 2025 results. On the call, Chairman and Chief Executive Officer Doug Charles Zhang, CFO and Vice President Finance James Tung. Also with us are Chang and CEO of Yaobing Wang. Before Management begins their prepared remarks, I would like to remind you of the coming 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 and therefore you should not place undue reliance on them. Forward looking Statements Involving 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 20F. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Charles Zhang - (00:03:03)

Thanks Guangpu and thank you everyone for joining our call. In the third quarter of 2025, our marketing services revenues were in line with our guidance. While both our online game revenues and the bottom line performance benefiting from our continuous efforts in the gaming business were well above our prior expectations, we recorded positive net income this quarter for the social media. So now for the social media platform. We continue to refine our products and integrate resources to better meet users needs and enhance their experiences. Meanwhile leveraging our product matrix and distinctive events, we remain committed to generating and distributing diversified premium content and continuously energizing our platform. Our differentiated advantages and unique IP enabled us to further unlock monetization potential for online games. Both new and established titles delivered outstanding performance driven by our deep understanding of our needs and proven operational expertise. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance for the third quarter of 2025. Total revenues $180 million upped 19% year over year and 43% quarter over quarter marketing services revenues $14 million down 27% year over year and 13% quarter over quarter online game revenues $162 million up 27% year over year and 53% quarter over quarter GAAP net income attributable to Sohu.com Ltd. $9 million compared with the net loss of $16 million in 3Q24 and the net loss of $20 million in the second quarter of this year. Non GAAP net income attributable to Sohu.com Ltd. Was $9 million compared to a net loss of $12 million in the third quarter of last year and net loss of $20 million in the second quarter of this year. Now I'll go through our key businesses in more detail. So for Sohu.com Platform, we continue to leverage the cutting edge technologies to optimize our products and and promote deeper integration across our product matrix. These enabled us to further adapt to various scenarios, improve operation efficiencies and enhance users experiences. At the same time, relying on the synergies between various online and offline events, we continue to stimulate the generation and dissemination of premium content and attract more users to our platform. During the quarter, we hosted a variety of events and activities to further build a vigorous social networking platform providing users with abundant opportunities for online and Offline Communications. The 2025 Autumn Convention of Social Video Influencers effectively promoted deeper communication among broadcasters across different verticals and significantly increased their vitality and retention on our platform. The ongoing 2025 Sohu K Pop Dancing Festival and also the Hanfu Model Competition Hanfu Model Competition both successfully ignited the passion of young people and further consolidated our influence in these areas. All these activities gained widespread recognition and popularity and continuously infused a large amount of content and traffic into our platform. As a result, we were able to further expand the influence of SOHU and foster a prosperous platform ecosystem. In addition, we also held a special themed activity such as the Halloween American TV Series Party. It not only engaged users with innovative content forms, but also became a highlight of our Social Video American TV Series Month which brought audiences with classic dramas such as the Western West World and also the Mandalorian. Meanwhile, we also launched multiple TV dramas, original drama and short dramas during the quarter to attract and retain users. The original drama the Rebirth Su Ye Ji was well received by audiences and attracted more users to our platform. Through our flagship IT the Physics class, we continue to strengthen our differentiated competitive advantages while at the same time exploring greater monetization opportunities. With Charles Physics class, we were able to reach a wider range of audiences through discussions on popular science topics and hot events and brought physics knowledge closer to the general public, not only helped us generate unique and premium content, but also consistently unlock monetization potentials. Together with the resources of sofu's product matrix and our marketing capabilities, we actively adapted to changes in the market trend and provided advertisers with customized marketing solutions through a series of innovative campaigns and events which are highly recognized by our both audiences and advertisers. Next turning to our guideline game business in the third quarter of 2025 we launched a new PC game, LBB Return. Based on a beloved early version of the TLBB PC. The game features reduced grinding and pay to win pressure, offering players a lighter gaming experience. It help us attract back many former players and its revenue performance has so far exceeded our expectations for TLBB PC. We also launched Game Content for TLBB Kunt Game Content for TLBB Vantage that recreated the classic design of the game which evoked a wave of nostalgia among players. Players enthusiasm and in game spending were far beyond our expectations. With regular TLBB PC we offered a new rare gear as rewards for our promotional events and redesigned the Cross Server Clan Wall gameplay which boosted willingness to pay among higher paying players for more games we launched for mobile games, we launched an expansion pack for legacy TLBB Mobile which brought an enhancement to the skills of Wang Clan alongside a new storyline and engaging activities. Revenue for this game remained stable on a sequential basis. TLBB Mobile Next quarter we will continue to launch expansion packs and content updates for the TLBB series and other titles to further keep players engaged amid an increasingly competitive market. We remain committed to our top game strategy. We follow a user centric philosophy and adhere to some strategies and a systematic RD process to enhance efficiency and success rate. As a part of strategy, we are taking concrete steps to unlock the potential of our TLBB IP. Meanwhile, building upon our core strengths in MMORPGs, we are working to diversify into new types of games including card based RPGs, sports games and casual games as well as expand our offerings for global markets. Now I'd like to give an update on the ongoing share repurchase program. As of November 13, 2025, SoHo has repurchased 7.6 million ADS for an aggregate cost of approximately $97 million. So basically 2/3 of the 150 million program. With that I will now turn the call over to Joanna please.

Joanna - (00:11:53)

Thank you Charles. I will now walk you through the key financials of our major segments for third quarter of 2025 all numbers on: A non GAAP basis. You may find a reconciliation of non GAAP to GAAP measures on our website. For social media platform quarterly revenues were $17 million compared with $73 million in the same quarter last year. Quarterly operating loss was $71 million compared with an operating loss $72 million in the same quarter last year. For Changyou, quarterly revenue $163 million compared with $129 million in the same quarter last year. Quarterly operating profit was $88 million compared with operating profit $62 million in the same quarter last year. For the fourth quarter of 2025, we expect marketing service revenues to be between $15 million and $16 million. This implies annual decrease of 15% to 20% and a sequential increase of 10% to 18%. Online game revenue to be between $130 million and $123 million. This implies annual increase of 3% to 12% and a sequential decrease of 24% to 30%. Both non GAAP and GAAP net loss attributable to Sohu.com Limited to be between $25 million and $35 million. This forecast reflects DOHS 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 - (00:13:54)

Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 Again, please stand by while we compile the Q and A roster. We will now take our first question from the line of Thomas Chong at Jefferies. Please go ahead.

Thomas Chong - Equity Analyst - (00:14:23)

Hi, good evening. Thanks management for taking my question. My first question is about the online game business. Given our online games performed very strongly in Q3, I'm just wondering how's the quarter to date performance so far? In particular, when I look into the guidance, it basically implies a sequential decline. So I'm not sure if we are a bit conservative in giving out the Q4 gaming guidance? And on the other hand, when I look into our portal business; when I look into the advertising side, we are actually seeing a quite sequential rebound in terms of the advertising revenue. May I ask about how you think about the macro sentiment coming into Q4 as well as the trend for different categories and based on the current visibilities, how should we think about the brand advertising outlook in 2026. If there's any color on that. Thank you.

UNKNOWN - (00:15:46)

The first question is about online gaming. Whether we are being conservative in the guidance. The performance of the fourth quarter so far is in line with our expectation. The strong third quarter results is primarily driven by the successful launch of new games LPB Return. And meanwhile the new servers of TLBB Vintage also performed very well, achieving historic high. So the actual revenue of third quarter exceeded our expectations a lot. And the performance of the fourth quarter depends mainly on the performance of new game TLBB Return and the performance of the content and activities that we will launch during the first quarter for TLBB PC next, the TLBB Mobile that. Yes. Thank you. So in line, right? Yep. Okay. So I think the Q4 rebound, right. Commons is. Yeah. I think since the whole ad base is not that big. Right. So it's kind of not. It's kind of oscillated a little bit. It depends on some like some you know, contract, you know, allocated to this quarter, but because the contract was signed late and then went to the next quarter. Right. So it's. But we do have them. So first of all, the macroeconomic situation is really not that good. Under pressure the different sectors like auto and IT services. So it's continued to kind of deteriorating. But as our new we have kind of innovative unique marketing campaign or services that kind of unique that still were able to attract some of the advertising. So we were able to go against the trend and basically stabilize the advertising revenue on a small basis. So because I think in Q4 we have some good events that we're able to create. Are you able to create such opportunities for them to advertise?

Thomas Chong - Equity Analyst - (00:19:34)

I see. Thank you. Charles, may I ask a follow up question about AI? Can you comment about how AI is integrated within sohu right now and are we actually seeing better productivity, cost savings or better advertising monetization so far?

UNKNOWN - (00:19:58)

Thank you.

Charles Zhang - (00:20:02)

I think AI has more impact, more usage or improvement of productivity on gaming business. Right. For Sohu.com, we're not developing the large language model. We are using AI to improve the user experience. Like for our social media platform, the AI, you know, can summarize the video's content and give the subtitles, the. And also in our news service news app there is this AI enhanced search and question answering features. So we're basically using AI and different models to improve our existing service of media and social network instead of spending a lot on the hardcore large language model. Yes. Maybe the, you know, the AI can improve.

UNKNOWN - (00:21:27)

The application of AI is now is mainly applied in art design and code generation and game planning creation. Thank you. Okay.

OPERATOR - (00:21:48)

Thank you. We will now take our next question from Alicia. Yup, Citi. Please go ahead Alicia.

Alicia - (00:21:58)

Hi. Yeah, thank you. Good evening management. Thanks for taking my questions. I have a couple follow up. First of all on the gaming, can management share with us what are the biggest surprise that you learned from the TLBB Return version and which one is the bigger driver in terms of the outperform helping on the outperform for this quarter, is that the TLBB Vintage news server or is that the new games TLBB Return? And I understand you give out the 4Q guidance you mentioned. This is reflecting the current situation that you are seeing and wanted to know is the vintage server that you are seeing the drop off of the user or you actually see that the new title TLBB Returns are seeing the sequential drop off or decline on the user and the revenue. So any colors that you can give us on that for the 3Q and 4Q would be helpful. And then second question for Charles on the macro situation, I think you mentioned auto IT services. The ad sentiment seems to be a little bit deteriorating. Are there any industry verticals or industry subsector that you are seeing is actually either improving on the sentiments or at least the sentiments is about the same as last few quarters. Thank you.

UNKNOWN - (00:24:33)

The first surprise from TLBB Return is the user spending is beyond our expectation because TLBB Return was positioned to be a gameplay is more relaxing and it requires less time and demand for paying spending is also less. So originally we thought the users paying would not be very good. Second, the retention, if the retention of TLP Return is very stable, better than our expectations. As for the contribution to the revenue increase of the quarter, we don't disclose the specific Number for individual pain 62 so far the user base of both TLP Return and TLBPV Vintage are both very steady but their revenues are actually trending down because for TLBB Vintage its performance in third quarter was very good. So in the fourth quarter we plan to roll out fewer promotional activities. And for TLBB Return, as it was newly launched in the third quarter, so it will experience natural decline compared with the initial launch period because users tend to have stronger willingness to pay when the game was initially launched. Okay, so your second question is about the ad situation, right? The sectors.

Alicia - (00:27:58)

Yeah.

Charles Zhang - (00:28:01)

So I think the overall you really kind of advertising market is under pressure. For example the auto industry, there's the two, you know, effective trend. First of all, the competition is fierce because there are just too many car companies. Right. So they need to stand out to try to have larger market share. There's the pressure to market and to promote their brands and the sales on the other hand, because of the too many cars there's the profit margin is very low for them. So the ad budget of each car companies are thinning, getting less. So that's why. So with this situation we have some kind of unique, like the physics class or through live streaming visits of their factories and some unique. And also with social media distribution, all kind of unique advertising. Instead of the traditional sponsorship of our channels or the portal channels, we were able.

UNKNOWN - (00:29:27)

To.

Charles Zhang - (00:29:31)

Get the ad budget. So auto industry is kind of flat, but it's still declining. And also we are also looking at other. The consumer electronics. We are just. And that manufacturer base, China's manufacturer base is very strong and they have a lot of new products, but they need to also market those products to domestic market. And still with our innovative offering of live streaming or social media distribution and lectures, physics lectures and the various events, we were able also to get some of those consumer electronics advertisers. And so that's why we were able to. With this deteriorating market situation, we're still able to get some of the advertising, you know, part or faction and still at a relatively small space.

Alicia - (00:30:48)

Okay, thank you, Charles.

Charles Zhang - (00:30:50)

Thank you.

OPERATOR - (00:30:53)

Thank you. I am showing no further questions. And with that, we conclude our conference call today. Thank you for your participation. You may now disconnect your lines.