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DATE

Monday, Aug. 10, 2026 at 7:30 a.m. ET

CALL PARTICIPANTS

  • Investor Relations Director - Huang Pu
  • Chairman and Chief Executive Officer - Charles Zhang
  • CFO - Joanna Lv
  • Vice President of Finance - James Deng
  • Changyou's CEO - Dewen Chen
  • Changyou's CFO - Yaobin Wang

TAKEAWAYS

  • Total Revenue -- $136 million, an increase of 7% year over year but a 4% decline compared with the first quarter of 2026.
  • Online Game Revenue -- $116 million, representing 10% year-over-year growth and exceeding previous guidance due to expansion packs for older titles.
  • Marketing Services Revenue -- $15 million, reflecting a 3% decrease year over year.
  • GAAP Net Income -- $200,000, which includes a $30 million reversal of uncertain tax positions.
  • Non-GAAP Net Income -- $500,000, compared with a non-GAAP net loss of $20 million in the second quarter of 2025.
  • Sohu Media Platform Operating Loss -- $71 million, which widened from a $69 million operating loss in the same period last year.
  • Changyou Revenue -- $117 million, increasing from $107 million in the prior year quarter.
  • Changyou Operating Profit -- $56 million, compared with an operating profit of $51 million in the second quarter of 2025.
  • Share Repurchase Total -- $124 million, used to repurchase 9.4 million ADS as of Aug. 6, 2026.
  • Repurchase Authorization -- $150 million, with the Board authorizing the program to continue on an open-ended basis to complete the remaining $26 million.
  • Q3 Marketing Revenue Guidance -- $40 million to $50 million, which management indicated implies a sequential decrease of 1% to 8%.
  • Q3 Online Game Revenue Guidance -- $105 million to $150 million, representing a projected annual decrease of 29% to 35%.
  • Q3 Net Loss Guidance -- $23 million to $30 million for both GAAP and non-GAAP measures.
  • Advertising Mix -- 33% from the auto sector, 20% from FMCG, and 17% from the IT sector.
  • Sohu Media Platform Revenue -- $19 million, remaining flat year over year.
  • Physics Class Engagement -- 2,000 live broadcasts over 10 years, serving as a core IP to drive traffic and brand value.

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RISKS

  • Zhang stated, "the macroeconomic situation is still very bad, actually bad and sloppy," noting that advertisers are now very cautious in spending.
  • Lv warned that for the third quarter, the company expects "older games to experience some natural decline," which is expected as they have been operating for a long time.

SUMMARY

Management reported total revenue growth for the quarter, led by outperformance in the online gaming segment which exceeded prior guidance. The company achieved a non-GAAP profit following a significant tax reversal, despite continued operating losses within the Sohu Media Platform. Executives stated that while macroeconomic conditions remain cautious, the integration of social media features and offline events helped attract advertisers through non-traditional marketing solutions. Sohu also extended its share repurchase program to an open-ended timeline to facilitate the completion of its $150 million authorization.

  • CEO Zhang noted a shift in the advertising market, stating that brand advertisers "are all trying to create the maximum effect of viral distribution or viral online through key influencers or KOLs and to use the social networks."
  • The company will host its 2026 Annual General Meeting of Shareholders on Wednesday, Sept. 16, 2026, in Beijing to elect directors and ratify auditors.
  • Zhang attributed the gaming revenue beat to "expansion packs for our older games," specifically mentioning crossover content for TLBB PC and TLBB Vintage.
  • Mobile game engagement was supported by an anniversary expansion pack for Legacy TLBB Mobile, which maintained stable sequential revenue.
  • Management is leveraging niche social content, such as the K-Pop Dancing Festival and Hanfu Model Competition, to increase platform coverage among younger demographics.
  • Sohu reported that its World Cup-related activities, including watching parties, were utilized primarily for user acquisition rather than direct revenue generation.

INDUSTRY GLOSSARY

  • TLBB: Tian Long Ba Bu, a major Wuxia-themed game franchise operated by Sohu's gaming subsidiary, Changyou.
  • ADS: American Depositary Share, a vehicle for foreign stocks to trade on U.S. exchanges.
  • KOL: Key Opinion Leader, an influencer with specialized knowledge and a significant following on social media platforms.
  • MMORPG: Massively Multiplayer Online Role-Playing Game, a genre of online games where a large number of people interact in a virtual world.
  • Changyou: The online gaming subsidiary of Sohu.com Limited.
  • FMCG: Fast-moving consumer goods, products that are sold quickly and at a relatively low cost.

Full Conference Call Transcript

Operator: Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] After management's prepared remarks, there will be a Q&A session. Today's conference call is being recorded. If you have any objections, you may now 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. Please go ahead.

Pu Huang: Thanks, operator. Thank you for joining us to discuss Sohu's second 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, I would like to remind you of the company's safe harbor statement [discussed] in 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 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. Dr. Charles, please proceed.

Charles Zhang: Thanks, Huang Pu, and thank you, everyone, for joining our call. In the second quarter of 2026, our marketing services revenues, online game revenue and bottom line performance all exceeded our previous guidance. For the Sohu Media platform, we continued to refine our products and host diverse events and activities to stimulate communication and interaction among users, which further strengthened the platform's social features and promoted its vigorous and healthy development. Leveraging our differentiated content and events, we were able to address advertisers' needs and continue to explore diversified monetization opportunities. For online games, we remain committed to our long-term operation strategy and continue to launch diverse content updates to deliver rich and engaging experiences for game players.

Before going through each business unit in more detail, let me first give you a quick update overview of our financial performance. Please be advised that this release relates to continuing operations only. For the second quarter of 2026, total revenue were $136 million, up 7% year-over-year and down 4% quarter-over-quarter. Marketing services revenues were $15 million, down 3% year-over-year and up 21% quarter-over-quarter. Online game revenues were $116 million, up 10% year-over-year and down 7% quarter-over-quarter.

After giving effect to reversal of a tax expense of approximately $30 million due to a reversal of uncertain tax positions previously, GAAP net income attributable to Sohu.com Limited was $200,000 compared with a net loss of $20 million in the second quarter of 2025 and a net loss of $4 million in the first quarter of 2026. Non-GAAP after giving effect to the above-mentioned reversal of tax expenses, non-GAAP net income attributable to Sohu.com Limited was $500,000 income compared with a net loss of $20 million in the second quarter of 2025 and a net loss of $4 million in the first quarter of 2026. Now I'll go through our key businesses in more detail.

First, Sohu Media Platform, our Sohu Social Media platform. This quarter, we continued to refine our products with upgraded technologies and enhanced user experience and engagement across different scenarios, leveraging the synergy between various offline activities and our online communities, we boosted active user interactions as well as the generation and dissemination of premium content. These efforts enabled us to expand genuine social connections among users on our platform and foster a virtuous cycle to build a prosperous and healthy social ecosystem. During the quarter, in addition to the 2026 spring convention of Sohu Video influencers, [indiscernible], hosted in April where we created opportunities for broadcasters to interact and to establish in-person social connections across various verticals.

We also continued with the signature event of 2026 kickoff the year annual K-Pop Dancing Festival and also the 2026 Chinese Costume, Hanfu Model Competition. These competitions attracted thousands of young enthusiasts to actively participate, consolidating our appeal and competitiveness in these areas. Based on our long-term endeavor in the dance area, we further consolidated our influence by introducing a series of engaging activities on campus, enhancing our platform's coverage among young people. In addition, we hosted attractive and innovative activities in conjunction with popular events or topics across different verticals, such as the Salute to the Ultimate Explorers, an outdoor vertical -- and sports and outdoor vertical, and World Cup-related activities and World Cup watching parties.

As a result, a variety of online interest clubs were developing rapidly. These distinctive events and activities garnered significant attention and recognition and spread widely across multiple social platforms, bringing active interactions to our platform and contributing to its vigorous and high-quality development. In May, we successfully hosted our traditional event of 2026 Sohu Annual Science Technology Conference. ,[indiscernible] We invited a host of leading scholars to engage in cross-sector high-end dialogues regarding the latest scientific trends and the developments attracting a large number of scientists and science enthusiasts to our platform.

At the same time, we continue to strengthen our leading position in knowledge and science-related live broadcast, class with our core IPs, myself, Charles Physics class, and we held live broadcasts related to the National College Entry examination in Physics and provided relevant learning advice for audiences. We also kept delivering public science popularization devoting to narrowing the gap between the public and the cutting edge science. This month, the English class, Charles' English Class celebrated its 10th anniversary, 10 years, we've been doing this for 10 years and has created -- conducted for more than 2,000 live broadcasts contributing -- continuing to generate practical content and driving traffic to the platform.

So relying on our unique IP product matrix and differentiated campaigns, we're able to tailor marketing solutions for advertisers and tap into more monetization potential. For example, we organically combined physics knowledge -- physics and delivered in the physics class with industry practice applications of the Applied Physics to help brand advertisers to showcase their technological strength and advance and brand value. Next, turning to our online game business. During the quarter, our online game business performed well with revenues exceeding our prior guidance. In our PC game business, we rolled out a series of crossover content with the renowned Wuxia comic franchise Storm Riders for both regular TLBB PC and TLBB Vintage.

We also introduced a new character development system for regular TLBB PC. In addition, we launched a new content and game play for TLBB. Return to enrich -- we like to enrich the player experience. Turning to our mobile game business. We launched an expansion pack to celebrate the anniversary of legacy TLBB Mobile as well as certain in-game promotional events, which drove an increase in player engagement. Revenue for this game remained stable on a sequential basis. Next quarter, we'll continue to launch expansion packs and content updates for the TLBB series and other titles to further enhance player engagement. Looking ahead, we remain committed to our top game strategy.

On the product development front, we will adhere to systematic R&D processes, drive implementation of advanced technologies and enhance our research and development R&D capabilities through continuous experimentation and validation, striving to bring more high-quality games to the players. Regarding to our pipeline, we seek to further unlock the potential of our TLBB IP. Meanwhile, as we maintain our competitive edge in the MMORPGs, we will continue to diversify our portfolio with multiple types of games and expand our product offerings with global appeal. Now I'd like to provide an update on the ongoing share repurchase program. As of August 6, 2026, Sohu had repurchased 9.4 million ADS for an aggregate cost of approximately $124 million.

Moreover, Sohu today announced that its Board of Directors authorized repurchases to continue on an open-ended basis until the maximum authorized amount of $150 million is reached. With that, I will now turn the call over to our CFO, Joanna.

Joanna Lv: Thank you, Charles. I will now walk you through the key financials of our major segments for the second 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 Media Platform, quarterly revenues were $19 million, flat with the same quarter last year. Quarterly operating loss was $71 million compared with an operating loss of $69 million in the same quarter last year. For Changyou, quarterly revenues, $117 million compared with $107 million in the same quarter last year. Quarterly operating profit was $56 million compared with an operating profit of $51 million in the same quarter last year.

For third quarter of 2026, we expect marketing service revenues to be between $40 million and $50 million. This implies annual increase of 3% to 10% and a sequential decrease of 1% to 8%. Online game revenues to be between $105 million and $150 million. This implies an annual decrease of 29% to 35% and a sequential decrease of 1% to 10%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $30 million and $23 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: [Operator Instructions] First question comes from Thomas Chong from Jefferies. .

Thomas Chong: My question is about the good result that we saw in Q2. I think last earnings call, Charles, you mentioned about the advertising sentiment is just so not great. Is there any change in your view about the advertising outlook in the second half? I think that's number one. And then a follow-up question is more about the World Cup. I remember last time, Charles talked about World Cup should be a small event. Just want to see if there's any change in your view about the World Cup impact? That's number one. And then number two is about the recent trend in advertising sentiment, in particular, for different categories like auto, IT, FMCG.

Can you provide some color about the second half outlook? And then secondly, I think on the gaming side, may I ask about the quarter-to-date performance so far for the TLBB series? Is it at the low end or the high end of the guidance quarter-to-date?

Charles Zhang: Okay. Your first part about the Sohu Media or Social Media platform, the advertising, yes, we actually beat the forecast and the answer to your question is still similar to last time that the macroeconomic situation is still very bad, actually bad and sloppy. Advertisers kind of are now very cautious in spending. But because of our unique marketing offerings, so we were able to achieve actually some kind of growth compared with Q1. Well, Q1 in seasonality, but yes, we actually have some growth beat the forecast because of our innovative marketing solution that we provided to our advertisers, especially combined our online social media platform and also offline activities with live streaming, with events.

And -- so now the marketing advertising side is very different from before like a few years ago when actually advertisers tend to -- especially brand advertisers tend to spend less on the standard advertising on channels on the traditional in Chinese called [indiscernible]. They are all trying to create the maximum effect of viral distribution or viral online through key influencers or KOLs and to use the social networks. That's -- and our solution, our social platform just provide -- are able -- we are able to provide exactly that, that kind of marketing services. In terms of categories, so still, the auto is 33%; and FMCG, 20%; IT, 17%. And all 3 areas are not doing well.

I mean the macroeconomic situation, they're all spending less. I mean, still more cautious. So the World Cup actually, yes, there's not much impact in terms of the income, I mean, the advertising. But the World Cup, we did organize the activities of watching World Cup games and tournament, which to promote or develop our -- to acquire users. It's more to the consumer side, I mean, the user side. Yes, I hope I answered your question.

Joanna Lv: [Foreign Language].

Thomas Chong: [Foreign Language]

Joanna Lv: From the past almost 2 months, the performance is largely in line with our expectation. But still, we have more than 1 month's time to go, and there are still some content and activities to be released, which are not very easy to forecast their performance. So final -- so eventually, it will depend on the performance of these content and activities.

Operator: Next question comes from the line of Alicia Yap from Citigroup.

Yik Wah Yap: I have 2 questions. First, I wanted to ask on the buyback. I think you mentioned the Board amended the existing buyback program to be open-ended rather than it was supposed to be expired, I think, in November. So just wanted to know what's the rationale behind? Does that mean that -- or does that imply or suggest that the remaining $26 million of that outstanding, it is highly chance that you might not finish by that November 30, so that you are making it open-ended so that you can continue to finish that $26 million before you announce a new plan? So any kind of like the reasons that you can share with us would be great.

And then the second question is a follow-up on the online advertising guidance for the 3Q. I know it maybe just from previously the pace wasn't that high, but still, it is the first time for a long time that you are now expecting a positive growth on the year-over-year. I know you just mentioned the macro, the budget sentiments remain quite weak. But it does look like -- I don't know whether the 3Q positive growth is the beginning of the positive growth trend after your ad revenue has been declining for such a long time.

So maybe if you can also illustrate despite this weak macro, but is this 3Q guidance is the first sign of potentially the more positive year-over-year trend going forward?

Charles Zhang: Okay, Alicia. So for your first question, you got it exactly right. Yes, we -- because of the daily trading volume limitation, we could not finish the $150 million by November. So we expanded -- I mean, extended the time to an open schedule so that we can finish that $150 million to finish the rest of the left -- $26 million left. And your second question, yes, basically, as I said earlier, that it's -- the macro is still bad, sloppy and people are cautious in spending.

But I mean, macro economy, but the individual Sohu, we are actually achieving some kind of -- in Chinese called [indiscernible] we are kind of -- because the base is small, so we are able to provide some unique marketing solutions so that advertisers buy in, they like the kind of solution that we provide to them. And we're looking at -- yes, we are looking at -- for a long time, we're looking at some kind of growth for the first time in a long time.

Yik Wah Yap: I see. Okay. Maybe lastly, if I can, I wanted to follow up on the gaming question. I think typically, 1Q, 3Q should be a seasonally stronger quarter. So your 2Q, you came in and you beat your guidance, but yet your 3Q guidance on gaming seems to be implying a sequential decline rather than seasonality-wise, it should be a sequential increase. So maybe if you can quantify it or give us some color how you were seeing or how you're actually thinking about the seasonality versus your portfolio performance?

Joanna Lv: [Foreign Language]

Unknown Analyst: [Foreign Language]

Joanna Lv: The outperformance of the second quarter is mainly due to outperformance, better-than-expected performance of some of our older games, including TLBB PC for which the expansion packs that we launched were very well for our players.

Unknown Analyst: [Foreign Language]

Joanna Lv: Several of our older games performed -- all of them performed better than our expectations.

Unknown Analyst: [Foreign Language]

Joanna Lv: So the performance of the second quarter is indeed quite well. So for the third quarter, we expect the older games to experience some natural decline, which is normal because we have been operated for a long time.

Unknown Analyst: [Foreign Language]

Joanna Lv: Mainly because of the better-than-expected performance of the older games in the second quarter.

Operator: [Operator Instructions] thank you all for the questions. This concludes the Q&A session, as I see no further questions. This also concludes today's conference call. Thank you for participating. You may now disconnect. Thank you.

Charles Zhang: Thank you.