On Monday, Sohu.com (NASDAQ:SOHU) announced a disappointing fourth-quarter financial report. The Chinese online advertising, search, and gaming specialist is checking in with revenue of $509.6 million for the quarter, a slight sequential downtick but 23.8% ahead of where it was a year earlier. Sohu has now come through with three quarters of double-digit percentage growth following six straight periods of declining top-line results.

The sequential slide isn't a deal breaker, as Sohu posted a quarter-over-quarter dip between the third and fourth quarters in 2015 and 2016. However, the year-over-year growth needs to be framed appropriately as results were depressed in the two previous years. This may be Sohu's second strongest top-line gain since late 2013, but it's short of the 25.7% uptick it scored during 2017's third quarter

The stock was hitting two-year highs three months ago, but after the earnings release, it's closing in on last year's springtime lows. Sohu opened 12% lower on Monday, while Spun-off subsidiaries Sogou (NYSE:SOGO) and Changyou.com (NASDAQ:CYOU) also moved lower following the quarterly updates.

Sohu logo.

Image source: Sohu.com.

Beneath the surface

This past summer's spin-off of Sogou prevented Sohu from offering up guidance for total revenue for the quarter the way it has historically done. In October, Sohu provided a forecast only for its Changyou-fueled online gaming business. It was targeting $110 million to $120 million in online gaming revenue, and it fell just short with $109 million on that front. The showing is a modest 15% increase from the prior year's fourth quarter but a problematic 17% sequential drop.

The rest of Sohu's business was a mixed bag. Ad rates continue to be a problem, as online and brand advertising revenue plummeted 27%. Real estate ads have been weakening all year, but this time Sohu experienced a thorny sequential decrease in video advertising revenue. The bright spot in Sohu's report, once again, was Sogou. Search and search-related advertising revenue soared 62% to $247 million. Search now accounts for nearly half of Sohu's total revenue. 

Red ink remains a nuisance. Sohu has posted a loss in 15 of the past 16 quarters, though it did see its operating loss and adjusted deficit narrow this time around. 

Sohu is back to offering full guidance for the current quarter, and it's not pretty. It is modeling $420 million to $435 million in revenue for the first quarter with sequential declines across all three of its major segments. It sees $55 million to $60 million in brand advertising revenue, down 26% to 32% since a year earlier. Online game revenue would post year-over-year growth of 5% to 17%, clocking in at $90 million to $100 million. Sogou revenue would rise between 35% and 41%, to a range of $218 million to $228 million, which is a surprising 18% to 22% sequential decrease. 

Sohu investors can expect another quarterly deficit. The company sees a net loss per share of $1.75 to $2, or an adjusted net loss per share between $1.65 and $1.90. Investors have had four years of quarterly losses, so the big concern for the company at this point is turning around its advertising business as it tries to accelerate its growth in search and gaming through Sogou and Changyou.

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