(SOHU -1.28%) is bouncing back this week after a better-than-expected financial report, and that's a welcome break for investors. The stock was hitting a 14-year low earlier in the month, but it has roared back with a 34% gain through the first two trading days of the week since its Monday morning earnings release. Sohu spinoffs Sogou (SOGO) and (CYOU) have risen 4% and 20%, respectively, in that time. 

Revenue of $431.4 million for the first quarter is a 5% decline when pitted against its prior year showing, and it's also an 11% dip sequentially. Negative growth may not seem very applause worthy, but the Chinese online advertising, search, and gaming specialist was bracing investors for an uglier showing. Sohu was targeting just $390 million to $415 million in revenue for the quarter three months ago, a 9% to 14% year-over-year tumble. The sequential slide is normal given the seasonality of the lunar new year, as Sohu has seen a decline between the fourth and first quarters every year since 2008 according to data provided by S&P Global Market Intelligence.'s logo.

Image source: Sohu.

Sohu's your daddy  

We're now at three straight quarters of year-over-year declines in revenue, but investors are relieved that things aren't as bad as Sohu itself was modeling earlier this year. 

Sohu's Sogou-led search revenue rose 6% to $234 million for the first three months of the year, better than the 3% to 7% reduction that it was forecasting for the division that continues to account for more than half of its revenue. Its original brand advertising business experienced a hefty 24% slide -- worse than the 11% to 20% drop it was forecasting -- but at $43 million it now accounts for just 10% of the total revenue. Its Changyou-helmed online gaming arm slipped 6% to $99 million, a welcome contrast to the 13% to 22% plunge it was expecting.  

It's surprising to see Sogou shares be the lone holdout from the double-digit percentage rally this week given its starring role in the blowout results, but Sohu and Changyou investors aren't complaining. Losses do continue at Sohu, but the adjusted net loss of $48 million is roughly half of the prior year's $97 million deficit. 

The guidance it initiated earlier this week for the current quarter is mixed. Sohu is projecting revenue of $469 million to $494 million for the second quarter. It clocked in at $486 million a year earlier, so we're looking at anywhere between a decline of 4% to a gain of 2%. If it lands at the high end of its range, it will break the current streak of three straight periods of year-over-year top-line declines. For its three segments, Sohu sees a 1% to 4% increase at Sogou, a 15% to 24% decrease in brand advertising, and a 9% dip to a 1% boost at its Changyou-led division. Sohu's bottom-line outlook calls for an adjusted loss per share between $0.95 and $1.20. 

Armed with a cash-flush balance sheet and the start of a turnaround at Sogou and possibly Changyou, Sohu is starting to bounce back. It will need to keep momentum going in the next few quarters if Sohu wants to keep its stock moving away from last month's 14-year low.