Things just keep getting harder for Sohu.com (SOHU 0.77%) investors. Shares of the Chinese online pioneer hit a 16-year low last week after the company posted disappointing financial results. You have to go all the way back to March 2003 to find the last time the stock was trading in the single digits the way it is right now.
Revenue clocked in at $474.8 million for the second quarter, a 2% decline from where it was a year earlier, but a 10% improvement sequentially. This is the fourth quarter in a row that Sohu has posted a year-over-year decline on the top line, though the pace of the declines has moderated with every passing reporting period.
It was a rough week for the Chinese online advertising, search, and gaming specialist, and the same can be said about the two subsidiaries that it has spun off along the way. Shares of Sogou (SOGO) and Changyou.com (CYOU) -- representing Sohu's search and gaming operations, respectively -- also tumbled last week. Sogou and Changyou hit all-time lows, despite those segments of Sohu's business posting increases in revenue.
Sohu's quarter itself didn't seem disappointing at first glance. The $474.8 million in revenue that it served up was at the low end of the $469 million to $494 million it was targeting three months earlier -- and below Street expectations -- but it did at least land in the range. Sohu's adjusted net loss of $50 million was actually kinder than the $65 million to $70 million that it was forecasting.
Things are understandably not great at Sohu. Its flagship brand advertising revenue has plummeted 29% over the past year. Its Sogou-fueled search and Changyou-led online gaming revenue rose 2% and 3%, respectively, but single-digit growth in those businesses is nowhere close to how things were chugging along in their prime.
Last week's guidance for the current quarter is problematic. Sohu is modeling $445 million to $470 million in revenue for the third quarter, a sequential dip even at the high end -- and a year-over-year decline as large as 3% to a gain as large as 2%. It sees a 10% to 14% top-line spurt at Sogou helping offset a 12% to 21% slide in brand advertising and a 6% to 17% decline for its online game revenue. It's eyeing an adjusted net loss between $0.55 and $0.80 a share.
Flattish top-line results may not seem awful, but comparisons were going to get easier now that we're lapping the four periods of negative growth. Sohu has been streaky that way. It never posted a quarterly decline in revenue through its first 15 years as a public company, according to data provided by S&P Global Market Intelligence. It would then go on to rattle off six straight periods of declines, followed by five quarters of top-line growth before its new four-quarter streak of sliding results. Whether Sohu lands above or below last year's third-quarter results will dictate if this streak stretches to five negative quarters or not -- and it will also likely be the factor that decides if Sohu hits another fresh 16-year low in three months.