Q1 2026 SOHU COM INC Earnings Call

May 18, 2026

Operator: 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd like to turn the conference over to your host for today's conference call, Pu Huang, Investor Relations Director of Sohu. Please go ahead.

Operator: 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd like to turn the conference over to your host for today's conference call, Huang Pu, Investor Relations Director of Sohu. Please go ahead.

Speaker #1: 26 earnings conference call. At this time, all participants are in the listen-only mode. After management's prepared remarks, there will be question-and-answer session. Today's conference call is being recorded.

Speaker #1: If you have any objections, you may disconnect at this time. And I'd like to turn the conference over to your host for today's conference call, Huang Pu, investor relations director of Sohu.

Speaker #1: Please go ahead.

Speaker #2: Thank you, operator. Thank you for joining us to discuss Sohu's fourth quarter 2023 results. On the call are Chairman and Chief Executive Officer Dr. Charles Zhang, CFO John Lu, and Vice President of Finance James Stone.

Pu Huang: Thank you, operator. Thank you for joining us to discuss Sohu's Q4 2023 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 Chang Yu, COO Dewen Chen, and CFO Yaobin Wang. Before management begins their prepared remarks, I would like to remind you of the company's safe harbor statement in connection with today's conference call. Except for the historical information contained herein, the matters discussed may contain forward-looking statements. These statements are based on current plans, estimates, and projections. Therefore, you should not place any reliance on them. Forward-looking statements involve significant 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.

Speaker #2: Also with us are Chang Yu, CEO of Dewen Chen, and CFO Bing Wang. Before management begins their prepared remarks, I would like to remind you of the company's CFR statement in connection with today's conference call.

Speaker #2: Except for the historical information contained herein, the matter discussed may contain forward-looking statements. These statements are based on current plans as made to protect and prevent projections.

Speaker #2: Therefore, you should not place any reliance on them. They caution you that a number of important factors could cause actual results to differ materially, from those containing any forward-looking statements.

Speaker #2: For more information about potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission. Including the most recent report on Form 10-TAF.

Pu Huang: For more information about potential risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission, including the most recent report on Form 10-K. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Speaker #2: With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

Charles Zhang: Thanks, Pu Huang, thank you everyone for joining our call. In Q1 2026, our marketing services revenue, online game revenue, and bottom line performance all exceeded our previous guidance. For the Sohu Media Platform, we continue to focus on promoting a healthy and vibrant atmosphere on our platform with a series of differentiated events. At the same time, we kept refining our products to cater to users' needs. Leveraging our unique events and brand influence, we were able to explore new monetization opportunities. For online games, we delivered another solid quarter, driven by a wealth of high-quality content and targeted operational refinements that resonated with our diverse player base. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance.

Charles Zhang: Thanks, Huang Pu, thank you everyone for joining our call. In Q1 2026, our marketing services revenue, online game revenue, and bottom line performance all exceeded our previous guidance. For the Sohu Media Platform, we continue to focus on promoting a healthy and vibrant atmosphere on our platform with a series of differentiated events. At the same time, we kept refining our products to cater to users' needs. Leveraging our unique events and brand influence, we were able to explore new monetization opportunities. For online games, we delivered another solid quarter, driven by a wealth of high-quality content and targeted operational refinements that resonated with our diverse player base. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance.

Speaker #3: Thanks, Huang Pu, and thank you everyone for joining our call. In the first quarter of 2026, our marketing service revenue online game revenue and bottom line performance all exceeded our previous guidance.

Speaker #3: For the social media platform, we continue to focus on promoting a healthy and vibrant atmosphere on our platform with a seriousness of differentiated events.

Speaker #3: At the same time, we kept refining our products to cater to users' needs. Leveraging our unique events and brand influence, we were able to explore new monetization opportunities.

Speaker #3: For our online games, we delivered another solid quarter. Driven by a wealth of high-quality content and targeted operational refinements, that resonated with our diverse player base.

Speaker #3: Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the first quarter of 2026, total revenues were $141 million, up 4% year over year, and down 1% quarter over quarter.

Charles Zhang: For Q1 2026, total revenues were $141 million, up 4% year-over-year and down 1% quarter-over-quarter. Marketing services revenues was $13 million, down 8% year-over-year and 26% quarter-over-quarter. Online game revenues were $125 million, up 6% year-over-year and 2% quarter-over-quarter. GAAP net loss attributable to Sohu.com Limited was $4 million, compared with a net income of $182 million in Q1 2025 and a net income of $223 million in Q4 2025.

Speaker #3: Marketing services revenues were $13 million, down 8% year over year, and $26% quarter over quarter. Online game revenues were $125 million, up 6% year over year, and 3% quarter over quarter.

Speaker #3: Net loss attributable to Sohu.Com Ltd was $4 million. Compared with the net income of $182 million, in the first quarter of 2025, and the net income of $223 million, in the fourth quarter of 2025.

Charles Zhang: Non-GAAP net loss attributable to Sohu.com Limited was CNY 4 million loss, compared with a net loss of CNY 16 million in Q1 2025 and a net income of CNY 261 million in Q4 2025. I'll go through our key businesses in more detail. First, Sohu Media Platform. In Q1 2026, we continued to integrate resources in depth and upgrade our products with cutting-edge technologies. We offered users various practical and easy-to-use new functions to optimize the user experience, enhance user engagement, and further promote dissemination of content. At the same time, we kept focusing on promoting a vigorous atmosphere in our community and fostering a prosperous platform ecosystem.

Speaker #3: Non-GAAP net loss attributable to Sohu.Com Ltd was $4 million loss and $4 million. Loss net loss $4 million. Compared with the net loss of $16 million, in the first quarter of 2025, and the net income of $261 million, in the fourth quarter of 2025.

Speaker #3: Now I'll go through our key businesses in more detail. First, social media platform. In the first quarter of 2026, we continue to integrate resources in depth and upgrade our products with cutting-edge technologies.

Speaker #3: We offer users various practical and easy-to-use functions to optimize the user experience, enhance user engagement, and further promote dissemination of content. At the same time, we kept focusing on promoting a vigorous atmosphere in our community and fostering a prosperous platform offline events, we held.

Charles Zhang: Benefiting from unique offline events we held, we provided users with plenty of interaction opportunities, improved their social engagement, and generated abundant premium content that was widely spread over the internet. In March, for example, we successfully held the 18th Sohu News Marathon in Hong Kong, and offline seminar of our Physics Class in Hong Kong. This season's marathon attracted active participation by celebrities and broadcasters nationwide, greatly promoting social interaction on our platform. Meanwhile, the host of the class made its debut at the Hong Kong University of Science and Technology, bringing in-depth physics knowledge to the public. Both events were well-received by audiences, thereby creating a strong synergy between our flagship IPs and further expanding our brand influence.

Speaker #3: We provided users with plenty of interaction opportunities, improved their social engagement, and generated abundant premium content that was widely spread over the internet. In March, for example, in March we successfully held the 18th Sohu Kong and offline seminar of physics class in Hong Kong.

Speaker #3: This season's marathon attracted active participation by celebrities and broadcasters nationwide. Greatly promoting social interactions on our platform. Meanwhile, the physics class made its debut at the Hong Kong University of Science and Technology bringing in-depth physics knowledge in the public to the public, both events were well received by audiences, thereby creating a strong synergy between our flagship IPs and further expanding our brand influence.

Speaker #3: In April, we hosted the Influencers which has been held biannually for the past three years. We invited various fields, including vertical popular with young users such as P-pop and Hanfu, and verticals in professional fields such as science and health.

Charles Zhang: In April, we hosted the 2026 spring convention of Sohu video influencers, for example, which has been held biannually for the past 3 years. We invited celebrities and gathered influencers from various fields, including verticals popular with young users such as P-pop and Hanfu, and verticals in professional fields such as science and health. The convention created a chance for broadcasters to interact in person, promoting content generation and dissemination and building genuine social connections. During the quarter, we also launched the 2026 Sohu P-pop Dancing Festival competition throughout the year, and also the 2026 Hanfu Chinese costume model competition. It is also a year-long event. To further consolidate our influence and appeal in these areas, we continue to combine offline events with online interactions and upgrade our profile and the standard of our competition.

Speaker #3: The convention created a chance for broadcasters to interact in person, promoting content generation and dissemination, and building genuine social connections. During the quarter, we also launched the 2026 Sohu K-pop Dancing Festival competition.

Speaker #3: Throughout the year, and also the 2026 Hanfu Chinese costume model competition, which also is a year-long event. It further consolidated our influence and appeal in this area to continue to combine offline events with online interaction and to upgrade our profile and the standard of our competitions.

Speaker #3: With these efforts, we garnered widespread attention and attracted thousands of enthusiasts with shared interests to participate and interact on our platform. We continue to leverage our unique content and live broadcasting technology while exploring new business opportunities.

Charles Zhang: With these efforts, we garnered widespread attention and attracted thousands of enthusiasts with shared interest to participate and interact on our platform. We continue to leverage our unique content and live broadcasting technology while exploring new business opportunities. We provided targeted marketing solutions for advertisers through our innovative and customized events and campaigns. As the Physics Class IP derivatives continues to grow in influence, it directly drove traffic to the platform and continues to unlock monetization potential. Turning to our online game business. During the quarter, our online game business performed well, with revenue exceeding our prior guidance. In our PC game business, we roll out various holiday events around the Chinese New Year and Valentine's Day, as well as promotional events for the regular TLBB PC, which helped sustain stable player engagement.

Speaker #3: We provided targeted marketing solutions for enterprises through our innovative and customized events and campaigns such as. As the physics class IP is derivatives and continues to grow in influence, effectively draws traffic to the platform and continues to unlock monetization potential.

Speaker #3: Next, turning to our online game business. During the quarter of online game business, we performed well with revenues exceeding our prior guidance. In our PC game business, we rolled out various quality events around the Chinese New Year and the Valentine's Day, as well as promotional events for the regular PLVD PC.

Speaker #3: Which helped sustain stable player engagement. Apart from holiday events, we also introduced a new Mu Rong clan for TLVD Vintage which boosted player enthusiasm.

Charles Zhang: Apart from holiday events, we also introduced a new Murong clan for TLBB Vintage, which boosted player enthusiasm. Meanwhile, we continue to update and refine TLBB Return to ensure its long-term vitality. Turning to our mobile game business, we launched an expansion pack for Legacy TLBB Mobile to celebrate the Chinese New Year, along with the diverse online offline events. Revenue for this game stayed largely stable on a sequential basis. Next quarter, we will continue to launch expansion packs and content updates for the TLBB services and other titles to further keep players engaged. Looking ahead, we will remain committed to our top games strategy. On the product development front, we will stay anchored in a user-centric approach and adhere to a systematic R&D processes while driving the implementation of new technologies to enhance efficiency and product success rates.

Speaker #3: Meanwhile, we continue to update and refine TLVD Return to ensure its long-term vitality. Turning to our mobile side, mobile game business, we launched an expansion pack for legacy TLVD mobile to celebrate the Chinese New Year, along with.

Speaker #3: A diverse online and offline event. Learning for this game saved largely stable on our sequential basis. Next quarter, we'll continue to launch expansion packs and content updates for the TLVD series, and other titles to further keep players engaged.

Speaker #3: Looking ahead, we will remain committed to our top game strategy. On the product development front, we will stay anchored in a user-centric approach and adhere to adhere to a systematic R&D processes while driving the implementation of new technologies to enhance efficiency and product success rate.

Speaker #3: Regarding our pipeline, we seek to further unlock the potential of our TLVD IPs. Meanwhile, as we maintain our competitive edge in the MMR RPGs, we will continue to diversify our portfolio with multiple types of games and expand our product offerings with global appeal.

Charles Zhang: Regarding our pipeline, we seek to further unlock the potential of our TLBB IP. Meanwhile, as we maintain our competitive edge in 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 13 May 2026, Sohu has repurchased 8.7 million ADS for an aggregated cost of approximately $116 million. With that, I'll turn now the call to Brenda. Brenda?

Speaker #3: Now, I'd like to provide an update on the ongoing share repurchase program. As of May 13, 2026, Sohu had repurchased 8.7 million ADS. From aggregated cost of approximately $116 million, with that, I'll turn now the call to our stable Joanna.

Speaker #3: Joanna?

Speaker #4: Thank you, Charles. I will now walk you through the key financials of our major segments. For the first quarter of 2026, all the numbers on the non-gap basis.

Brenda: Thank you, Charles. I will now walk you through the key financials of our major segments for Q1 2026. All the numbers are on a non-GAAP basis. You may find a reconciliation for non-GAAP to GAAP measures on our IR website. For Sohu Media Platform, quarterly revenues were $60 million compared with $70 million in the same quarter last year. Quarterly operating loss was $70 million, flat with the same quarter last year. For Changyou, quarterly revenues $125 million compared with $180 million in the same quarter last year. Quarterly operating profit $66 million compared with operating profit $55 million in the same quarter last year. For Q2 2026, we expect marketing services revenue to be between $30 million and $40 million.

Joanna Lv: Thank you, Charles. I will now walk you through the key financials of our major segments for Q1 2026. All the numbers are on a non-GAAP basis. You may find a reconciliation for non-GAAP to GAAP measures on our IR website. For Sohu Media Platform, quarterly revenues were $60 million compared with $70 million in the same quarter last year. Quarterly operating loss was $70 million, flat with the same quarter last year. For Changyou, quarterly revenues $125 million compared with $180 million in the same quarter last year. Quarterly operating profit $66 million compared with operating profit $55 million in the same quarter last year. For Q2 2026, we expect marketing services revenue to be between $30 million and $40 million.

Speaker #4: You may find a reconciliation of non-gap to gap measures on our IR website. For Sohu Media platform, quarterly revenues were $16 million. Compared with $17 million, in the same quarter last year.

Speaker #4: Quarterly operating loss was $17 million. Flat with the same quarter last year. For Chaoyang, quarterly revenues $125 million. Compared with $118 million, in the same quarter last year.

Speaker #4: Quarterly operating profit $66 million. Compared with operating profit $55 million. In the same quarter last year. For the second quarter of 2026, we expect marketing services revenues to be between $13 million.

Speaker #4: And $14 million. This implies a new decrease of 10% to 17%. And the sequential increase of 4% to 11%. Unlike game revenues, to be between $104 million.

Brenda: This implies annual decrease of 10% to 17% and a sequential increase of 4% to 11%. Online game revenue to be between $104 to 114 million. This implies annual decrease of 2% to annual increase of 8% and a sequential decrease of 8% to 17%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $50 to 25 million. This forecast reflects Sohu's management's current and preliminary view, which is subject to substantial uncertainty.

Joanna Lv: This implies annual decrease of 10% to 17% and a sequential increase of 4% to 11%. Online game revenue to be between $104 million and $114 million. This implies annual decrease of 2% to annual increase of 8% and a sequential decrease of 8% to 17%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $50 million and $25 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.

Speaker #4: And $114 million. This implies a new decrease of 2% to an annual increase of 8%. And the sequential decrease of 8% to 17%. Both non-gap and gap net loss attributable to Sohu.com Limited.

Speaker #4: To be between $15 million. And $25 million. This forecast reflects Sohu's management's current and the preliminary view. Which is subject to substantial uncertainty. This concludes our prepared remarks.

Dewen Chen: This concludes our prepared remarks. Operator, we would now like to open the call to questions.

Speaker #4: Operator, we would now like to open the call to questions.

Speaker #1: Thank you. If you wish to ask a question now, please press star 11 on your telephone and white phone name to be announced. To withdraw your question, please press star 11 again.

Operator: Thank you. We will now take our first question. Our first question comes from the line of Thomas Chong at Jefferies. Please ask your question, Thomas. Your line is open.

Speaker #1: Please stand by while we compile the Q&A roster. We will now take our first question and our first question comes from the line of Thomas Chong, at Jefferies.

Speaker #1: Please ask your question, Thomas. Your line is open.

Thomas Chong: Hi. Thanks management for taking my question. I have a couple of question. I think first is on our marketing services on our advertising revenue. Can management comment about how we should think about the advertising outlook in H2 and full year? In particular, we are going to soon to have World Cup. Would this be a big positive to our advertising revenue in Q2 and Q3? My second question is about the gaming business. Can you comment about the quarter to date performance so far we are seeing in Q2? Is it more likely to hit the low end or the high end of the revenue guidance? My third question is about the earnings outlook.

Thomas Chong: Hi. Thanks management for taking my question. I have a couple of question. I think first is on our marketing services on our advertising revenue. Can management comment about how we should think about the advertising outlook in H2 and full year? In particular, we are going to soon to have World Cup. Would this be a big positive to our advertising revenue in Q2 and Q3? My second question is about the gaming business. Can you comment about the quarter-to -date performance so far we are seeing in Q2? Is it more likely to hit the low end or the high end of the revenue guidance?

Speaker #5: Hi. Thanks, management, for taking my question. I have a couple of questions. I think first, it's on our marketing services on our advertising revenue.

Speaker #5: Can management comment about how we should think about the advertising outlook in the second half? And full year. And in particular, we are going soon to have a World Cup.

Speaker #5: Would this be a big positive to our advertising revenue in Q2 and Q3? And my second question is about the gaming business. Can we comment about the quarter-to-date performance so far we are seeing in Q2?

Speaker #5: Is it more likely to hit the low end or the high end of the revenue guidance? And my third question is about the earnings outlook.

Thomas Chong: My third question is about the earnings outlook. Given our solid performance in Q1 and we are expecting the losses to widen sequentially in Q2, I am just wondering, is this a conservative assumption? Should we use Q2 as a benchmark to project Q3 and Q4 bottom line? Thank you.

Thomas Chong: Given our solid performance in Q1 and we are expecting the losses to widen sequentially in Q2, I am just wondering, is this a conservative assumption? Should we use Q2 as a benchmark to project Q3 and Q4 bottom line? Thank you.

Speaker #5: Given our solid performance in Q1, and we are expecting the losses to widen sequentially in Q2, I'm just wondering, is this a conservative assumption?

Speaker #5: And should we use Q2 as a benchmark to project Q3 and Q4 bottom line? Thank you.

Speaker #6: Okay. Thomas. So the first question about marketing services revenue, right? Q2 forecast, as Joanna just said, is going to be 13, right? 13 to 14 million about 7%.

Charles Zhang: Okay, Thomas, the first question about marketing services revenue, right? Q2 forecast, as Joanna just said, is going to be CNY 13, right? CNY 13 to 14 million, about 7% sequential growth compared with Q1. First of all, the overall economy, you know, situation is kind of, we're in the downturn, right? The economic situation. The advertisers are tend to be cautious in spending. We are able to maintain some growth because we have our unique and differentiated marketing solutions and events.

Speaker #6: Sequential growth. Compared with Q1. First of all, the overall economy situation is kind of we're in the downturn, right? The economy situation. And the advertisers are tend to be cautious in spending.

Speaker #6: We were able to maintain some growth because we have our unique and differentiated marketing solutions, events. Especially, we can take advantage of our growing social network and also influencers and also some IPs like my own physics class IP and the offline events like the K-pop competition.

Charles Zhang: Especially we can take advantage of our going into the networks, influencers, and some IPs like my, in my own, the Physics Class IP and the offline events like the K-pop competition and Hanfu and all those. We have a quite unique, tailor-made or customized marketing event based on what the available, like our own platform and its activities. Your next question is about the overall year look, outlook or just the Q2? I think it will be similar, right, to last year. About the game, right? The game.

Speaker #6: And so we have quite a unique tailor-made or customized marketing events based on the available our own platform and also its activities. So your next question is about the overall year look or outlook or just the Q2?

Speaker #6: I think we're similar, right? Last year. About the game, right? The game. So the first quarter is good. And then the second part, you want to see that second part is about is that a low end or up end, right?

Charles Zhang: The Q1 is good and then you second part you want to see that second part is not, you know, is that a low end or high end, right?

Dewen Chen: Thomas.

Speaker #1: Thomas想问一下我们Q2目前来看。游戏业务Q2目前来看表现怎么样？然后我们guidance是比较可能是偏向高点往高的点还是低点比较可能性比较大？

Thomas Chong: Oh, yes.

[Company Representative] (Sohu): [Foreign Language]

Speaker #5: 目前来看，Q2游戏业务表现符合目前是符合我们的预期的。那收入高低主要还是看我们这个天龙系列游戏在二季度推出的这个内容和活动。是不是能够满足用户的需要？从目前来看应该是符合预期。但是那个二季度因为我们根据相比拉收和促销活动比较少一点，所以预期二季度收入肯定是会自然下滑的。

Dewen Chen: So far, the performance of Q2 is largely in line with our expectation. The level of revenue will largely depend on the performance of the content and activities we plan to roll out for our TLBB series games to see whether they can satisfy users' needs. So far, we believe it is in line with our expectation. Also, as we plan to roll out fewer promotional and revenue-boosting activities in Q2, we expect our gaming revenue to experience a natural decline.

[Translator]: So far, the performance of Q2 is largely in line with our expectation. The level of revenue will largely depend on the performance of the content and activities we plan to roll out for our TLBB series games to see whether they can satisfy users' needs. So far, we believe it is in line with our expectation. Also, as we plan to roll out fewer promotional and revenue-boosting activities in Q2, we expect our gaming revenue to experience a natural decline.

Speaker #1: So far the performance of the second quarter is largely in line with our expectation. And the level of revenue will largely depend on the performance of the content and activities we plan to roll out for our TLBB series games.

Speaker #1: To see whether they can satisfy users' needs. So far, we believe it is in line with our expectation. Also, as we plan to roll out fewer promotional and revenue boosting activities in the second quarter, so we expect our gaming revenue to experience some natural decline.

Speaker #6: So the game TLBB return, right? That was in Q1, still had an impact, but in Q3, gradually declined, right? TLBB return, yes.

Charles Zhang: The game, TLBB: Return, right. That will, in Q1, still have an impact, but in Q3 gradually decline, right. Because in the return, TLBB: Return. Yes.

Speaker #1: That's for gaming.

Dewen Chen: That's for gaming.

[Translator]: That's for gaming.

Speaker #6: Right. So you have third question, Thomas. Earning outlook. Is that?

Charles Zhang: Right. You have third question, Thomas? Earning outlook?

Thomas Chong: Oh, yes. Yes.

Thomas Chong: Oh, yes. Yes. Because of Q1, we are better than expected, but Q2, we are seeing sequential widening of the losses. Just want to see if Q2 is a benchmark for Q3 and Q4. Thank you. Thank you, Charles.

Speaker #5: Oh, yes. Yes. On the bottom line, because Q1, we are better than expected. But Q2, we are seeing sequential widening of the losses. So just want to see if Q2 is a benchmark for Q3 and Q4.

Charles Zhang: Yes

Thomas Chong: Because of Q1, we are better than expected, but Q2, we are seeing sequential widening of the losses. Just want to see if Q2 is a benchmark for Q3 and Q4. Thank you. Thank you, Charles.

Speaker #5: Thank you. Thank you, Charles.

Speaker #6: I think this year Q2 and Q3 will be similar to last year. Because on the marketing service side, on the platform side, we are basically about the same.

Charles Zhang: I think the this year, Q2 and Q3 will be similar to last year because on the marketing service side, on the platform side, we are basically about, you know, about the same. We still working on our total network and make sure that we have a larger user base so that we can have an update. Now still we are maintaining a stable and advertising growth. The Q2 result or the earnings dropped compared with Q1 mainly because of gaming's revenue. Top line is much less than Q1 as we just described.

Speaker #6: We're re still working on our social network and make sure that we have a larger user base. So that we can have an update uptake.

Speaker #6: But now still, we are maintaining a stable and advertising growth. So the Q2 result or the earnings dropped compared with Q1. Mainly because of gaming profit, right?

Speaker #6: It's less than Q1. And we just described

Thomas Chong: Got it. Thank you.

Speaker #5: Got it. Thank you.

Thomas Chong: Got it. Thank you.

Speaker #1: Thank you. We will now take our next question from the line of Alicia Yap, SAT. Please ask your question, Alicia. Your line is open.

Operator: Thank you. We will now take our next question from the line of Alicia Yap at Citi. Please ask your question, Alicia. Your line is open.

Alicia Yap: Hello. Good evening, good afternoon, management. Thanks for taking my questions. I have 2 follow-up on the earlier question. You know, you mentioned on, I think, the Q2 already the guidance. It is a bit, you know, weaker than I expected in terms of the sequential trend that typically we would see from the Q1 to Q2, even though sequentially it's growth. The year-over-year decline seems to be, you know, worse than the Q1 year-over-year decline. I'm just wondering, you know, is the macro getting, you know, even weaker than what you had previously expected, let's say compared to, you know, 5 months ago in the beginning of the year?

Speaker #7: Hello. Good evening. Good afternoon. Management. Thanks for taking my questions. I have two follow-ups on the earlier question. So I guess the you mentioned on, I think, the second quarter obviously the guidance.

Speaker #7: It is a bit weaker than I expected in terms of the sequential trend that typically we would see from the one Q to two Q, even though sequentially is growth.

Speaker #7: But then I think the year-over-year decline seems to be worse than the first quarter year-over-year decline. I'm just wondering is the macro getting even weaker than what you have previously expected, let's say, compared to five months ago in the beginning of the year?

Alicia Yap: Yeah, you know, any colors you can share with, you know, overall the macro outlook? Is that worse than what you had previously expected? Then, on the operating loss, I just wanted to make sure I did not hear it wrong. For this Q1, the marketing ad business, was the operating loss $17 million? I just wanted to double-check on that because I think, you know, our revenues are only like, you know, $14 or $15 million, but we are losing $17 million, so it seems like the expense is like double of the revenue. Just wanted to make sure I heard it correctly. Then, if so, where was the money spent?

Speaker #7: So yeah, any colors you can share with overall the macro outlook. Is that worse than what you had previously expected? And then on the operating loss, I just wanted to make sure I did not hear it wrong.

Speaker #7: For this one Q, the marketing ad business is the operating loss was 17 million. I just wanted to double-check on that. Because I think our revenue is only like 14 or 15 million.

Speaker #7: But then we are losing 17 million. So it seems like the expense is double of the revenue. So just wanted to make sure I heard it correctly.

Speaker #7: And then if so, then where were the money got spent? Is it mostly on the product development or is it on the user acquisition?

Alicia Yap: Is it mostly on the product development, or is it on the user acquisition? Thank you.

Speaker #7: Thank you.

Speaker #6: So first, let's answer your last question about the what? You have a question about the loss, the marketing spending in Q1. Is that? What number you're talking about?

Charles Zhang: First let's just answer your last question about the what? You have a question about the loss, the marketing spending in Q1, is that?

Charles Zhang: First let's just answer your last question about the what? You have a question about the loss, the marketing spending in Q1, is that? What number you're talking about? Which one? Mm-hmm.

Alicia Yap: Yes.

Charles Zhang: What number you're talking about? Which one? Mm-hmm.

Speaker #6: Which one?

Alicia Yap: They said CNY 17 million.

Speaker #7: Is it 17 million, the OP loss for the ad business?

Alicia Yap: They said CNY 17 million.

Charles Zhang: Seventeen

Charles Zhang: Okay.

Alicia Yap: the OP loss for the ad business.

Alicia Yap: The OP loss for the ad business.

Charles Zhang: CNY 17 million over loss. Over loss of what? We don't have a CNY 17 million loss.

Speaker #6: Seven. 17 million. Our loss of what? We don't have a 17 million loss.

Alicia Yap: Yeah, the operating loss.

Speaker #7: Yeah. The operating loss.

Speaker #6: Operating loss. 17 million operating loss in Q1. Just a second.

Charles Zhang: Operating loss. CNY 17 million operating loss in Q1.

Alicia Yap: Oh, seven.

Charles Zhang: Just a second. Yeah.

Alicia Yap: For social media platform, the operating loss in Q1, $17 million.

Speaker #7: So we need a platform, the operating loss in Q1, 70 million dollars. 17.

Charles Zhang: Seventeen.

Charles Zhang: 17.

Alicia Yap: Seventeen.

Alicia Yap: 17.

Charles Zhang: 17. 17. Yeah.

Alicia Yap: 17. Yeah.

Speaker #6: 17. 17. Yeah.

Speaker #7: Yeah.

Charles Zhang: Yeah.

Speaker #6: Yeah. Yeah. Is there any I mean, it's similar, right? To this previous, yeah?

Alicia Yap: For seven-

Charles Zhang: Yeah. Is there any I mean, it's similar, right, to the previous, yeah?

Alicia Yap: Like with the same Q in last Q, yeah.

Alicia Yap: Like with the same quarter in last quarter, yeah.

Speaker #7: Like with the same quarter in the last year.

Charles Zhang: Yeah, it's similar to previous quarters.

Speaker #6: Yeah. It's similar to previous quarters.

Speaker #7: Okay. So this is not something that we spent.

Alicia Yap: Okay.

Charles Zhang: You have a question about?

Speaker #6: The money was spent?

Alicia Yap: is not money that we spent.

Alicia Yap: Is not money that we spent.

Charles Zhang: how money was spent?

Speaker #7: Yeah. Yeah.

Charles Zhang: How money was spent?

Alicia Yap: Yeah. Yeah.

Charles Zhang: We didn't spend more money, just as we did before, the previous quarters. Well, it's either on user acquisition or on product development. It's all together because we are building. Actually, we have three social network products. One is Sohu Video, square video. We also have Huyou and also have Sohu News App, and also turn that into a, you know. And also for each of the products, especially for the Sohu Video, we have, yeah, we do spend some money on the user acquisition and also the team, you know, the cost and also product development. It's similar to previous quarters.

Speaker #6: We didn't spend more money, just as we did before. The previous quarters. Mostly through I think well, we don't it's either on user acquisition or on product development.

Speaker #6: So it's all together because we are building actually, we have three social network products. One is social video screen video. We don't have the Huio and also have social news app and also turned that into a the Shijian Chen.

Speaker #6: So and also for each of the products, especially for the social screen video, we have yeah, we do spend some money on the user acquisition and also the team.

Speaker #6: The cost and also product development. So it's similar to previous quarters. It's until we build a really until we have a really successful product that I would say explode into a lot much larger scale, now the and also considering the macroeconomic situation.

Charles Zhang: It's, until we, you know, build a really, until we have a really successful product that, you know, obviously flow into a lot, much larger scale. Now, also considering the macroeconomic situation. The advertising dollars will not be able to cover the cost that we are, you know, incurred on product development and user acquisition. That's similar, CNY 17 million a quarter.

Speaker #6: So the advertising dollars will not be able to cover the cost we are incurring. We incurred on product development and user acquisition. So that's similar.

Speaker #6: 70 million dollars. Per quarter.

Speaker #7: Okay. Okay. And then the revenue, the guidance, is that worse than you expected?

Alicia Yap: Okay. Okay. Then, the revenue, the guidance, is that worse than you expected?

Speaker #6: That's because of macroeconomic situation, right? Compared with last year, right? It's worse than last year. Because all the auto car companies, they're because of the three years competition and the low margins of their so we are more cautious in spending less.

Charles Zhang: That's because the macro economy is considering last year, right? It's worse than last year because those are also co-car companies there. Because of the fierce competition and the low margin out there, you know, so we are more cautious and spending less, and we have to come up with a really unique, you know, event or opportunities like, you know. Like, for example, I have to, myself, I have to, you know, to apply, you know, the Physics Class IP to try to explain, you know, to, how to call it, how to say, give lectures about their products or the machines, the engines, and also the cars, why the car is the better.

Speaker #6: And we have to come up with really unique events or opportunities like so for example, I have to myself, I have to apply this physics class IP to try to explain to how to say the give lectures about their products or the engines and also the cars why the car is better.

Speaker #6: So it's and also sometimes the organized users or users and influencers to have a forum or whatever. But we have to have a differentiated unique opportunities to have a marketing solution offered to them.

Charles Zhang: Also sometimes to organize the users, our users and influencers to have a forum or whatever. We have to have a differentiated, unique opportunities to have a marketing solution offer to them. Compare with a few years ago, there just was, you know, it's an easy decision to spend money to advertise, but now it's very difficult.

Speaker #6: So that we attend to but compared with a few years ago, a few years ago, they are just it's an easy decision to spend to advertise.

Speaker #6: But now it's very difficult.

Speaker #7: I see. I see. Just lastly to follow up, can you share with us? I know you mentioned auto is one of the industry vertical probably are cutting back the ad budgets.

Alicia Yap: I see. I see. Just lastly, to follow up, can you share with us, I know you mentioned auto is one of the industry vertical probably are cutting back the ad budget. Any other vertical that you're actually seeing is also, you know, facing more cautious ad budgets?

Speaker #7: Any other vertical that you actually seeing is also facing more cautious ad budgets?

Charles Zhang: It's across the board, all companies, basically. The Chinese consumers are spending less. You know, consumers are spending less. Those companies are not making money or have, you know, good, not making good money. They are actually reduced with their ad reduction, advertising dollars.

Speaker #6: It's across the board. All companies. Basically. Because just the Chinese consumers are spending less. Consumers are spending less. That's why those companies are not making money or have a good not making good money.

Speaker #6: That's why they are actually reduced their ad reduction. Their advertising dollars. The auto or IT. And FMCG and all across the board.

Charles Zhang: The auto, IT.

Alicia Yap: Oh.

Charles Zhang: FMCG and all. Across the board, all, you know, everything is slashed.

Speaker #7: I see. Okay. Maybe just lastly, in terms of the first quarter on your advertising revenue contribution by industry vertical, if you can rank them by the contribution percentage and.

Alicia Yap: I see.

Charles Zhang: They're advertising.

Alicia Yap: Okay. Maybe just lastly, in terms of the Q1 on your advertising revenue contribution by industry vertical, if you can rank them by the contribution percentage. Thank you.

Charles Zhang: 19%. Auto industry, 19%. IT services like home appliances and electronics, you know, that's 19%. FMCG, 14%.

Speaker #6: 19%. Auto industry, 19%. IT services like home appliances and electronics and that's 19%. And FMCG, 14%.

Speaker #7: I see. Okay. Very helpful. Thank you, Charles.

Alicia Yap: I see. Okay. Very helpful. Thank you, Charles.

Charles Zhang: Yeah, the IT sector, there are some good signs in the IT sector because the traditional home appliances, now because of the IT AI, you know, they're all turning into AI product with, you know, intelligence. We have seen a lot of new kind of products that tend to the market, you know. That's why, because like, for example, I went to the Shanghai AWE, the annual AWE, and see a lot of new, the traditional home products, home appliance electronics with a, you know, with, you know, in Chinese called 疯了 , AI 疯了 , you know, turning, you know.

Speaker #6: Yeah. The IT sector is there's some good sign. The IT sector because the traditional home appliances now because of the IT, AI, they are all turning into AI products with intelligence.

Speaker #6: So that's we have seen a lot of new kind of products that tend to market to the so that's why because for example, I went to the Shanghai AWE, the annual AWE, and see a lot of new traditional home products, home appliance electronics with the Chinese called Funen.

Speaker #6: AI Funen, turning really a lot of with a lot of that's some opportunity.

Charles Zhang: Really, you know, with a lot. That's some opportunity.

Speaker #7: I see. I see. And then so that is you are seeing decent budget. And then in terms of the second quarter, should we also rank maybe you are seeing more upbeat from the IT and then maybe FMCG also okay, but then weaker in auto?

Alicia Yap: I see. I see. You are seeing, you know, decent budget. In terms of, you know, in Q2, should we also rank maybe you are seeing more upbeat from the IT, maybe FMCG also okay, weaker in auto. Is that fair to assume that on Q2?

Speaker #7: Is that fair to assume that on the second quarter?

Speaker #6: Yeah. The second quarter, the auto right. Yeah. Auto a few years competition. Yes. And also the electric vehicle, it's a more penetration of electric vehicle into the market, into the market share.

Charles Zhang: Yeah, the Q2, the auto. Right. Yeah, auto is a fierce competition, yes. They're Also the new electric vehicle, you know, it's a higher, a more penetration of electric vehicle into the market share. Yeah, obviously I'm similar, right? The auto industry is graduating, right? Now they're all trying to, you know, export more to the European market or to the Middle East, right? Domestically, the consumption, you know, the human power is really a problem. People are not spending money. It's too saturated.

Speaker #6: And yeah, I would say similar, right? The auto industry is gradually right? And now they're all trying to export more. To the European market or to the Middle East, right?

Speaker #6: So domestically, the consumption consuming power is really a problem. People are not spending money. It's too saturated. Right? Because people are all paying their mortgage that's why they don't have money to spend, right?

Charles Zhang: Right? Because people are all, you know, paying their mortgage. That's why they don't have money to spend, right? They're all paying the high, you know, housing price mortgage. That's a major, that's mostly the biggest problem with the Chinese economy. People all have debt and have to pay back their to pay their mortgage. They don't have time, they don't have the money to spend on other things.

Speaker #6: They're all paying the high housing price mortgage. That's a major that's the most the biggest problem with the Chinese economy. So people are all have debt.

Speaker #6: And have to pay back their to pay their mortgage. So they don't have time to they don't have the money to spend on other things.

Alicia Yap: Okay. Okay. Thank you so much, Charles. Thanks for sharing.

Speaker #7: Okay. Okay. Thank you so much, Charles. Thanks for sharing.

Alicia Yap: Okay. Okay. Thank you so much, Charles. Thanks for sharing.

Charles Zhang: Yeah. Okay.

Speaker #6: Okay.

Speaker #1: Thank you. As a reminder, please press star 11 on your telephone keypad if you wish to ask a question. I am showing no further questions.

Operator: Thank you. As a reminder, please press star one one on your telephone keypad if you wish to ask a question. I am showing no further questions. With that, we conclude our conference call for today. Thank you for your participation. You may now disconnect your lines.