Prepared remarks
Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Second Quarter 2026 Earnings Conference Call. 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.
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.
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 overview of our financial performance.
Please be advised that this release relates to continuing operations only. For the second quarter of 2026, total revenues 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. After giving effect to the above-mentioned reversal of tax expenses, non-GAAP net income attributable to Sohu.com Limited was $500,000 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.
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, which was 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 signature events including the 2026 kickoff-of-the-year annual K-Pop Dancing Festival and 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 Salute to the Ultimate Explorers in the outdoor and sports vertical, and World Cup-related activities and World Cup watching parties. As a result, a variety of online interest clubs developed 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 2026 Sohu Annual Science and Technology Conference. During the conference, we invited a host of leading scholars to engage in cross-sector high-end dialogues regarding the latest scientific trends and developments, attracting a large number of scientists and science enthusiasts to our platform. At the same time, we continued to strengthen our leading position in knowledge and science-related live broadcasts and classes with our core IPs, such as Charles' Physics Class. We held live broadcasts related to the National College Entrance Examination in Physics and provided relevant learning advice for audiences. We also kept delivering public science popularization, devoting ourselves to narrowing the gap between the public and cutting-edge science. This month, the English class, Charles' English Class, celebrated its 10th anniversary. For 10 years, we've been doing this and it has conducted more than 2,000 live broadcasts, continuing to generate practical content and drive 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 delivered in the physics class with industry practice applications of applied physics to help brand advertisers showcase their technological strength and advance 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 new content and gameplay for TLBB Return 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 capabilities through continuous experimentation and validation, striving to bring more high-quality games to the players. 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 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.
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 were $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 an annual increase of 3% to 10% and a sequential decrease of 1% to 8%. Online game revenues are expected 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 is expected 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.
Questions and answers
First question comes from Thomas Chong from Jefferies.
My question is about the good result that we saw in Q2. I think last earnings call, Charles, you mentioned that advertising sentiment was 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 the 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?
Okay. Regarding the Sohu Media or Social Media platform and advertising: yes, we actually beat the forecast. My view remains similar to last time in that the macroeconomic situation is still weak; advertisers are very cautious in spending. However, because of our unique marketing offerings, we were able to achieve growth compared with Q1. Q1 has seasonal effects, but we did see growth and beat our forecast because of the innovative marketing solutions that we provided to our advertisers, especially by combining our online social media platform with offline activities, live streaming and events. Advertising today is very different from a few years ago when brand advertisers tended to spend more on standard advertising channels (in Chinese called 'traditional media'). Advertisers are trying to create maximum viral distribution through key influencers or KOLs and social networks. Our social platform is able to provide exactly that kind of marketing service.
In terms of categories, auto is 33%; FMCG, 20%; IT, 17%. All three areas are not doing well — the macroeconomic situation has caused them to spend less and be more cautious. As for the World Cup, there was not much impact on advertising revenue. But we did organize World Cup watching activities to promote user acquisition and engagement; the impact was more on the consumer/user side than on advertising income. I hope I answered your questions.
Over the past almost two months, performance has been largely in line with our expectations. However, we still have more than one month's time to go in the World Cup period, and there are content releases and activities that remain, which are not easy to forecast. Ultimately, results will depend on the performance of those content and activities.
Next question comes from the line of Alicia Yap from Citigroup.
I have two questions. First, on the buyback: I think you mentioned the Board amended the existing buyback program to be open-ended rather than expiring in November. What's the rationale behind that? Does that imply the remaining $26 million is unlikely to be finished by November 30, so you made it open-ended to continue repurchasing before you announce a new plan? Any reasons you can share would be great. Second, a follow-up on online advertising guidance for 3Q. This is the first time in a long time you're expecting positive year-over-year growth. Given weak macro and budget sentiment, does this 3Q guidance indicate the beginning of a positive year-over-year trend after prolonged declines?
Okay, Alicia. For your first question, you are exactly right. Because of daily trading volume limitations, we could not finish the $150 million repurchase by November. Therefore, we extended the timing to an open schedule so that we can complete the remaining $26 million. For your second question, the macro is still weak and advertisers remain cautious, but Sohu has been able to achieve growth because our base is relatively small and we provide unique marketing solutions that advertisers like. We are looking at positive growth — for the first time in a long time we are targeting some growth.
I see. Lastly, on gaming: typically, 1Q and 3Q are seasonally stronger. You beat guidance in 2Q, yet your 3Q guidance for gaming implies a sequential decline rather than the usual seasonal increase. Can you quantify or give color on how you're thinking about seasonality versus portfolio performance?
The outperformance of the second quarter was mainly due to better-than-expected performance from several of our older games, including TLBB PC, where the expansion packs launched were very well received by our players. Several of our older games all performed better than our expectations. Thus the performance of the second quarter was indeed quite strong. For the third quarter, we expect the older games to experience some natural decline, which is normal given the long-running operation of those titles. The third-quarter guidance reflects that the second-quarter outperformance was driven by older games performing better than anticipated.
Okay.
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.
Thank you.