Sohu.com's Q1 2025 Results: Navigating Headwinds in Advertising and Gaming Markets

Investors will soon get their first look at Sohu.com Limited’s (NASDAQ: SOHU) performance in 2025 when the company reports Q1 results on May 19. While preliminary guidance paints a cautious picture, the earnings release will reveal whether management’s cost-cutting measures and strategic bets are paying off—or if the company remains mired in structural challenges.

Revenue Outlook: Challenges in Advertising, Hope in Gaming

Sohu’s revenue guidance for Q1 2025 highlights a stark divergence between its two core businesses. Brand advertising revenue is projected to fall between $13 million and $14 million, a year-over-year decline of 13% to 19%. This marks a continued slide for the segment, which has struggled with broader economic softness and shifting advertiser preferences toward platforms like TikTok. Sequentially, the drop of 26% to 31% compared to Q4 2024 suggests seasonal factors may also be at play, though the trend underscores the sector’s broader malaise.

The online gaming division, however, offers a sliver of optimism. Changyou’s revenue is expected to range between $105 million and $115 million, a modest year-over-year decline of 2% to 11%, but with potential sequential improvement of up to 5%. Management has pinned its hopes on titles like Journey Renewed: Fate Fantasy, which launched in Southeast Asia last year, and efforts to revitalize older games like Tian Long Ba Bu. The variable guidance, however, reflects uncertainty about these initiatives’ traction.

Net Losses: The Cost of Staying Competitive

The company’s financial health remains under pressure. Non-GAAP net losses are forecasted between $16 million and $26 million, while GAAP losses could hit up to $30 million. These figures reflect ongoing operational challenges and the costs of maintaining Sohu’s media platforms and game development pipelines.

Notably, Sohu has repurchased $52 million worth of shares since 2024 under its $150 million buyback program, signaling confidence in its long-term value. Yet with net losses widening in Q4 2024 to $21 million (GAAP) and $15 million (Non-GAAP), investors will scrutinize whether cost discipline has improved.

Strategic Moves and Risks Ahead

Management has emphasized product refinement and algorithmic improvements to boost user engagement on its media platforms. However, competition from social media giants like ByteDance and regulatory scrutiny over data practices in China’s internet sector remain headwinds.

Currency fluctuations also loom large. Sohu’s guidance assumes an exchange rate of RMB7.18 to $1.00, slightly higher than recent periods. If actual rates deviate, especially with the yuan weakening, revenue and expense figures could shift meaningfully.

Historical Context: A Pattern of Decline

Comparing Q1 2025 projections to Q4 2024 results highlights the uphill battle Sohu faces. In Q4, total revenue fell 5% year-over-year to $135 million, with online games contributing $110 million and advertising $19 million. Net losses widened despite these figures, suggesting that even modest revenue declines are magnified by fixed costs.

Conclusion: A Turning Point or More of the Same?

Sohu’s Q1 results will be a litmus test for its ability to stabilize its core businesses. The advertising segment’s decline appears entrenched, but gaming’s potential rebound—if realized—could offset some of those losses. Investors should watch for three key metrics:
1. Advertising Revenue: Is the decline narrowing? A result closer to $14 million versus $13 million signals lessening pressure.
2. Gaming Performance: A sequential rebound toward $115 million would validate management’s strategy.
3. Cost Control: Non-GAAP losses below $20 million would indicate progress, though GAAP results may still be weighed down by non-operational charges.

With shares trading at roughly $17—near their 52-week low—the market has priced in disappointment. Yet Sohu’s buyback program and strategic bets suggest management believes better days lie ahead. For now, the onus is on Q1 results to prove it.