Sohu.com Ltd Sponsored ADR Stock

Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 update overview of our financial performance. Please be advised that this release relates to continuing operations only. For the second quarter of 2026, total revenue 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. Non-GAAP after giving effect to the above-mentioned reversal of tax expenses, non-GAAP net income attributable to Sohu.com Limited was $500,000 income 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, [indiscernible], 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 the signature event of 2026 kickoff the year annual K-Pop Dancing Festival and also 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 the Salute to the Ultimate Explorers, an outdoor vertical -- and sports and outdoor vertical, and World Cup-related activities and World Cup watching parties.

As a result, a variety of online interest clubs were developing 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 event of 2026 Sohu Annual Science Technology Conference. ,[indiscernible] We invited a host of leading scholars to engage in cross-sector high-end dialogues regarding the latest scientific trends and the developments attracting a large number of scientists and science enthusiasts to our platform.

At the same time, we continue to strengthen our leading position in knowledge and science-related live broadcast, class with our core IPs, myself, Charles Physics class, and we held live broadcasts related to the National College Entry examination in Physics and provided relevant learning advice for audiences. We also kept delivering public science popularization devoting to narrowing the gap between the public and the cutting edge science. This month, the English class, Charles' English Class celebrated its 10th anniversary, 10 years, we've been doing this for 10 years and has created -- conducted for more than 2,000 live broadcasts contributing -- continuing to generate practical content and driving 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 -- physics and delivered in the physics class with industry practice applications of the Applied Physics to help brand advertisers to showcase their technological strength and advance and 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 a new content and game play for TLBB. Return to enrich -- we like 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 R&D capabilities through continuous experimentation and validation, striving to bring more high-quality games to the players.

Regarding to our pipeline, we seek to further unlock the potential of our TLBB IP. Meanwhile, as we maintain our competitive edge in the 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, $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 annual increase of 3% to 10% and a sequential decrease of 1% to 8%.

Online game revenues 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 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.

[Operator Instructions] 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 about the advertising sentiment is just so 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 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. Your first part about the Sohu Media or Social Media platform, the advertising, yes, we actually beat the forecast and the answer to your question is still similar to last time that the macroeconomic situation is still very bad, actually bad and sloppy. Advertisers kind of are now very cautious in spending. But because of our unique marketing offerings, so we were able to achieve actually some kind of growth compared with Q1. Well, Q1 in seasonality, but yes, we actually have some growth beat the forecast because of our innovative marketing solution that we provided to our advertisers, especially combined our online social media platform and also offline activities with live streaming, with events.

And -- so now the marketing advertising side is very different from before like a few years ago when actually advertisers tend to -- especially brand advertisers tend to spend less on the standard advertising on channels on the traditional in Chinese called [indiscernible]. They are all trying to create the maximum effect of viral distribution or viral online through key influencers or KOLs and to use the social networks. That's -- and our solution, our social platform just provide -- are able -- we are able to provide exactly that, that kind of marketing services.

In terms of categories, so still, the auto is 33%; and FMCG, 20%; IT, 17%. And all 3 areas are not doing well. I mean the macroeconomic situation, they're all spending less. I mean, still more cautious. So the World Cup actually, yes, there's not much impact in terms of the income, I mean, the advertising. But the World Cup, we did organize the activities of watching World Cup games and tournament, which to promote or develop our -- to acquire users. It's more to the consumer side, I mean, the user side. Yes, I hope I answered your question.

[Foreign Language].

[Foreign Language]

From the past almost 2 months, the performance is largely in line with our expectation. But still, we have more than 1 month's time to go, and there are still some content and activities to be released, which are not very easy to forecast their performance. So final -- so eventually, it will depend on the performance of these content and activities.

Next question comes from the line of Alicia Yap from Citigroup.

I have 2 questions. First, I wanted to ask on the buyback. I think you mentioned the Board amended the existing buyback program to be open-ended rather than it was supposed to be expired, I think, in November. So just wanted to know what's the rationale behind?

Does that mean that -- or does that imply or suggest that the remaining $26 million of that outstanding, it is highly chance that you might not finish by that November 30, so that you are making it open open-ended so that you can continue to finish that $26 million before you announce a new plan? So any kind of like the reasons that you can share with us would be great.

And then the second question is a follow-up on the online advertising guidance for the 3Q. I know it maybe just from previously the pace wasn't that high, but still, it is the first time for a long time that you are now expecting a positive growth on the year-over-year. I know you just mentioned the macro, the budget sentiments remain quite weak. But it does look like -- I don't know whether the 3Q positive growth is the beginning of the positive growth trend after your ad revenue has been declining for such a long time. So maybe if you can also illustrate despite this weak macro, but is this 3Q guidance is the first sign of potentially the more positive year-over-year trend going forward?

Okay, Alicia. So for your first question, you got it exactly right. Yes, we -- because of the daily trading volume limitation, we could not finish the $150 million by November. So we expanded -- I mean, extended the time to an open schedule so that we can finish that $150 million to finish the rest of the left -- $26 million left.

And your second question, yes, basically, as I said earlier, that it's -- the macro is still bad, sloppy and people are cautious in spending. But I mean, macro economy, but the individual Sohu, we are actually achieving some kind of -- in Chinese called [indiscernible] we are kind of -- because the base is small, so we are able to provide some unique marketing solutions so that advertisers buy in, they like the kind of solution that we provide to them. And we're looking at -- yes, we are looking at -- for a long time, we're looking at some kind of growth for the first time in a long time.

I see. Okay. Maybe lastly, if I can, I wanted to follow up on the gaming question. I think typically, 1Q, 3Q should be a seasonally stronger quarter. So your 2Q, you came in and you beat your guidance, but yet your 3Q guidance on gaming seems to be implying a sequential decline rather than seasonality-wise, it should be a sequential increase. So maybe if you can quantify it or give us some color how you were seeing or how you're actually thinking about the seasonality versus your portfolio performance?

[Foreign Language]

[Foreign Language]

The outperformance of the second quarter is mainly due to outperformance, better-than-expected performance of some of our older games, including TLBB PC for which the expansion packs that we launched were very well for our players.

[Foreign Language]

Several of our older games performed -- all of them performed better than our expectations.

[Foreign Language]

So the performance of the second quarter is indeed quite well. So for the third quarter, we expect the older games to experience some natural decline, which is normal because we have been operated for a long time.

[Foreign Language]

Mainly because of the better-than-expected performance of the older games in the second quarter.

[Operator Instructions] 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.

Ladies and gentlemen, thank you for standing by, and good day. Thank you for joining Sohu's First Quarter 2026 Earnings Conference Call. [Operator Instructions]. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd 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.

Thank you, operator. Thank you for joining us to discuss Sohu's Fourth Quarter 2026 results. On the call are Chairman and the Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and the Vice President of Finance, James Deng. Also with us CEO Dewen Chen; CFO, Yaobin Wang.

Before management begins their prepared remarks, I would like to remind you of the company's safe harbor statements 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, project and projections. Therefore, you should not place any 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 containing in any forward-looking statements. 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 20-F. With that, I will now turn the call over to Dr. Charles Zhang. Charles, please proceed.

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

For the Sohu Media platform, we will 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.

For the first quarter of 2026, total revenues were $141 million, up 4% year-over-year and down 1% quarter-over-quarter. 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.

GAAP net loss attributable to Sohu.com Limited was $4 million compared with a net income of $182 million in the first quarter of 2025 and a net income of $223 million in the fourth quarter of 2025. Non-GAAP net loss attributable to Sohu.com Limited was $4 million loss and $4 million -- loss, net loss in compared with a net loss of $16 million in the first quarter of 2025 and a net income of $261 million in the fourth quarter of 2025.

Now I'll go through our key businesses in more detail. First, Sohu media platform. In the fourth quarter of 2026, we continue to integrate resources in depth and upgrade our products with cutting-edge technologies. We offer various practical and 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.

Benefiting from unique off-line events we held, we provided users with plenty of interaction opportunities, improve the social engagement and generating abundant premium content that was widely spread over the Internet. In March, for example, in March, 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 total interactions on our platform.

Meanwhile, the 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 synerg between our flagship IPs and further expanding our brand influence. In April, we hosted the 2026 Spring Convention of Sohu Video Influencers, 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 pop and verticals in professional field such as science and health. The convention created a chance for broadcasters to interact in person, promoting content generation and dissemination and doing genuine social connections.

During the quarter, we also launched the 2026 Sohu K-Pop Dancing Festival competition throughout the year and also the 2026 [indiscernible] mobile competition, also a year-long event to further consolidate our influence and appeal in these areas. We continue to combine off-line events with online interactions and to update our profile and the standard of our competition.

With these efforts, we garnered widespread attention and attractive some guest 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 to provide targeted marketing solution for advertisers through our innovative and customized events and campaigns such as the Cloud IP, it's a deriving traffic to the platform given to unlock monetization potential.

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 various holiday events around the Chinese New Year and Valentine's Day as well as the promotion events for the regular TLBB PC, which helped sustain stable player engagement. Apart from holiday events, we also introduced a new lfull client for [indiscernible] best. It's posted clear in [indiscernible]. Meanwhile, we'll continue to update and refine [ TLBB ] return to secure its long-term by tenants.

Turning to our mobile side, the mobile game business, we launched an expansion pack for Legacy [ TLBB ] mobile to celebrate the Chinese year along with the diverse online offline events, earning for this gain stayed largely stable on a sequential basis. Next quarter, we will continue to launch expansion tax and content updates for the [ TLBB ] services and other titter key players engaged.

Looking ahead, we will remain committed to our top game strategy. On the product development front, we will stay being anchored in a user-centric approach and here to adhere to a systematic R&D processes while driving the implementation of new technologies to enhance efficiency and product success rate. Regarding our pipeline, we seek to further unlock the potential of our [ TLBB IT ].

Meanwhile, as we maintain our competitive edge in the MMRO RPGs, 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 May 13, 2026, Sohu has repurchased 8.7 million [ ABS ] from aggregated cost of approximately $160 million. With that, I'll turn now the call to our CFO, Joanna. Joanna?

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 a non-GAAP basis. You may find a reconciliation of non-GAAP to GAAP measures on our IR website.

Social media platform. Quarterly revenues were $16 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 $18 million in the same quarter last year. Quarterly operating profit, $66 million compared with operating profit of $55 million in the same quarter last year.

For the second quarter of 2026, we expect Marketing services revenue to be between $30 million and $40 million. This implies annual decrease of 10% to 17% and a sequential increase of 4% to 11%. Online game revenues to be between $104 million and $114 million. This implies a decrease of 2% to an annual increase of 8% and a sequential decrease of 8% to 17%. And both on [indiscernible] and GAAP net loss attributable to Sohu.com Limited to be between $50 million and $25 million. This forecast reflects focus 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.

[Operator Instructions]. We will now take our first question. And our first question comes from the line of Thomas Chong at Jefferies.

I have a couple of questions. 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 the second half and full year. And in particular, we are going to soon to have well [indiscernible]. Would this be a big positive to our advertising revenue in Q2 and Q3?

And my second question is about the gaming business. Can you comment about the quarter-to-date performance so far, we are seeing in Q2. You see more likely to hit the low end or the high end of the revenue guidance?

And 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'm just wondering, is this a conservative assumption? And should we use as a benchmark to project Q3 and Q4 bottom line?

Okay, Thomas. So the first question about marketing services revenue, right? Q2 forecast, as Joanna said, it's going to be [indiscernible], but sequential growth compared with the Q1. First of all, the overall economy situation is kind of in the downturn in economic situation. And 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 events, especially we can take advantage of our growing to the network and also influencers and also some IPs like in my own [indiscernible] and the off-line events like the [indiscernible] competition and [indiscernible].

We have is quite unique tailor-made or customized marketing spend based on what is available like our own platform and also its activities. So you're -- so your next question is about the overall year outlook or from the Q2. I think we'll be siting right -- last year about the -- again, right, the game or the first quarter is good. And then for the sake time, you want to that second part last is at the low end or half end, right?

[Interpreted] 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 were planned to roll out for our [ TLBB ] series game to see whether they can satisfy users' needs. So far, we believe it is in line with our expectations. Also, as we plan to roll out fewer promotional and revenue booking activities in the second quarter, so we expect our gaming revenue to experience a natural decline.

So the game TLB return that was in Q1 did have impact by Q3 revenue decline in the year-over-year ones. [indiscernible]. So you have a third question, Thomas? [indiscernible] all over?

Yes. On the bottom line, because of Q1, we are better than expected. But Q2, we are seeing sequential widening of the losses. So I just want to see if Q2 is a benchmark for Q3 and Q4. Thank you, Charles.

I think this year, Q2 on Q3 will be similar to last year because on the marketing services side on the platform, side, we basically about the same. We're still working on our total network and make sure that we have a larger user base so that we can have an uptake. But now still we are maintaining a stable and advertising growth. So the Q2 results or the earnings so compared with Q1 mainly because of gaming revenue cover, right? It's much less than Q1 as we just described.

We will now take our next question from the line of Alicia Yap, Citi.

I have 2 follow-ups on the earlier question. So I guess the -- you mentioned on, I think, the second quarter, obviously, the guidance. -- it is a bit weaker than I expected in terms of the sequential trend that typically we would see from the 1Q to 2Q, even though sequentially is growth. 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 5 months ago in the beginning of the year. So yes, any color 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. For this 1Q, 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 million or $15 million, but then we are losing $17 million. So it seems like the expense is double of the revenue. I just wanted to make sure I heard it correctly.

And then if so, then where will the money got spent? Is it mostly on the product development? Or is it on the user acquisition?

So first, let's just answer your last question about the -- well, you have a question about the loss, the margin expanding in Q1. Is that what number you're talking about? Which --

Is it $17 million, the op loss for the ad business?

$17 million over what? We don't have a [ 7 million ] operating loss.

Operating loss. Media platform, the operating losses in Q1 [ $70 million ]. Yes.

Yes. Is there I mean it's similar, right? So [indiscernible], yes.

Flat with the same quarter in the last quarter.

Similar previous quarters. Okay. So question was fair.

Yes, yes.

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 pet acquisition or product development -- so it's altogether because we are giving -- actually, we have 3 social network products. One is video square meter. We [indiscernible] and also have so new app and also turn that into a [indiscernible]. So -- and also for each of the products, especially for the [indiscernible], we have -- yes, we do spend some money on the user acquisition and also the team, the cost and also product lane. So it's similar to previous quarters. It's -- until we do a really -- until we have a really successful product that, I would say, explore into much larger scale.

Now we -- and also considering the macroeconomic situation. So the advertising dollars will not be able to cover the cost that we are -- incurred revenue is acquisition, at $270 million per quarter.

Okay. Okay. And then on the revenue, the guidance, is that worse than you expected?

That's because the macro funds compared to last year, right? It's work than last year. Because those are also [indiscernible] companies there because of the year competition, the low margin so we are more cautious in spending less and we have to come up with a really unique events or optimists like -- so like, for example, I have to myself, I will to apply the [indiscernible] to try to expand to -- I would say give lecture about their products, the engines and on the car, why the current the better.

So it's and also sometimes outline the users, our user bank forces to the forum forever -- but we have to have differentiated our unique opportunities to have a marketing solution offer to them so that we attend compared with a few years ago. A few years ago there, just with -- it's an easy decision to spend to advertise, but now very big.

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

It's possible 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 need to have a good amount being good money. That's why they are actually used the reduction rather than as -- there are also a [ FMCG ] and across the board, both the --

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?

19%. Auto industry, 19% IT services like home appliances and electronics and that's 19%. And I have a [indiscernible].

I see. Okay. I think --

There is some good signs in the IT sector because the traditional home appliances. Now because of the IT AI, they are all turning into AI product with intelligence. So that's -- we have seen a lot for new kind of products that tend to market to the market that's [indiscernible]. Like, for example, I went to the [indiscernible] and you see a lot of new the traditional home products, home applying electronics in China [indiscernible], turning really a lot of that's an opportunity.

I see. I see. And then -- so that is -- you are seeing decent budget. And then in terms of in the second quarter, should we also rank maybe you're seeing more update from the IT and then maybe [ FMCG ] also okay, but then are weaker in auto? Is that fair to assume that in the second quarter?

Yes. In the second quarter, the auto right, the -- yes. I hope with a few competition, yes, there -- and also the electric vehicle is a [indiscernible] -- more penetration of active the market is the market share. And yes, I'm going to say I'm similar, right? So also the industry is gradually, right? And now they're all trying to export more to the European market or to the lease.

So domestically, the consumption in power problem. People are not spending money. Too saturated right? Because people are paying their mortgage, that's why they don't have money to spend, right? They're all paying the housing price mortgages. That's a major [indiscernible] of most -- the biggest problem is the cinema people all have debt and have to pay back their pay their mortgage. So they have time -- don't have the money to spend on other things.

[Operator Instructions]. I'm showing no further questions. And with that, we conclude our conference call for today. Thank you for your participation. You may now disconnect your lines.

Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. If you have any objections, you may 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 fourth quarter 2025 results. On the call are Chairman and the Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and the Vice President of Finance, James Deng. Also with us are Changyou's CEO, 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 on this call may contain forward-looking statements. These statements are based on current plans, estimates and projections, and therefore, you should not place undue reliance on them.

Forward-looking statements involve inherent 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. Charles, please proceed.

Thanks, Huang pu, and thank you, everyone, for joining our call. In the fourth quarter of 2025, our marketing services revenues exceeded our previous guidance, while our online game revenues were in line with our expectations. Our non-GAAP bottom line performance, excluding the impact of the Changyou withholding income tax reversal came in at the high end of our prior guidance.

For Sohu Media Platform, we continue to improve our products and algorithms to address user needs and enhance the experiences across different scenarios. We continue to host a variety of innovative events, which generated abundant premium content, greatly promoted user engagement and enabled us to capture more monetization opportunities.

For our online games, we remain committed to long-term operational excellence and continue to deliver high-quality content updates and compelling experiences to our players. Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the fourth quarter of 2025, the total revenue, $142 million, up 6% year-over-year and down 21% quarter-over-quarter.

Marketing services revenues, $17 million, down 10% year-over-year, up 25% quarter-over-quarter. Online game revenues, $120 million, up 10% year-over-year and down 26% quarter-over-quarter. After giving effect to the reversal of previously accrued withholding income tax of approximately $285 million related to Changyou, GAAP net income attributable to Sohu.com Limited was $223 million compared with a net loss of $21 million in the fourth quarter of last year -- I mean, 2024 and net income of $9 million in the third quarter of 2025.

After giving effect to the above-mentioned reversal of the withholding income tax, non-GAAP net income attributable to Sohu.com Limited $261 million compared with a net loss of $15 million in the fourth quarter of 2024 and net income of $9 million in the third quarter of 2025. For the full year of 2025, total revenues $584 million, down 2% compared with 2024. Marketing services revenues, $16 million, down 18% compared with 2024.

Online games revenues, $506 million, up 1% compared with 2024. GAAP net income attributable to Sohu.com Limited $394 million compared with a net loss of $100 million in 2024. Non-GAAP net income attributable to Sohu.com Limited $234 million compared with a net loss of $83 million in 2024. Yes. Excluding the reversal of accrued income tax, the 2025 non-GAAP net income is $51 million loss, right, $51 million loss, a 40% improvement over 2024.

So now I will go through our key businesses in more detail. For Sohu Media Platform, we continue to refine our products and enhance algorithms to address diverse user needs in various scenarios. Through a mix of vibrant offline and online events across various verticals will continue to attract and retain a large number of users, especially younger generations. Through spontaneous and active connections and communication, we consistently improved the user experience and boosted user engagement, further strengthening their stickiness on our platform.

With the above efforts, we were able to cultivate a healthy platform ecosystem with an active social atmosphere. For example, in the fourth quarter of 2025, we successfully hosted the year's most eye-catching finals for the 2025 Sohu K-pop Dancing Awards and 2025 Sohu Video Chinese Traditional custom Awards.

These events received a widespread praise spark enthusiastic interaction among participants and audience and drove extensive discussions and disseminations across multiple social media platforms. These initiatives further consolidated our position as the most influential and preferred platform in these areas and boosted the vigorous development of the platform.

During the quarter, we also continue to host traditional signature events such as the 2025 Sohu Fashion Awards and 2025 Sohu Finance Annual Forum. These events not only garnered significant attention, but also contributed to the continuous enhancement of our brand influence.

Additionally, we held a Halloween themed American TV series, party during the Sohu Video American TV series month end of fourth quarter of 2025, which brought audiences with lots of high-quality American movies. We have -- on the TV series. We also continue to steadily expand our content library with American dramas as well as other attractive TV series, original dramas and [indiscernible] dramas to consistently drive traffic for our platform.

Marking its fourth anniversary, the physics class, myself has conducted more than 270 live broadcasts over 30 offline classes and 270 online classes, multiple university seminars and published 3 books. It has continuously made physics more engaging for the general public while attracting lots of leading professional broadcasters in a variety of fields of knowledge on our platform.

With this highly regarded IP, we were able to further reinforce our reputation in the field of knowledge and science-based related live broadcasts and demonstrate our commitment to being a socially responsible media platform. On the monetization side, we deeply integrated advertisers' needs with the above-mentioned events and customized marketing campaigns. We also actively explore more monetization opportunities, leveraging our deep understanding of the market.

Through the dissemination of our premium content related to events, we facilitated advertisers' brand marketing while promoting the monetization value we offer. Now let me turn to our online game business. During the quarter, our online game business performed well with revenues in line with our expectations.

With fewer launches of the in-game promotional activities for TLBB PC and a natural decline of our new PC game TLBB Return, online game revenues decreased on a sequential basis. In our PC game business, we raised a player level cap for regular TLBB PC, which effectively boosted user engagement. Meanwhile, we rolled out a new character development system for TLBB Vintage, providing players with fresh goals and a more engaging experience.

Moving on to TLBB Return, we introduced its first new plan and continuously refine the game based on player feedback. In our mobile game businesses, we launched featured content centered on a return to classics and streamlined gameplay for the legacy TLBB Mobile. This effectively boosted player engagement and willingness to pay, leading to a sequential revenue increase. Next quarter, we will continue to launch expansion packs and content updates for the TLBB series and other titles to keep players engaged.

Looking ahead, we remain committed to our top game strategy, user-centric approach, and we'll continue to deliver high-quality games to players. In terms of game development, we will adhere to sound methodologies and systematic R&D processes while driving the integration of our new technologies to enhance efficiency and product success rate.

Regarding our pipeline, we're actively working to unlock the potential of TLBB IP. Meanwhile, as we maintain our core competitiveness in MMORPGs, we will continue to diversify our portfolio with multiple types of games and expanded product offerings with global appeal.

Now I'd like to give an update on the ongoing share repurchase program. As of February 5, 2026, Sohu had purchased 8.1 million ADS for the aggregate cost of approximately $106 million. So we still have 1/3 to go to finish this tranche purchase.

With that, I will now turn the call over to Joanna.

Thank you, Charles. I will now walk you through the key financials of our major segments for the fourth quarter and full year of 2025. 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 $21 million compared with $24 million in the same quarter last year. Quarterly operating loss was $72 million compared with operating loss of $69 million in the same quarter last year. For the full year 2025, revenues were $75 million compared with $91 million in 2024. The full year operating loss was $283 million compared with an operating loss $287 million in 2024.

For Changyou, quarterly revenues, $121 million compared with $111 million in the same quarter last year. Quarterly operating profit was $45 million compared with operating profit of $38 million in the same quarter last year. For the full year 2025, revenues $509 million compared with $506 million in 2024. The full year operating profit was $238 million compared with operating profit of $196 million in 2024.

For the first quarter of 2026, we expect marketing service revenues to be between $10 million and $11 million. This implies annual decrease of 20% to 27% and a sequential decrease of 35% to 41% online game revenues to be between $130 million and $123 million. This implies annual decrease of 4% to an annual increase of 5% and a sequential decrease of 6% to a sequential increase of 2%, both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $10 million and $20 million. This forecast reflects Sohu's management's current and preliminary view, which is subject to substantial uncertainties. This concludes our prepared remarks.

Operator, we would now like to open the call to questions.

[Operator Instructions] Our first question comes from the line of Thomas Chong of Jefferies.

My first question is about advertising. When I look at the Q1 advertising guidance, it seems it is relatively soft on a sequential basis compared to historical Q1. So I just want to get some color. Is it due to macro uncertainties? And can we talk about the trend for categories like auto and IT sectors in Q1?

And also on the gaming guidance, because when I look at the Q1 revenue guidance on gaming is seeing like a negative or positive Q-on-Q. And I just want to see what really drives the high end or the low end of the guidance and the trend we are seeing now. So that's my first question.

And my second question is about AI. Given that I think there's a lot of industry discussion in overseas market with regard to whether AI will disrupt the online gaming sector. I just want to get some thoughts from management about whether AI is a productivity tool in gaming? Or are we actually seeing AI may disrupt the sector in the long term?

Okay, Thomas. The first question is about advertising. Your question about the Q1 softness, right? So I think it's mainly due to the seasonality because this year's Chinese New Year is kind of late. I mean, 2 weeks late, it's like in the middle of February. So companies not getting a lot of things done in January or February. The overall macroeconomic situation will remain similar to Q4. So that's why.

And then the next question is about gaming, right? For gaming revenue? Yes, Q1, yes.

[Foreign Language]

[Interpreted] So since we have no new game launching in the first quarter, so the level of the revenue of the first quarter depends on the existing games performance, including such as the performance of the new content and activities that we will launch in the first quarter for TLBB PC, TLBB Return and lastly, TLBB Mobile. And so far, the performance is basically in line with our expectation.

[Foreign Language]

[Interpreted] We think so. We've been pushing the application of AI, especially in terms of the creation of game design plan, which we think is essential thing for the content production of game industry.

May I quickly also ask a follow-up question back to advertising. Charles, may I ask about how we are actually seeing the trend for different advertising categories such as auto and IT sectors. I remember in the last earnings call, we are actually seeing some softness. I'm not sure if there's any improvement for auto and IT sectors.

Yes, there is some improvement in the auto sector. It a higher percentage of the overall revenue split. So yes, because yes, there is -- so auto industry is doing better than IT and other FMCG, have a higher percentage of the total time -- I mean, of revenue.

This is Q4, we are talking about?

Yes, Q4, yes.

Our next question comes from the line of Alicia Yap of Citi.

I have a few questions. First is that I wanted to follow up on the first quarter guidance and also the 4Q. So was there any one-off revenue that were recognized in the 4Q that lead to the outperformance in the first -- in the fourth quarter? So any special ad campaign by any industry vertical that outperformed during the 4Q?

And then second question is can management -- on gaming, can management share with us the game pipeline and also the major expansion pack that you plan to release for the remaining of 2026 so that we can better assess the game revenue trend for the next 3 quarters?

And then last question is on your guidance, the net loss guidance. It seems like this quarter, the $10 million to $20 million net loss that you guided is a much smaller number than previously. Usually, the loss is around $20 million to $30 million range. So any particular reasons why the loss is narrower than previous quarter? And also, should we expect this trend to be consistent for the remaining of 2026?

So your first question is -- you're trying to understand why the Q4 -- there is a growth, right? And then the Q1, there's softness for the advertising, right? You were thinking the marketing campaign....

That's right. Why Q4 is stronger than your guidance, right? And then any particular special events that happened in 4Q?

No, I think the Q4, I think we are just doing better overall. The Q1 softness or the Q1 lower forecast is purely due to the Chinese New Year -- delayed Chinese New Year this year. Chinese New Year is like February 16, right? So it's like more than 2 weeks late than last year.

So that advertisers, they just don't have much -- only after the Chinese New Year and after February and into March, they come back to work and start to plan for the year's ad marketing campaign, right? So it's purely due to Chinese New Year that our advertising are not doing that well in Q1. Even compared -- the seasonality, even compared with last first quarter, first quarter of 2025. But the Q4 is not because there's a major -- it's just like we're just doing better because -- well, the macroeconomic situation is still similar, it's still not very good and a lot of uncertainties.

But we are just through -- there's basically a change or shift of advertising industry that the traditional advertising on those media channels, those so-called [indiscernible] is not working now. People are not spending much on that on the brand. But instead, we have the innovative marketing solutions like based on some KOL or influencer or the online and viral -- some event, offline events, live streaming, all these that actually consistent with our product development side, our user -- social media.

So we have this innovative marketing solutions that differentiate us from others from the -- so that we are getting the -- adding the brand marketing -- I mean, the spending. So we're just -- especially like in Q4, we have some major events, offline events that attract advertisers and online KOL accounts and those -- it's live streaming, all these things. So it's really -- we are entering into a new age of marketing in the social media time.

So I hope I answered your question.

So next....

[Foreign Language]

[Interpreted] First, regarding the game pipeline, we have our card-based RPG based on TLBB IP. It's a mobile game, mid- to hard-form game. It is expected to launch by the end of 2026 or early 2027, subject to its development process and the testing results.

Meanwhile, we also have several mini program, new games in development, and we will decide if we will launch the games or when to launch the games based on their development and their testing results. And for the existing games, we will launch expansion packs similar -- in a similar cadence as previous years.

As for the revenue trend for this coming quarters, we can't forecast the trend right now, and it depends on the performance of the expansion pack of our older games and also depends on whether we can launch new games and the new games performance.

For the 2026, the loss -- average loss is similar, right?

Thank you for the questions. With that, that concludes the conference call for today. Thank you all for participating. You may now disconnect your lines.

Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, thank you for standing by, and good evening. Thank you for joining Sohu's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd 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, Roberta. Thank you for joining us to discuss Sohu's third quarter 2025 results. On the call are Chairman and the Chief Executive Officer, Dr. Charles Zhang; CFO, Joanna Lv; and the Vice President of Finance, James Deng. Also with us are Changyou's CEO, 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 historic information contained herein, the matters discussed on this call may contain forward-looking statements. These statements are based on current plans, estimates and projections, and therefore, you should not place undue reliance on them. Forward-looking statements involve inherent 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-20F.

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

Thanks, Huang Pu. And thank you, everyone, for joining our call. In the third quarter of 2025, our marketing services revenues were in line with our guidance, while both our online game revenues and the bottom-line performance benefiting from our continuous efforts in the gaming business were well above our prior expectations.

We recorded positive net income this quarter for the Sohu Media -- now for the Sohu Media platform, we continue to refine our products and integrate resources to better meet users' needs and enhance their experiences. Meanwhile, leveraging our product metrics and distinctive events, we remain committed to generating and distributing diversified premium content and continuously energizing our platform. Our differentiated advantages and unique IP enabled us to further unlock monetization potential. For online games, both new and established titles delivered outstanding performance driven by our deep understanding of our needs and proven operational expertise.

Before going through each business unit in more detail, let me first give you a quick overview of our financial performance. For the third quarter of 2025, total revenues of $180 million, up 19% year-over-year and 43% quarter-over-quarter. Marketing services revenues, $14 million, down 27% year-over-year and 13% quarter-over-quarter. Online game revenues, $162 million, up 27% year-over-year and 53% quarter-over-quarter.

GAAP net income attributable to Sohu.com Limited, $9 million compared with a net loss of $16 million in the third quarter of '24, and a net loss of $20 million in the second quarter of this year. Non-GAAP net income attributable to Sohu.com Limited was $9 million compared to a net loss of $12 million in the third quarter of last year and a net loss of $20 million in the second quarter of this year.

Now I'll go through our key businesses in more detail. So for Sohu platform, we continue to leverage the cutting-edge technologies to optimize our products and promote deeper integration across our product metrics. This enabled us to further adapt to various scenarios to improve operational efficiencies and enhance user experiences, at the same time relying on the synergies between various online and offline events. We continue to stimulate the generation and dissemination of premium content and attract more users to our platform.

During the quarter, we hosted a variety of events and activities to further build a vigorous social networking platform, providing users with abundant opportunities for online and offline communications. The 2025 Autumn Convention of Sohu Video Influencers, [Foreign Language] effectively promoted deeper communication among broadcasters across different verticals and significantly increased their vitality and retention on our platform. The ongoing 2025 Sohu Hip Hop Dancing Festival, [Foreign Language]; and also the Hanfu Model Competition, Hanfu [Foreign Language], both successfully ignited the passion of young people and further consolidated our influence in these areas.

All these activities gain or spread recognition and popularity and continuously infused a large amount of content and traffic into our platform. As a result, we were able to further expand the influence of Sohu and fostered a prosperous platform ecosystem.

In addition, we also held a special themed activities such as the Halloween American TV series party, [Foreign Language], not only engaged users with innovative content forms, but also became a highlight of our social video -- Sohu Video American TV series, [indiscernible], which brought audiences with classic dramas such as the Westworld and also the Mandalorian. Meanwhile, we also launched multiple TV dramas, original drama and short dramas during the quarter to attract and retain users. The original drama, The Rebirth, [Foreign Language] is well received by audiences and attract more users to our platform.

Through our flagship IP, the Physics Class, Charles' Physics Class, we continue to strengthen our differentiated competitive advantages while at the same time, exploring greater monetization opportunities. With Charles' Physics Class, we were able to reach a wider range of audiences through discussions on popular science topics and hot events and brought physics knowledge closer to the general public, not only helped us generate unique and premium content, but also consistently unlock money -- monetization potential.

Together with the resources of Sohu's product metrics and our marketing capabilities, we actively adapted changes in the market trend and provide advertisers with customized marketing solutions through a series of innovative campaigns and events, which are highly recognized by our both audiences and advertisers.

Next, turning to our online game business. In the third quarter of 2025, we launched a new PC game, TLBB: Return. Based on a beloved early version of TLBB PC, the game features reduced grinding and pay to win pressure, offering players a lighter gaming experience. It helped us attract back many former players and its revenue performance has so far exceeded our expectations.

For TLBB PC, we also launched the game content for TLBB -- game content for TLBB Vintage that recreated the classic design of the game, which evolved in a way of nostalgia among players. Players' enthusiasm and the in-game spending were far beyond our expectations. With regular TLBB PC, we offered a new rare gear as rewards for our promotional events and redesigned the cross-server clan war gameplay, which boosted willingness to pay among higher paying players.

For more games, we launched -- for mobile games, we launched an expansion pack for Legacy TLBB Mobile, which brought an enhancement to the skills of [indiscernible] clan alongside a new storyline and engaging activities. Revenue for this game remained stable on a sequential basis, the TLBB Mobile. Next quarter, we will continue to launch expansion packs and content updates for the TLBB series and other titles to further keep players engaged.

We made an increasingly competitive market. We remain committed to our top game strategy. We follow a user-centric philosophy and adhere to solve [indiscernible] and systematic R&D process to enhance efficiency and product successfully. As a part of the strategy, we are taking concrete steps to unlock the potential of our TLBB IP.

Meanwhile, building upon our core strengths in MMORPGs, we are working to diversify into new types of games, including card-based RPG, sports games and casual games as well as we expand our offerings for global markets.

Now I would like to give an update on the ongoing share repurchase program. As of November 13, 2025, Sohu has repurchased 7.6 million ADS for an aggregate cost of approximately $97 million, so basically 2/3 of the $150 million program.

With that, I will now turn the call over to Joanna, please?

Thank you, Charles. I will now walk you through the key financials of our major segments for third quarter of 2025. 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 $70 million with $73 million in the same quarter last year. Quarterly operating loss was $71 million compared with an operating loss of $72 million in the same quarter last year. For Changyou, quarterly revenues, $163 million compared with $129 million in the same quarter last year. Quarterly operating profit was $88 million, compared with operating profit, $62 million in the same quarter last year.

For the fourth quarter of 2025, we expect marketing service revenues to be between $15 million and $16 million. This implies annual decrease of 15% to 20%, and a sequential increase of 10% to 18%. Online game revenues to be between $113 million and $123 million. This implies annual increase of 3% to 12% and a sequential decrease of 24% to 30%. Both non-GAAP and GAAP net loss attributable to Sohu.com Limited to be between $25 million and $35 million. This forecast reflects Sohu 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.

[Operator Instructions] We will now take our first question from the line of Thomas Chong at Jefferies.

My first question is about the online game business. Given our online games performed very strongly in Q3, I'm just wondering how's the quarter-to-date performance so far? In particular, when I look into the guidance, it basically implies a sequential decline. So I'm not sure if we are a bit conservative in giving out the Q4 gaming guidance.

And on the other hand, when I look into our Portal business, when I look into the advertising side, we are actually seeing quite a sequential rebound in terms of the advertising revenue. Can -- Charles, may I ask about how you think about the macro sentiment coming into Q4 as well as the trend for different categories? And based on the current visibility, how should we think about the brand advertising outlook in 2026, if there's any color on that?

First question is about online game, whether it is contributing to guidance.

[Interpreted] The performance of the fourth quarter so far is in line with our expectations. The strong third quarter results is primarily driven by the successful launch of new game, TLBB: Return. And meanwhile, the new servers of TLBB Vintage also performed very well, achieving historic high. So the actual revenue of third quarter exceeded our expectations a lot. And the performance of the fourth quarter depends mainly on the performance of new game, TLBB: Return, and the performance of the content and activities that we will launch during the first quarter for TLBB PC, Legacy, TLBB Mobile, that, yes.

Okay. So I think the Q4 rebound, right, Thomas? We're seeing the advertising...

Yes.

Yes. I think since the whole ad base is not that big, right? So it's kind of not -- it's kind of oscillated a little bit. It depends on something like some pack, a contract allocated to this quarter, but because the contract was signed late and then it went to the next quarter, right?

So it's -- but we do have some -- so first of all, the macroeconomic situation is really not that good, under pressure in the different sectors like auto and IT services. So it's continued to kind of deteriorating. But as our new -- we have kind of an innovative, unique marketing campaign or services that are kind of unique that still we're able to attract some of the advertising. So we were able to go against the trend and basically stabilized the advertising revenue on a small basis.

So because I think in Q4, we have some good events that we're able to create -- are able to create such opportunities for them to advertise.

I see. May I ask a follow-up question about AI. Can you comment about how AI is integrated within Sohu right now? And are we actually seeing better productivity, cost savings or better advertising monetization so far?

I think AI has more impact, more usage or improvement on productivity on the gaming business, right? For Sohu, we are not developing a large language model. We are using AI to improve the user experience like for our social media platform, the AI can summarize video content and give the -- and so the subtitles. And also in our news service, news app, there's this AI-enhanced search and question answering features. So we're basically using AI and different models to improve our existing service of media and social network instead of spending a lot on the hardcore large language model. Yes, maybe the AI can improve. [Foreign Language]

[Interpreted] The application of AI is now -- is mainly applied in art design and the code degeneration and the game planning creation.

We will now take our next question from Alicia Yap of Citi.

I have a couple of follow-ups. First of all, on the gaming. Can management share with us what are the biggest surprise that you learned from the TLBB: Return version? And which one is the bigger driver in terms of the helping on the outperformance for this quarter? Is that the TLBB Vintage new server? Or is that the new games, TLBB: Return?

And I understand you gave out the 4Q guidance. You mentioned this is reflecting the current situation that you're seeing. And I wanted to know, is the Vintage server that you are seeing the drop off of the user or you actually see that the new title, TLBB: Return are seeing the sequential drop off or decline on the user and the revenue? So any color that you can give us on that for the 3Q and 4Q would be helpful.

And then second question for Charles on the macro situation. I think you mentioned auto, IT services, the ad sentiment seems to be a little bit deteriorating. Are there any industry verticals or industry subsector that you are seeing is actually either improving on the sentiments or at least the sentiment is about the same as last few quarters?

[Interpreted] The first surprise from TLBB: Return is the user spending is beyond our expectation because TLBB: Return was positioned to be -- the gameplay is more relaxing and it requires less time and the demand for paying, spending is also less. So originally, we thought the users paying would not be very good.

Second, the retention, user retention of TLBB: Return is very stable, better than our expectations.

As for the contribution to the revenue increase over the quarter, we don't disclose the specific number for individual game.

So far, the user base of both TLBB: Return and TLBB Vintage are both very steady, but their revenues are actually trending down because for TLBB Vintage, its performance in the third quarter was very good. So in the fourth quarter, we plan to roll out fewer operational -- fewer promotional activities. And for [Foreign Language], as it was newly launched in the third quarter. So it really experienced a natural decline compared with the initial launch period because users tend to have stronger willingness to pay when the game was initially launched.

Okay. So your second question is about the ad situation, right, the sectors?

Yes.

So I think the overall, the really kind of advertising market is under pressure. For example, the auto industry, there is the 2 counter effective trend. First of all, the competition is fierce because there are just too many car companies, right? So they need to stand out, try to have a larger market share, the pressure to market and to promote their brands and the sales.

On the other hand, because of too many cars, there's the profit margin is very low for them. So the ad budget for each car companies are seeming getting less. So that's why it's the -- so with this situation, we have some kind of unique like The Physics Class or to -- like myself and live streaming -- to live streaming, visit of their factories and some unique and also with social network, social media distribution, all kind of unique advertising instead of the traditional sponsorship of our channels, the Portal channels. We were able to get the ad budget.

So the auto industry is kind of flat, but it's still declining. And also, we are also looking at the other -- the consumer electronics. We are just -- that manufacturer base, China's manufacturer base is very strong, and they have a lot of new products, but they need to also market those products to domestic market and still with our innovative offering of live streaming or social media distribution and lectures, lectures and the various events, we were able also to get some of those consumer electronics advertisers. And so that's why we are able to -- with this deteriorating market situation, we're still able to get some of the advertising part or section and still at a relatively small base.

Thank you. I am showing no further questions. And with that, we conclude our conference call today. Thank you for your participation. You may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]