By firstname.lastname@example.org (InfoseekChina)
(Investopedia) Sohu recently reported second quarter earnings that topped analyst estimates on both the top and bottom lines. The top line rose 23% annually to $493.6 million, beating analyst estimates by $12.9 million. Its GAAP net loss narrowed from $45 million a year ago to $28 million, or $0.71 per diluted share, which beat estimates by $0.09.
The key numbers
During the quarter, total online advertising revenues — which are generated by its brand, search, and web directory ads — rose 31% annually and accounted for 58% of the top line.
Revenue from video ads notably improved with Sohu Video, a Hulu-like platform, jumping 36% annually to $59 million. The Sohu Media Portal (which excludes Sohu Video) posted 4% annual sales growth to $52 million. Its search and web portal businesses both reported a higher number of paid clicks and cost-per-click.
Revenue from online games rose 12% annually to $172 million, accounting for 35% of the top line.
Sohu attributed that growth to the strong performance of new mobile games like Dashfire and Twin of Brothers. These games are notably published by Changyou.com, the company’s former online gaming unit. Sohu spun off Changyou in an IPO in 2009, but it still owns a controlling stake in the company.
Sohu’s gross margins fell at its brand advertising and online game units but rose slightly across its online, search, and web directory advertising businesses. Operating expenses also declined 13% annually thanks to lower marketing and promotional expenses for Changyou’s mobile Internet products. Unfortunately, those reductions were not enough to bring Sohu’s bottom line back into the black.
Sohu’s shares have fallen over 15% year-to-date along with the broader Chinese stock market.
Looking ahead, the company’s search engine, Sogou, faces stiff competition from Baidu and Qihoo 360, which could keep applying pressure to Sohu’s margins. The same applies to Changyou’s online games business, which competes against rivals like Netease and Perfect World. Therefore, a positive earnings beat might not be enough to allay those ongoing concerns about Sohu’s bottom-line growth.
Source:: Sohu.com Reports Solid Second Quarter