Shares of Sohu.com Ltd. (SOHU, Financial) fell after reporting a second-quarter loss per share of $1.27 on revenue of $486 million, a 5.4% year-over-year growth. The company beat earnings estimates by 22 cents but fell short revenue estimations by $16.2 million.
CEO Charles Zhang said: "We saw mixed financial performance in the second quarter. While quarterly revenue was slightly soft given the continued headwinds against our brand advertising business, the bottom line performance was better than expected as we aggressively slashed content costs. For SohuMedia Portal, we continued to focus on user growth for the Sohu News App by consistently refining the product design and content quality. For Sohu Video, we maintained steady momentum with our original content and substantially narrowed the loss as a result of lowered spending on licensed content. For Sogou, in the second quarter its core search revenues posted 45% year-over-year growth and Sogou Mobile Keyboard's DAU increased by 36% from the prior-year to $380 million. Changyou delivered in-line performance as its online game business continued to generate healthy cash flow."
In the trimester, total online advertising revenues were $332 million, up 22% year-over-year. Brand advertising revenues reached $62 million, down 29% year-over-year because of decreases in portal and real estate advertising revenues. Search and search-related advertising revenues were $270 million, up 45% year-over-year, due to continued traffic growth and improved monetization in mobile search.Online game revenues were $94 million, down 23% year-over-year due to the natural decline in revenue of Changyou's older games, including Legacy TLBB Mobile and Dao Jian Dou Shen Zhuan.
Moreover, GAAP and non-GAAP gross margin was 44%, compared with 40% in the second quarter of 2017 and 43% in the first quarter of 2018. Both GAAP and non-GAAP gross margin for the online advertising business was 35%, compared with 19% in the second quarter of 2017 and 29% in the first quarter of 2018.
GAAP and Non-GAAP gross margin for the brand advertising business in the second quarter of 2018 was 23%, compared with negative 45% in the second quarter of 2017 and 10% in the first quarter of 2018.Both GAAP and non-GAAP gross margin for the search and search-related advertising business in the second quarter of 2018 was 38%, compared with 48% in the second quarter of 2017 and 34% in the first quarter of 2018. Both GAAP and non-GAAP gross margin for the online games business in the second quarter of 2018 was 85%, compared with 91% in the second quarter of 2017 and 84% in the first quarter of 2018.
For the third quarter of 2018, the company expects total revenues to be between $445 million and $470 million.
(Disclosure: The author holds no position in any stocks mentioned).
